Posts Tagged ‘jackie’s pearls of wisdom- buyers’

Oakland County Michigan Home Buyer- Find a Foreclosure Listing You Want? Jump on It!

Dear Home Buyer,

While it is true that we are currently in a buyers market here in Oakland County Michigan if you define a “buyer’s market” as follows: low prices, low interest rate. One thing that is strange about this market is that even though our inventory is low, and half of what is available is over priced, prices are still way down there. So much for the theory of supply and demand!

Despite the fact that demand is greater than the supply, prices are still very low. My buyers for both Oakland County and Lapeer Michigan have been getting great deals for the past couple years, and today is no different. But one thing that is a bit different in today’s market is when you find that “great deal,” you really don’t have time to think about it or continue to look and come back to that dream house.

If you find what you consider to be a great deal, you can believe that somebody else (or multiple somebody else’s) will also find it a great deal. One of the big differences today from the past is there’s a good chance that some of those other competing buyers are investors.

This is especially true with bank owned homes, AKA foreclosures. If you find that perfect home and it is bank owned there is a good chance that you will be part of a multiple offer situation. And when that happens you will more than likely end up paying asking price or over.

Banks tend to price their Oakland County Michigan listings below market value for a quick sale. That may not be good for the neighbors, but it seems to be working for the banks. So if you see that bank owned home that you really have your heart set on, don’t wait. Jump on it with a strong offer or you could lose out.

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I got burned! I’ve heard it from more than one Oakland County buyer lately. They didn’t get the house they wanted. They wrote low and expected the seller to take it- even though the house was properly priced, even though it was a multiple offer situation, even though the buyer could afford to pay over asking price if need be.

One thing these Oakland County buyers had in common – they all blamed their agents. That’s how we ended up working with them.

Unit sales in Oakland County Michigan are up significantly; there is no shortage of buyers to work with. So we have nothing to lose by being blunt. These buyers burned themselves by not writing a serious offer. Maybe their previous agent didn’t educate them? Maybe they didn’t listen to their agent.

Guidelines to making an offer:

1.) Listen to your agent! You hired me to represent you. Listen to my advise. When you find a house you want to buy I will pull comparable sales and go over them in detail with you. I want you to get a good deal; I don’t want you to lose something you have your heart set on because we’re writing ridiculous offers.

2.) Have a STRONG pre-approval letter

3.) Put up a hefty good faith deposit

4.) You’re buying a house- not appliances, furniture, lawn mowers, etc. Don’t muddy up the offer with crap

5.) Make a fair offer. The definition of fair depends on the individual situation. If you are in a multiple offer situation our strategy will be different than if you are the only offer. Short sale offers will be different than bank owned listings or “regular” sales

6.) Did I mention- LISTEN TO YOUR AGENT!!!

Search the MLS for Oakland and Lapeer County Michigan Homes for Sale

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Pre Closing Walk Through- What is it? And Why You Should Do It

The majority (if not all) of the purchase agreements used in Oakland and Lapeer County Michigan have a clause allowing the buyer to walk through the house up to 48 hours prior to closing. I typically like to recommend to my buyers that we walk through on the way to the closing. What follows are 2 examples of why you (the buyer) should take advantage of this clause.

The pre-closing walk through is just to make sure the house is in the same condition as when we made the offer.

Story #1 is a true story about a closing this past January. It was a short sale, vacant house and immediate possession. We showed up to do the walk through the morning of the closing. The alarm was going off (the neighbor said it had been going off all night), and when we walked into the house it was how I would imagine a rain forest. Condensation dripping from the ceiling and drooling down the walls. It was a one story lake front home with a walk out basement. The entire first floor with the exception of the living room were soaked. Almost like it was raining. And the basement was pretty flooded.

Somehow the furnace had been accidently turned off and the hot water line for the bath tub split. When we got there it was spewing hot water and evidently had been for quite a while. Needless to say we didn’t close that day. The seller called his insurance company, took care of the problem and we closed the next week- with new plumbing, floors and a few other things that had been destroyed.

Story #2 is a true story that took place several years ago. This time it was my listing. The seller had strategically placed furniture, throw rugs, ect. over dog pee stains. Bad dog pee stains that had gone through the carpet and into the wood flooring below.

The buyer and seller went to arbitration and the seller won. One of the reasons given was that the seller was giving immediate occupancy and if the buyer had done his walk through, he would have seen the stains and would have had the option to either renegotiate or back out at that time. Even though the seller had obviously gone to great pains to hide the defects.

Would the outcome have been the same with different arbitrators? Hard to say, but in this instant the buyer was SOL.

Above are two very good reasons to exercise your right to walk though prior to closing. I surely don’t mind taking my time to meet you at the house and walk through. It’s for your protection, not mine.

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“Highest” and “Best” Are Not Synonyms

True story:

A friend of mine, who is also a Realtor, wrote an offer on a house for herself. The house is a short sale, and my friend made a fair offer. The listing agent called to tell my friend that there were other offers, and hers wasn’t the highest, and did my friend want to increase her offer.

My friend (did I mention she is an EXCELLENT agent) pointed out that her offer was within 10% of asking price, that the comps bore it out, and it still had to appraise in 3-6 months in a declining market. That she was willing to look at a reasonable counter offer if the lien holders needed a higher pay off. AND that she was willing to buy the appliances or lawn tractor- up to $10,000. She pointed out that this particular lien holder wasn’t receptive to releasing the seller from their responsibility for the deficiency (waive their right to sue the seller in the future) without a note or cash payoff for a portion at close. If the sellers know in advance that they have a buyer for up to $10K of their stuff, it can change the playing field a bit when it comes to negotiating the short sale.

The listing agent came back after meeting with her seller with an accepted offer. They were all in agreement- my friend’s offer wasn’t the highest offer, but it was the best.

The moral of this story:

Everybody has a bottom line, but as long as you meet that bottom line – or come close enough to lower that line- there are other factors important to today’s sellers in Southeast Michigan.

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Land Contracts- Southeast Michigan Real Estate

Over the past couple years I’ve been getting quite a few calls asking about Land Contracts and Lease/Option properties. Many of these callers have recently lost their homes to foreclosure or recently sold via short sale and need a place to live. It is understandable- these people are used to being homeowners and the thought of renting is not an attractive thought.

The other day I wrote a post about Lease/Option purchases and why it won’t work for many of the callers who have been contacting me. This post is an attempt to explain exactly what a land contract is and why that option will not work for most people either.

What is a Land Contract? Basically it’s seller financing. The seller is your bank.

Does this mean I can get in with zero money? You can– but it’s not likely. If you are too high risk for a bank to loan you money, you are high risk for a land contract seller, too. Usually a seller will require at least enough down payment to cover the commission. If the seller is represented by a good agent, the seller will want to see a credit report, proof if income, a reason for your poor credit (otherwise you would probably be getting a mortgage), and then after review the seller may approve you. If the seller does agree to take the risk, he will then determine the amount of down payment required and the interest rate which is usually a bit higher than you would get from a bank. The worse your credit the higher your down payment and/or interest rate will be.

Other things to consider:

If there is a mortgage on the property there is probably a due on sale clause that requires the owner to pay off the mortgage prior to selling.

Typically a land contract is for less than 30 years and there will be a balloon payment at the end of the term. Are you going to be able to get a mortgage for the balance at the end of the Land Contract term?

When you look only for homes offering Land Contract terms you are severly limiting your choices. Is it so bad to rent for a few years, repair your credit, save some money and buy at that time? Your choices will be much broader.

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Lease Option- A Brief Explanation and Why it Probably Isn’t a Good Idea in Southeast Michigan

First- what exactly is a lease/option? It’s where a tenant leases a house with the option to buy at some point in the future at a price decided on today. The lease part is easy- lease = rent. The option part is where some have a problem. Option = $$. You pay for the privilege to determine a price today. Sometimes this is paid up front and surprisingly is called “option money.” Sometimes this is paid to the landlord/potential seller with increased house payments. Example rent is $1000/month, but raised to $1100/month and $100 of that is going toward the option money. Sometimes a combination of the two.

At the end of the option period, you need to perform on the purchase agreement and purchase the house at the pre-determined price and terms. Your option money will go against the purchase. If you decide not to exercise your option, then you lose your option money. There can be some protections written in to the agreement, but good luck enforcing them. This is the way a lease/option typically works.

This is great in a stable market or so called normal market where home prices rise some each year as long as the home is maintained. But right now, we have no clue what could happen over the next few years. We can guess.

At the end of that option period you will probably need to get a mortgage in order to perform on the sale. More than likely one of the conditions of that mortgage will be an appraisal. Will you be in a position to pay the difference if it appraises low? Are you willing to risk your option money?

The better choice for most tenants in this still volatile market is to flat out lease and include a first right of refusal in the lease. You may not want the home after 2 or 3 years. Prices may come down so much you find you can buy something nicer for the same money. Or you may have a change in pay (either way), or a significant change in interest rates, or…

Coming soon- All you ever wanted to know about land contracts.

Please don’t hesitate to contact me for more information about lease/option in North Oakland County or Lapeer County

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In the past it wasn’t uncommon for home buyers in Southeast Michigan to need to sell a house prior to purchasing the new home. “Back in the day” everybody had equity, prices were increasing rapidly, and just like in any market, properly priced homes sold. So there wasn’t a huge risk when the seller accepted an offer subject to the sale of another home. Often called a 72 hour contingency.

Basically the way it worked: Buyer makes an offer with acceptable price and terms and subject to the sale of the buyer’s current house which would need to be listed with an agent. If somebody else came along before the buyer sold his house, the buyer would have 72 hours to perform or back out. If the buyer’s house sold first, then he would just remove the 72 hour contingency clause and proceed to close.

Sellers didn’t have anything to lose. Their house was still on the market, values were going up and it didn’t seem like there were any distressed sellers back them.

Now days we haven’t been seeing 72 hour contingencies at all. Prices are declining and sellers don’t want a 3 day obstacle for a potential qualified buyer.

So- after a 4 paragraph intro we get to the topic of this post. Contingent offers on distressed sale homes, AKA short sales and foreclosures. First of all, banks will not accept an offer contingent on the sale of another home. Banks tend to price for quick sales and aren’t willing to wait for your house to sell first. If you need to sell first, don’t even look at bank owned homes.

I can’t say definatively that absolutely no short sale listing will accept a contingent offer. But I can say the majority won’t. Once the bank approves the short sale they expect to close quickly; they aren’t going to wait around for your house to sell and close. I don’t even know if a bank will look at a short sale with that contingency attached to the offer.  Also, short sale sellers tend to be under the gun to get the house sold. Many are facing foreclosure and time is of the essence.

If you need to sell your current home in order to purchase the next one, the best advise I can give you is to sell first then purchase the next home subject to the closing of your current home. If you do that and are interested in purchasing a short sale, you will more than likely need a place to stay between the sale and purchase.

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