Does it Matter if I Make My Payments While Selling a Home Through a Short Sale?

As home prices have decline precipitously over the past couple of years, many homeowners have discovered that the price that their home can sell for in the local real estate market may be far less than what is owed on the mortgage.  When a home is Sold under these conditions, the transaction is referred to as a Short Sale.

One question which is on some folks’ minds is whether continuing to make payments on a declining asset makes sense.  Particularly when they do not stand to make a dime on a home they have been making payments on for years. 

Well, although defaults on mortgages have increased significantly over the past several years due to the economic down-turn and there is a sharp increase in the number of folks who have made a strategic decision to default on mortgage loan payments although they can well afford the payments, it is prudent for anyone thinking about this option to consider the latest word from HUD (the Department of Housing & Urban Development) on the topic. 

 Here’s a link to the Mortgagee Letter, a document which provides guidance to lenders and underwriters about WHO will be able to qualify for new FHA loans if they have gone through a Short Sale.

Reading through the letter, it seems to make sense to stay current on your loan even while continuing to try to sell your home…even if that involves a Short Sale.

Is Your Home All Dressed Up without a Date? 3 Easy Steps to Increase Your Chances of a Sale!

She’s as pretty as she can possibly be.   She’s been shined to ’squeaky clean’…every square inch has been dusted, scrubbed and waxed.

Primping and stylin’ has brought in the latest accessories; new plumped up throw pillows, flowers on the table, colorful throw rugs on the floors and perhaps a few pictures.

All the clutter is gone – banished to storage sheds or the basement.  She’s ready for the show, except for one problem…her date is taking awhile to appear.  NO ONE IS CALLING TO SCHEDULE A HOME SHOWING PRE-VIEW!

If you’ve ever sold a home or are trying to sell a home, you might relate to the description above.   In the Grand Rapids, Michigan area, there are thousands of homes on the market right now.   Last year over 29,000 homes went on the market throughout the year with an average number of just under 10,000 homes on the market at any given time.   The total number of homes SOLD was 11,033 in 2009 which accounted for under 1,000 homes SOLD per month on average.

SO…there were a lot of homes which got all ‘prettied’ up with nowhere to go.   While these numbers may seem a little daunting at first glance, there are some things you can do to increase the probability of being on the list when home buyers pre-view homes.  Here they are:

1.  Price to Surprise!

Today’s market has really taken a hit on home prices.  In the greater Grand Rapids, MI area some communities have seen average home prices decline 24-40 percent within the last 3 years.  Those who are serious about selling a home today need to understand the importance of pricing to sell. The good news is that this is something ENTIRELY within your control.  YOU set the price!  Your real estate can  offer intelligent counsel.  Choose an experienced agent and listen to their advise. Take your time to review the comparables and understand your competition.  And then…price your home to beat the competition.  This includes…

2.  Stage to succeed!

Staging your home to sell is not optional if you want a home buyer’s visit to your home to linger in memory even after they’ve left your residence.  Setting the stage for a successful sale involves not just cleaning the home and clearing out the clutter but also determining WHERE the sale is likely to take place in your home and setting the stage to make that happen.  A properly staged home leads the buyer to a buying conclusion when the setting is arranged correctly.  From the moment a prospective client steps onto a property,  an artful seduction can lead to a mutually satisfying conclusion as they come to the realization that this home really should belong to them!

3.  Be Ready for the Party!

When your home becomes available to the buying public, make sure you’re ready to respond to prospective buyers even if this is at short notice.  I advice clients to clean and clear away all clutter in a big way at the beginning and then keep things that way.  To aid in this process, we suggest that our clients obtain a few boxes for the main areas of the home such as the kitchen, bathroom and bedrooms.  This  allows everyday items to be discretely stored out of site when showings take place.   Then, these items can then be easily accessed once the showing is over.  This exercise will also help you to determine what you really need on a day to day basis.  It’s often a lot less than you think!

Paying heed to these 3 simple issues will greatly increase your chance of being picked when prospective buyers go out to check out the latest inventory.

Grandville, MI New Listing…Vintage Character & Style ~ 3136 Locke Ave SW, Grandville, MI 49418

This vintage ranch style home reveals a surprising amount of finished living space (almost 2000 sq. ft).  The living room features large picture windows and a number of notable built-ins which include a china cabinet buffet and a custom cubbyhole for a TV or entertainment center.

You’ll appreciate the main floor utility, mud room and 1/2 bath which are attached to the garage. The garage also has it’s own separate furnace. Three good sized rooms and an additional bathroom round out the upstairs area.

The lower level has been completely remodeled in the last several years. A large family room serves as the central point from which the lower level bathroom and bath and large pantry & cellar can be accessed. In addition, there’s a private reading nook/study/den to retreat to.

*Please note, the backyard actually extends around the neighboring home and includes 2 exterior buildings: a traditional shed and a larger unit with an attached carport ~ so there’s covered parking for a least 3 vehicles PLUS tons of storage.

Click on the picture to take a peek inside!

I’m Dreaming of a White Christmas…

Reconciling Confusion…Making Sense of Conflicting Statistics in the Grand Rapids, Mi Real Estate Market!

It is not yet noon this Monday morning (12/14/2009).  Yet, I have already had several  conversations with clients who are disconcerted.  On the one hand, they have heard that the market is improving, but the news about their specific home in their specific Grand Rapids, Michigan neighborhood seems to paint a different picture.   This information seems at odds with recent headlines.

They are not alone.  Those of us in the Mid-West have been listening to the media reports that the economy has turned the corner and that jobs will come roaring back in the spring of 2010.  News that seems to obscure the reality that our unemployment rate in Michigan is still one of the highest in the nation.  The recent newspaper headlines about the surge in year to date home sales may inadvertently obscure some very pertinent details.  Facts which if they happen to relate to the situation in your particular neighborhood may dramatically alter your perception of the real estate marketplace.

It is said that perception creates reality.  But it is the  facts which ultimately ground reality.   But  facts  sometimes mask the underlying assumptions which serve as their bedrock foundation.

While it is true that there has been an increase in sales over the past year (sales year to date over 2008 are currently up above 35%),  it is ALSO true that these sales have largely comprised of distressed properties and therefore PRICES have been driven down almost 13% since the same period last year. And 2008  is on the record for being a year in which home equity plunged dramatically across the nation.

Going back to the conversations I alluded to earlier…in one case, a home that was sold for $90,000 just a mere 3 years ago has been re-sold and closed in June of this year for $38,000!  This is not an isolated situation.  I have witnessed many homes within the last year that are now retailing for 60% – 75% of what they would have retailed for 3-5 years ago.  That’s quite a loss!

So how does one reconcile these numbers? Are homes selling?  Yes!  Are there bidding wars on the best deals? Absolutely!  We’ve had the experience of being told to ‘take a number’ to await word on a multi bid situation.  Most of these homes selling today in bidding wars are retailing so far below normal market values, that buyers are waiting in line to get a good deal.

But even these situations should be approached with caution.  Under- market pricing does not guarantee a smooth path to home ownership.  Some of these homes have been abandoned and severely neglected or they may have hidden underlying issues.  It’s important to do careful and thorough research and to have a complete inspection.

If you’re considering flipping a property for a quick profit, it may be prudent to check with your mortgage  company to ensure a comprehensive understanding of potential limitations of your financing vehicle in the new lending environment.

Lastly, make sure you have a realistic appreciation for the current housing values in you area. A below market purchase not only impacts the homes around the neighborhood, but will also impact the re-sale value of the remodeled home you intend to place back on the market to some extent.  This factor should also be kept in mind when contemplating an area which has been dramatically impacted by the housing crisis.

We are available to provide comprehensive counsel and statistics on neighborhoods in the Grand Rapids area for home owners, home buyers and investors.  Please contact us for a confidential inquiry at:  info@auduhomes.com

Health Intervention Services…Serving Grand Rapids MI with Hope and Healing.

You never know just where a real estate deal will take you! When the agent contacted me about a pre-view request for my listing, I thought it would be simply a routine home showing request.

But as the conversation proceeded, I learned that Marcia Vander Woude who is also an Adjunct Professor at Grand Valley State University  was involved in much more than a part-time real estate career.

Marcia began to share her passion about Health Intervention Services and invited me to come by and take a tour.  Prior to our connection through a showing request, I had never heard of Health Intervention Services although this mission of mercy and healing has been functioning in some capacity in the local area since 1988.

Health Intervention Services, (HIS) is a faith-based, non-profit 501 (c)3 health care center which is located in the  Burton Heights neighborhood in Grand Rapids, MI.  ”HIS is founded on the belief that the intrinsic value of all people justifies the right to quality health services that promote physical, emotional, and spiritual wellness. ” (quote from promotional sheet)

While touring the facility, I was surprised to see how comprehensive the care offered on site was.  Included were dental care, optical care, comprehensive medical and dental care, psychological and social work counselling, medication assistance and spiritual encouragement.

The service is staffed almost entirely by volunteers…over 130 of them of which 76 are medical professionals and a small crew of 10 full or part-time employees.  It’s extraordinary to think of what this group of committed individuals has accomplished in just this past year by averaging over 1,000 patient visits each month!

HIS also collaborates with other community organizations to maximize the utilization of scarce resources in challenging economic times.  Patients who visit the center participate on a sliding scale fee base with the minimum payment being $20.

On December 9, 2009 there will be a special fundraising concert to help raise money to fund the organizations’ efforts which will enable them to continue their work in caring for people. The concert features World Renowned Tenor, Carlos Seise who will be performing at the Basilica of St. Adalbert located on  704 4th St. NW  Grand Rapids, MI.   Tickets can be purchased for $40 or $25 (special rate for Seniors over 60+ or Students) by contacting Marcia at savvywomen@gmail.com or Thressa @thoekstra@hisgr.org.

It is really heartening to see the difference that this organization is making at a time when so many people are in need of health care assistance in our local community.

Health Intervention Services (HIS)

15 Andre St. SE, Grand Rapids, MI  49507

616-475-1363  web:  www.hisgr.org

Enjoying a Feast of Gratitude…Happy Thanksgiving!

If the line at the grocery store is any indicator, a lot of folks are going to be cooking up a storm this Thanksgiving Holiday.  Thanksgiving is one of my favorite holidays because it is about sharing gratitude and love.  It’s also a time when one has permission to eat to your heart’s content.  If you’re like me, all that cooking has a way of making you tired.  Not just sleepy tired, but tired of cooking.

Well,  I found this picture in my files from a Sunday Brunch that we enjoyed at a fabulous local restaurant, Restaurant Bloom.  The Quiche reminded me of pumpkin pie…and the fact that many local Grand Rapids restaurants are happy to take over the cooking when one runs out of steam.  Happy Thanksgiving Everyone!

FAQ about the 2009 Homebuyer Tax Credit Extension

This morning, my inbox has received several notifications about the formal extension of the Homebuyer Tax Credit which will provide financial assistance to many New Home Buyers and Existing Homeowners who are considering the purchase of their next home.  Later in the day, a conversation with a client underscored our need to make sure that as real estate professionals, we provide accurate information from the Federal Government about this tax credit.  Here’s the question:

Question:  If an existing homeowner sells a home and qualifies to utilize the extended Tax Credit, is the date on the contract OR the settlement closing date the one which is used to determine qualifying eligibility?

I spoke with 2 mortgage officers, both of whom were not certain about the answer.  Than I visited the Federal Tax Credit information site (which has not yet been updated to reflect the news of the morning 11/06/09) and also read the FAQ from our State Association & the National Association of Realtors. Why was this necessary?  Well, the answer in part my be the result of changes which are happening very rapidly and the fact that sometimes there is a lack of clarity initially. Here’s the response from the National Association of Realtors (NAR) which was obtained from my local  and state Board.

Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?

Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.

This is just on example of the types of questions which consumers will be asking.  Do you know where to send them to get accurate information? The Michigan Association of Realtors has been proactive in getting information out about this program. Other detailed questions about the change in the provisions for the Tax Credit can be found here.

Dramatic Home Sale Increase in 2009 Grand Rapids MI Housing Market Over 2008!!

Good News on the housing front & just in time for the Holidays in Grand Rapids, MI. In a market which has seen the worst of times in recent years, arecent article in the Grand Rapids Press heralding an increase of 35 PERCENT in home sales over 2008 was more than welcome…local professionals are ecstatic!

It’s been great to touch base with so many agents who tell me they are busy again. We sold most of our inventory within the last couple of months and are “re-stocking the shelves.” The ‘HOT PRICE’ range is $100,000 ~ $140,000.

This has helped to increase the average Home Sale Price to $109, 826 which was 3.2 percent higher than the same period in 2008. But…year to date, home prices are still down by 15.1% over 2008, a number which can be attributed to the on-going issues with foreclosures and short sales in the local market.

Other noteworthy improvements in the Grand Rapids, MI market include the decreased number of Short Sales and Foreclosures in September and the possibility of the extension of the Home Buyer tax credit which served to enable over 200,000 new jobs last year according to a quote by Jerry Howard, President of the National Home Builders Association in this article.

Now, all this good news does not necessarily indicate we are totally OK. There are still huge inventory of foreclosed properties which have not yet been placed on the market and joblessness continues to be a scourge on the Michigan economy.  As we near the end of the year, what happens in these two areas as well as the credit markets will send strong signals about the on-going journey of recovery.

If You’re a Homeowner…

These past several months have created some glimmers of hope.  Inventory levels have declined and housing prices have inched up.  More importantly, Sales have increased substantially. One of the critical assessments that homeowners who need to sell a home can make is the OPPORTUNITY COSTS CALCULATION.  It’s a fairly simple calculation which aids in determining how long you should hold on to your home, if this is a time to sell your home and what your carrying costs without a Sale actually are.

An Example...Calculating the OPPORTUNITY COST

For example, let’s say your home is valued at $140,000.  You’ve been in the home for less than a decade and you currently owe approximately $120,000. The OPPORTUNITY COST is determined by taking approximately 10% of your current expected Sales Price and dividing it by 12.  In this case:

140,000 X .10 = 14,000

14,000 / 12 = $1,167 = OPPORTUNITY COST per month

That number $1, 167 is approximately what it will cost you EACH MONTH if home prices DECLINE another 10% over the next 12 months. This year, home prices declined approximately 15% overall from last year, and since 2006, there has been a 30% DECLINE nationwide.  So an improvement to a decline of only 10% is not unreasonable.  You can manipulate the numbers to see a range of options, but most experts seem to think that we can expect declines within the neighborhood of 6% – 10% in home prices over the next year.

An Example…Calculating Your Specific OVER-PRICING PENALTY

OPPORTUNITY COST + CURRENT MORTGAGE PAYMENT = OVER-PRICING PENALTY

For example:  $1,167 + $1,100( est. Mortgage Payment) = $2, 267 (OVER-PRICING PENALTY PER MONTH)

OR…$27,204 PER YEAR

Adding the OPPORTUNITY COST to your current mortgage payment gives you a unique perspective of what it will actually be costing you to OVER-PRICE your house in today’s market.  If you’d like a detailed report about housing & pricing in your specific Grand Rapids, MI neighborhood, please give us a call at 616-791-0511 or e-mail us at info@auduhomes.com.

A Celebration of the Art of Life…ArtPrize 2009

The ‘Nessie’ sculpture remains one of my favorite entries for the ArtPrize contest which took place in Grand Rapids early this fall.  Over 1,000 artistic entries from all over the country and world came to Grand Rapids and were displayed in the streets and buildings of our city.

It’s a wonderful thing to see what the beauty of art can do.  I think it brings out the beauty of people.  As I walked around looking at various entries, I observed people smiling, talking, holding hands and having a great time.  It was a time of wonderful moments!