Summer weather roared in with blazing high temperatures and strong storms here in Grand Rapids, Michigan!  It's been a little while since I've been able to look out my window at a clear blue sky and gently swaying trees.  In some ways the recent rush of climatic activity is a metaphor for the real estate situation here in West Michigan.

2008 has been a year in which we have seen some stormy conditions.  The year commenced with the down draft in the mortgage sector due to the sub-prime lending crisis.  In fact, until just recently, most of West Michigan was considered a declining market which meant that New Home Buyers were being asked to bring additional money to the closing table to close loans.  Money which many of them were hard pressed to find. Zero down programs evaporated into the cosmic ethers.

Yet, not all the news was bad.  In the midst of this tempest, affordability levels increased as the prices of homes plummeted sharply creating all sorts of opportunities for buyers and investors to pick up properties at rock bottom prices.  Home owners learned hard lessons about the laws of supply and demand Because bank owned properties now constituted almost 1 out of every 3 sales, marketing times increased to almost a year and homes that were not priced correctly were all but ignored.

In an environment in which so many winds of change are raging, it's often difficult to decipher exactly what is going on.  Recently, Jennifer Granholm the Governor of Michigan signed some important legislation into LAW!  It's the Agency Responsibility Act (ARA)  I think that this legislation is one of the best things to emerge out of the storm which has engulfed our industry.

The Governor's signature on the acts is the culmination of the Michigan Association of Realtors hard fought efforts to clarify for consumers the real estate services that were being provided by various agencies.  This movement was brought about by the amazing discovery that the ONLY duties imposed by statue or rule of law when representing seller or buyers or real estate property were:

The duty of agents to present offers to sellers within a reasonable period of time

The duty of listing brokers to review and sign the closing statements.

ASTOUNDINGLY, THAT WAS IT!

While most Realtors® were offering substantially MORE than this, the public had limited understanding of the potential vast difference of service levels between brokers because all brokers were using the "Exclusive Right to Sell Contract." (Buyers usually are serviced under a Buyer Agency Agreement)

As a result of this legislation, brokers who do NOT provide the required MINIMUM service levels will now have to use a LIMITED SERVICE AGREEMENT form which clearly defines exactly what they are doing or NOT doing.  The ARA also amends the law to make it a VIOLATION of the Occupational Code if a Realtor FAILS to provide all Statutory Services unless they are expressly waived by a client in a limited services agreement.

The is a huge advancement forward for the rights of consumers to ensure they understand exactly WHAT they are getting when they sign up with a real estate broker.  I think it will help to dispel some of the misunderstanding and confusion which has marred the positive perception of the real estate industry. 

Sometimes, it takes a storm to bring out the best in nature.  Today, my lawn is a gorgeous green and the flowers are blooming.  It may have been a little rough getting here, but the results I'm witnessing make it worth it.  The Act becomes effective as law on July 1, 2008. My hope is that the turmoil in our industry will continue to yield changes which serve the good of our profession and the clients we have the privilege of assisting.

Copyright 2008  Audu Real Estate  All Rights Reserved

Trying to sell a home in Grand Rapids, Michigan has not been easy for the past few years due to the crisis in the manufacturing sector, the mortgage industry implosion and the glut of homes which deluged the market within the past 24 months. 

Selling a home without help as an Unrepresented Seller presents some additional challenges.  In a conversation with an experienced mortgage broker, this past week, I was surprised to learn about some unique criteria which are now pre-requisites for homeowners who are selling their own homes.

According to this source, she indicated that many area lenders are now requiring at least 2 appraisals on any home purchased directly from a home owner.  This additional expense is due to the fact that much of West Michigan is now considered a Declining Market. 

Thus homes sold by Unrepresented Homeowners aka FSBO's are scrutinized more closely because they represent a higher risk to investors. This is also why title/escrow costs are often higher for Unrepresented Sellers.

The designation of Declining Market has two significant implications for all home owners in West Michigan.  First of all, many lenders are looking more closely at ANY HOME which has been on the market for over 6 months even if the location has not been designated a Declining Market.  If a home has been on the market for some time, (in West Michigan, our average was between 9-11 months in many areas) the lender may require that the buyer put a deposit of 5% or more down for a mortgage. Unfortunately, many buyers today are unprepared or unable to come up with additional funds.

In addition, areas which have been designated as Declining Markets may experience this added burden on ALL HOMES regardless of how long they have been listed.  This contributes negative leverage to the drag that Foreclosures and Short Sales have already had on home values.

There are some lending options which may diminish the impact of these additional fees and these should be explored with an experienced lender PRIOR to placing a home on the market.  The government programs such as the FHA have really been much needed source of stability in these times. Now, more than ever...it's important to have a Strategy in place to Sell your Home.  Unfortunately, today...simply getting a Buyer to sign a purchase agreement will NOT guarantee you a seat at the Closing table.

If you'd like a referral to a highly qualified lender or need to discuss some options to successfully market and sell your home, please contact Audu Real Estate.  We are available to discuss the current Market Conditions in your specific neighborhood in the comfort and convenience of your home.

Copyright 2008 Audu Real Estate All Right Reserved

In Grand Rapids, Michigan it's an argument that every real estate agent has heard at least once. In the opinion of most...one time too many. It goes something like this. I'd like to sell my home, but I need (X) amount from it. I know that you are recommending I list my home for 10 ~15 % Less than (X) but I figure that if buyers are interested, they will make an offer. I refer to this argument as the decision to Chase Down the Market.

Chasing Down the Market has become a real estate consumer sport. Homeowners gambling with the odds of Selling their home before the market swings further south usually have several options up their sleeves. These include: Lowering the Price of the home, offering incentives to buyers such as 3 months of FREE Mortgage Payments or providing decorating allowances. These are held out like chips to bait potential home buyers.

Sometimes, these gambits work and attract an offer. But, it's usually not the offer that was anticipated or expected. What we are seeing in Grand Rapids, Michigan and across the country is that buyers for homes are remarkably well informed. Incentives are no longer viewed as reasons to purchase. Instead, savvy buyers dig deeper to try to determine WHY Incentives are necessary.

Savvy buyers understand that irregardless of the market, Accurately Priced Homes will Sell even within a challenged market like Grand Rapids, Michigan within 3-4 months.

It's particularly instructive to note that Banks who own a number of Foreclosed homes in the Grand Rapids area right now also understand this. In fact, these banks will often lower their prices several times within a relatively short period of time simply to ensure a quick sale. This tactic has led to an increase in the sales of Bank Owned Homes to a level which is almost 50% of ALL Current Sales in the Grand Rapids area.

The implications of so many foreclosed and short sale homes on the market has had a devastating effect on homeowners who are Chasing the Market Down. Last year, the Grand Rapids Association of Realtors statistics indicated that homeowners who did not sell their homes during the first 5-6 months eventually Sold their homes for an average of 25% Less than the Listing Price. This was in stark contrast to those who through pricing their home properly to reflect the current market usually Sold within 3-5% of the Listing Price.

Thus the Penalty for Chasing the Market Down and Loosing in 2007 was about a 20% Reduction in Net Proceeds. This did not take into account the investment of additional time on the market or the inconvenience of two mortgage payments in some cases. Unfortunately for home owners, playing this game in 2008 will be even more risky.

With foreclosures and short sales on the rise, and a large influx of homes anticipated for Spring Market of 2008, the Grand Rapids real estate market simply does NOT have the elasticity to absorb all these homes for a couple of MAJOR REASONS. The most significant issue is the Lending Crisis which has dried up funds for a large number of potential buyers. Secondly, since many areas of West Michigan have now been designated as Declining Markets, potential buyers are being asked to come up with larger down-payments and sometimes having to pay higher interest rates unless they qualify for a government funded program.

In my view, Chasing Down the Market is a risky gambit. The twists and turns of gambling in this market require a pretty strong constitution...one which many home owners are ill equipped to maintain. The closer your initial asking price is to the Bullseye, the better your chance of obtaining a fair price and the pre-requisite mortgage for a buyer which allows you to move on with your life. Less exciting perhaps...but certainly easier on the stomach wouldn't you say?

Copyright 2008 Audu Real Estate All Rights Reserved

 Good News!

Rates are going down. Yippee Yeah!  This is Great News For home buyers in Grand Rapids, Michigan.  According to a January 9, 2007 article by Inman News, the Mortgage Bankers Association, a trade group for lenders indicates that this past week the Jump in applications for loans was a whopping 32%!  This is the highest one week increase for mortgage applications documented within the past 4 years.

The increase in mortgage applications is due to the fact that mortgage rates are now lower than 6%.  The rate on a 15 year note is now averaging 5.21%.  If you've got an adjustable rate mortgage, this is the time to get a fixed rate. It's also smart to review loan documents for your primary residence and home equity lines of credit.

It might be helpful to highlight a Brief Overview of the real estate market in the Greater Grand Rapids, Michigan Area over the past year.(2007)  The year started with average Listing Prices in the $157,000 range.  Sales Price Averages of 150,000 indicated that most home owners were selling within 95% of the Average Sale Price.  But what is not revealed in these numbers was the Cost in Time for home sellers.  With over 17 months of Inventory, just under 7% of the Available Inventory actually sold.  Successful Sales however averaged 109 days on the market.

The Best Time to have been a Seller in Grand Rapids, MI in 2007was between March ~ August.  Inventory levels for all listed properties dropped to 12 ~ 13 months and the Average Sales Prices were between $155,000 ~ $165,000.  Of course some areas were much higher and some lower, but this was the net effect.  In addition, close to 10% of Homes Listed were going into Escrow for Closing.

At years end, inventory levels rose dramatically.  By December, we had 19 months of Inventory in stock and the Average Sale Price has now fallen to $133,000.  So, What does this mean if you are a Buyer?  Well, NOW is a good time to see what's available for Sale when you consider the decrease in Interest Rates and the high number of homes available.  Don't waste this opportunity.  Take advantage of these Numbers to go shopping and Invest in you dreams.

*information regarding average home prices and inventory levels was obtained from the Grand Rapids Association of Realtors Sales & Inventory History.  The information is deemed reliable but not guaranteed.

To Read Other Articles in the Smart Buyers Series Click below...

home buyers: Michigan Buyers...When the Government Gives Free Money to Buy a House...Go Get IT!

home buyers: How To Avoid Paying Too Much for Your Next Home!

home buyers: How to Avoid Buying a Real Estate Lemon.

home buyers: Limitations Are Simply A Matter of How You See Things!

foreclosures: So, You Want A Great Deal on A Foreclosure...10 Power Tips for Success!

 Click Here to Read More about Grand Rapids, Michigan

The call came into our office as a referral. A former client was recommending us to assist her good friend who needed to purchase a home quickly! Now, who doesn't relish that kind of call? I contacted the individual who confirmed that she was indeed ready to buy a home right NOW. However, there were a few issues.

She indicated that she was loosing her home although she didn't own it. She could sense my surprise over the phone and answered my question before I could verbalize it, "You're wondering how I can loose a home I don't even own right?" "Yes," I said, "Please, Explain."

She proceeded to explain that several years ago, they had made an agreement to rent with an option to purchase a great home. The family had enjoyed living there for several years, but recently began to get suspicious notifications. Initially, they didn't understand what was going on. Finally, their landlord called and told them the truth. He was behind on his payments and taxes. He was being foreclosed and had lost the house!

Her family had approximately 30 days to get out. The process had proceeded through the Sherrifs Sale. Talk about shock! And Awe...that anyone could be so crassly insensitive to the plight of a family with school aged children.

But unfortunately, this is actually becoming more common that you might imagine as a result of the Foreclosure Crisis. Many investors who purchased homes to flip them at the height of the real estate market are now over-extended.

In related developments, landlords often took out home equity loans on rental properties which had adjustable rate mortgages. When the rates adjusted...some were unable to keep up with the payments or sell the home. It's one of the unexpected consequences of the Foreclosure debacle that is now wrecking havoc in throughout the rental market in a manner that was unanticipated.

This issue was recently addressed on the Today Show by real estate guru, Barbara Corcoran. (You can watch the short video by clicking this link.) In a revealing interview Cochran talks about how many renters are being caught in the crisis by renting homes which the landlord can no longer afford.

Cochran offers some helpful tips. She advises renters to do the following to avoid the situation altogether OR to figure out if the home you are currently renting is up for grabs by the bank. Here are some of her suggestions:

1. Look at the Records...

• Check the County Clerk's office to see if a Foreclosure Filing has been made on your home. (Some additional advise: If someone comes to knock on your door and tells you that a filing has been made...DOUBLE CHECK with the county. I've heard of situations in which Scam artists have tried to rob people by telling them this lie.)

2. Negotiate With the Lender!

• You might find this surprising as technically the renter does not own the home. However, this is a situation which creates an issue for the bank too. Not only do they have to deal with a delinquent home owner, they have to be concerned about getting their property back and respecting the rights of the renter. Consequently, being proactive as a renter can be mutually beneficial for you and the bank.
• In exchange for an orderly and speedy transfer of the property, renters may be able to negotiate concessions. There's even a name for these deals. It's Called Cash For Keys! In exchange for Leaving the Property, banks may be willing to give money to the renter to leave the property which can be helpful in paying for moving costs or finding another place to stay. Renters may also be able to negotiate more time to stay in the property while the bank works out final foreclosure or re-sale details.

3. Talk to a Lawyer!

• If you can afford to do so, this may be something which might be appropriate to consider. Although, it is unlikely that any funds will be forth coming from a landlord who is broke, a lawyer may be able to wrangle some helpful concessions from the bank.

We are living in extraordinary times. Sometimes, opportunity knocks in a strange way. You may want to re-consider looking at your home purchasing options once again. Interests rates remain low and the housing inventory is great. If you'd like to talk about owning your own home, please contact us at info@auduhomes.com to explore how you can become a home owner and never pay rent again!

Copyright 2007 Audu Real Estate All Rights Reserved