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Archive for January, 2011

If You’re Short on Cash Don’t Ask About Buying a Lake Orion or Oxford Home on Land Contract

I probably get 2 or 3 calls or emails per week asking about buying a home in Lake Orion or Oxford MI on land contract. Often times these callers want land contract terms because they are unable to get a mortgage for the next few years. Many of these prospects had a financial setback of some kind- like many who live in Michigan- and have lost their homes and killed their credit. Again, this is not unusual these past few years and I am not passing judgment on anybody. These people are used to being homeowners; I sell real estate and I LOVE people who want to be homeowners. But because so many people have been losing their homes in North Oakland County MI and Lapeer County MI there is a ton of mis-information and quick fixes all over the Internet, TV, newspapers…

On the surface a land contract seems like the perfect situation for both buyer with bad credit and seller in a market that has experienced declining value. But let’s dig a little deeper.

From the seller perspective:

  • You have bad credit or you would be getting a mortgage
  • They would be giving you title to their house
  • If they currently have a mortgage they are probably depending on you and your bad credit to make your payments on time so they can make their payments

For that risk the seller will usually want a substantial down payment and a higher interest rate than you would pay a bank. You may also pay a bit higher than fair market value for the house. Part of your spanking for having bad credit. And compensation to the seller for taking a risk.

From the buyer view there are also risks you need to consider:

  • If you can’t get a mortgage at the end of the land contract term you may be out your down payment and principle payments
  • If the seller has a mortgage on the house and lets the house go into foreclosure you will be SOL and lose your down payment and principle payments along with any cash you put into the place
  • There is a real lack of choice if you are limited to sellers offering land contract terms

As of today there are 17 homes in the Lake Orion and Oxford school districts offering land contract terms. The range in asking price from $174,900- $4,200,000. The smallest down payment offered is $20,000 and the most common interest rate asked for is 6%.

I am not saying that land contract terms are never in the best interest of both a seller and buyer. I will write another post in the next day or two covering when a land contract is in the best interest of all involved. The point of this post is to address the misconception that many have that a land contract is cheap way to get into a house while you repair your credit.

Jackie Hawley
Keller Williams Realty
cell: (248)736-6407
email: Jackie@JackieHawley.com

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The Difference Between The Deposit and Downpayment

I recently wrote an offer for a buyer client where the earnest money deposit (AKA good faith deposit or just plain deposit) was $10,000 and the downpayment amount I wrote in the offer to purchase was $70,000. Pretty straight forward- they were putting $70K down and the $10K would apply against the closing costs and downpayment.

Not so straight forward and hence the reason for this post. You see, the buyer didn’t see it the way I described above and the buyer happens to be a very intelligent person who actually listens when you talk. The buyer thought he was putting $70,000 down IN ADDITION to the $10,000 deposit.

So to clarify for future buyers– the downpayment is exactly that. The total amount you will be putting down on your mortgage. If you are buying a $200,000 house in Lake Orion MI and you are putting 20% down, then your downpayment is $40,000. Your deposit is totally separate. It shows your seriousness as a buyer and it does apply toward your closing costs/downpayment.

Jackie Hawley
Keller Williams Realty
cell: (248)736-6407
email:
Jackie@JackieHawley.com

www.MiRelocation.com

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Considering a Condo? Figure the Association Fee in Your Pricing

If you have been pre-approved to buy an Oakland County MI home for X price as long as the property taxes don’t exceed Y doesn’t mean you can qualify for a mortgage for the same price condo. Condominiums in Oakland County MI tend to have a monthly association fee. If you qualify for a $1200/month house payment that $1200 needs to include the association fee. And they can be pretty hefty.

Now to the defense of condos– the price tends to reflect both the association fees and the perks (maintenance, etc the association takes care of) of condo living. But if you’re qualified to buy a $150K house and having trouble finding what you like, don’t think you can just go buy a $150K condo.

Tomorrow I will be showing a condo in Clarkston MI listed for $155,000 with an association fee of $261 per month. Looking at the listing photos and after reading the description it sounds like a very nice home. Probably nicer than a regular house in the same area. After factoring in the association fee your monthly payment would be about the equivalent of a $200,000 home with no association fee.

So if you are looking for a home in the North Oakland County area and are content with either a house or condo, please consider you will have a different price limit for the condo than for the house.

Jackie Hawley
Keller Williams Realty
Cell: (248)736-6407
Email:
Jackie@JackieHawley.com

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The Best Loan Officer Isn’t Necessarily The Cheapest

If you are shopping for a loan officer for your Oakland County MI home purchase, you need to get a good faith estimate and have him/her go over the figures with you. If you get good faith estimates from more than one loan officer and one of them is much cheaper than the others, you need to ask why. In fact at that point you may want to bring all your good faith estimates to your buyer’s agent and get a second opinion, because there shouldn’t be a major difference in prices.

If you have two good faith estimates and they’re fairly close, don’t choose your loan officer solely on the costs. Sometimes going on the cheap can cost you more in the long run. We recently had a buyer choose to go with her credit union loan officer instead of our preferred lender and it cost her $50/day for each day we went past the to close by date. We went 2 weeks past the to close by date in the purchase agreement- or $700.

Another buyer who recently went with the cheapest lender ended up paying for a second appraisal and the time spent in appraisal review caused the buyer to have to pay for a rate lock extension and for me, his agent, to have to beg an extension from the seller. Thankfully the seller was a live human being- not a bank or a short sale.

Both of these buyers saved a few hundred dollarsuntil the problems started. It not only cost these buyers more in money, but the cost in headaches, stomach aches and stress in general was- priceless.

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Thinking of Buying a Short Sale Listing? A Few Things to Consider

oakland county mi short saleThe amount of short sale listings in the North Oakland County and Lapeer MI area have been on the rise over the past several months. I believe this is happening for a variety of reasons. More agents and attorneys are pushing the benefits of selling via the short sale route over allowing a home to go into foreclosure. Homeowners are hearing the term more often and assume it’s better for them in the long run. Unemployment in Michigan is still high and people are still losing their homes, and for whatever reason more are opting to sell short rather than allowing the house to go into foreclosure.

What does this mean for you, the home buyer? Short sale listings tend to be in better condition than bank owned homes- not always but often. Short sales tend to be good deals, but honestly everything that is selling is a good deal. The regular homeowner/seller has to price their homes like a foreclosure or short sale in order to 1) find a buyer and 2) appraise for that buyer’s mortgage.

The easiest transaction tends to be with the regular homeowner/seller. Bank owned sales tend to be fairly easy to deal with. You may have to wait a little longer for an answer than with a normal seller and you will need to sign a bunch of addenda from the bank/seller and you DO have to sign them and you CANNOT change them.

Short sales– They are a unique animal unto themselves. First you make an offer to a homeowner who will accept, reject or counter. Once you come to terms, that seller will submit the offer to the bank(s) that has the current mortgage(s) on the house and ask for them to reduce the payoff amount(s) to match your offer amount. There is quite a bit more the seller needs to do, but from your perspective this is what basically happens.

Now you wait for 3-6 months. At the end of that time frame the following can happen:

  • your offer is outright rejected
  • your offer price is countered
  • if you asked for the seller to pay some or all of your closing costs those may be countered
  • if you asked for the seller to pay some or all of your closing costs those may be eliminated
  • the offer may be accepted but the seller may need some cash in order to be able to go through with the sale

When it comes to closing costs the banks, in my experience, rarely/never allow more than 3% of your costs to be covered. Often times they eliminate that part of the offer entirely. If you NEED to have your closing costs covered you shouldn’t look at short sales. We aren’t dealing with a logical being at the other end of the transaction. I know that you are really mortgaging those costs. I know that you would have offered 3% or 6% less if you weren’t asking for those costs to be covered by the seller. You can even offer to raise your offer amount and you will probably get shot down.

Sometimes the short sale will be approved but ask for the seller to bring cash to the closing- cash they probably don’t have. The seller may offer to sell you appliances, lawn tractor, etc to cover that cash needed to close. If you are tight on cash to close, you probably shouldn’t look at short sale listings.

How will you feel if you wait 6 months only to have your offer rejected or countered in a manner that keeps you from being able to buy the home and in the meantime the interest rates go up? What if in 6 months the interest rates are 1/2% higher? Or 1% higher? Do you know how much buying power you just lost with that size of a hit?

For More About the Home Buying Process Please Contact

Jackie Hawley
ReMax Encore, Clarkston MI
cell: (248)736-6407
email: Jackie@JackieHawley.com

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Photo courtesy Kate Ter Haar, Flickr Creative Commons

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The Perfect House May Not (Probably Not) Exist

Even with the low inventory in North Oakland and Lapeer County MI, I still consider this a buyer’s market. Prices appear to have stabilized, and in some areas prices look to be increasing a bit and inventory is pitifully low, BUT prices are still low as are interest rates. And there are good houses out there, but if you are looking to buy the “perfect” home there’s a good chance it just doesn’t exist.

A house that sold for $200,000 give or take “back in the day” may go for $110,000 or $115,000 today. And it will probably be in quite decent shape. But it IS a used house. There’s a 50-50 chance it is a distressed sale (foreclosure or short sale), and a homeowner who is looking at losing their home probably isn’t staying on top of maintenance. And quite honestly- there are things wrong with just about every house in every kind of market.

So basically, when you start looking for that great new home, don’t expect perfection. No matter what price range you are in, it probably doesn’t exist. Don’t spend every penny you have to get into the house and don’t max yourself out on what you purchase. You will probably need/want to make improvements/changes/updates to the home you buy. There ARE great deals out there- just not perfect houses.

Jackie Hawley
ReMax Encore, Clarkston MI
cell: (248)736-6407
email:
Jackie@JackieHawley.com

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Lake Orion and Oxford MI Housing Inventory is Low but There are Still a Few Gems if You Look

some real gems in Lake Orion and Oxford MIThe housing inventory in Lake Orion and Oxford MI is currently low. A couple years ago there was about a year and a half’s worth of inventory. Now there’s about a 4 month inventory, and after you toss out the grossly overpriced listings that exist in every market, and the dumps which are a great deal for a very small, specialized sector of the buyer pool, there isn’t a whole lot to choose from.

Today I showed homes to 3 sets of buyers; 1 couple looking for a nice home and needing to keep their house payment under $950/month and 2 investors who want to buy rentals. I admit I only showed each investor 1 house each- 1 was a 2 bedroom for under $60K and it needed absolutely nothing on the interior. The porch could use some boards replaced and paint, but the interior had been gutted and all was new- granite counters in the kitchen and bath, new carpet, nice hardwood floors, new windows, new roof, updated electrical- everything. Lake Orion schools and 5 minutes from I-75. It will probably rent for $900-$1000/month. Not a bad deal.

The other investor looked at a house in Oxford asking $35K. It needs work and she has to go back with someone to figure the extent of the work. Even if $20K is needed you’re still looking at a small payment for a 1400 sq. ft. house on an acre – a house that will probably rent for $1000-$1200/month.

What surprised me the most was the condition of the homes I showed the couple looking for a home. We looked at 5 houses– 1 bank owned, 2 short sales and 2 regular sales. All had at least 3 bedrooms, 2 full baths, basement and garage. 1 was a lakefront. 3 were quite nice and the other 2 would be if they had their basements waterproofed. All of these homes were in Lake Orion and Oxford. Even the 2 houses with water issues in the basements would be pretty good deals if a buyer had the $5K-$10K cash after the closing to have the basements waterproofed. The most expensive house we looked at was $115,000. Taxes ran between $2,000-$3,000. All 5 houses would have sold for over $200,000 in 2004 or 2005. In fact one of them DID sell for over $200,000 in 2002- a couple years before prices peaked.

All in all it was a good day. And it’s nice to know that the small inventory isn’t all fixers.

Jackie Hawley
Keller Williams Realty
cell: (248)736-6407
Jackie@JackieHawley.com

For Buyers

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Homes for Sale in Lake Orion MI

Homes for Sale in Oxford MI

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