Michaels Blog

So what's a home seller to do? What does it take to sell a house today?

If your job or life circumstances leave you no alternative other than to sell in this market, you must be prepared to go well beyond the usual feints and gimmicks if you want to get potential buyers in the front door and, ultimately, to the closing table. By all means, feng shui the living room, bury a statue of St. Joseph in the front yard and bake brownies before the open house.

But if you really want to sell the place, you need to think and act like a salesperson. Most important, you must separate your emotional attachment to your family home from your financial interest in your family's largest asset. Selling a house is business, and you must approach the sale in a businesslike manner.

Here are seven points to keep in mind:

1. DON'T WAIT AROUND.

Even in the better housing areas, it's taking a long time to sell houses; and in the hardest-hit metro areas, inventories of unsold homes are stretching well past 180 days.

So, don't try to sit out the market. That's what hundreds of other timid sellers are doing, each of them hoping -- somehow, some way -- that hanging on the sidelines will improve prices and, ultimately improve his or her chances for selling success. It won't. Not if you expect to sell anytime soon. If you want your place sold, the best way to make sure that happens is to put it up for sale.

Obviously, you should take advantage of your local market cycles -- early spring is usually better for selling in much of the country -- but otherwise don't try timing the market. You won't have any better luck than a stock trader who's always holding out for the market highs or lows.

2. FIX IT UP AND CLEAN IT UP.

Buyers are taking your house out on a date. It has to make a good impression.

Don't spend a lot of money -- absolutely no big-ticket renovations -- but do see that everything is in good repair. And give the place a new paint job and a general sprucing up. (Caution: This won't necessarily give you any pricing advantage over less fixed-up places, but it will attract buyers and keep them interested.)

As you get closer to the date that the house actually goes up for sale, start moving out by decluttering the place. No buyer wants to see a house filled to the rafters with other people's things. They want to imagine their stuff filling the place. "Stage" the place with only enough furniture to make it look livable; put the rest in storage.

3. PRICE IT CHEAPLY.

Don't fight the market by trying to price your house at bubble-era levels or by factoring in all those improvements you made. It won't fly.

Set a realistic, salable price on day one. Don't let the house hang around on the market as you gradually lower the price. Forget what you think the house should be worth or what it was worth three years ago. That's not what it's worth today.

Smart buyers will be looking for bargains. So you must set your price below comparable nearby properties. Look at the asking prices of neighboring houses, and set your price to beat them. If prices in your area are generally down 20% from where they were at the bubble peak in 2005, then price your house 25% to 30% below its peak bubble value. Your area down 40%? Be prepared to take just half of what the house was worth three years ago. Yes, it's painful. But if you want to sell, you don't have much choice.

And remember: In much of the country, renting is still a better deal right now than buying. As you try to settle on a price, look at rents on comparable properties. Buyers are not likely to be counting on huge price appreciation, as they did during the bubble, so they may be less willing to take on the higher monthly costs of home buying and owning. You must set a price that makes someone's prospective mortgage and home-owning costs look like a better deal than a month's rent.

4. HIRE A TOP REAL-ESTATE AGENT.

Get the best, most aggressive selling (listing) agent you can find.

When everything was selling before it even hit the market, of course, you didn't need the best. You just needed the cheapest. But not these days.

Fortunately, in this market, real-estate brokers are even more anxious than you. They're eager to get whatever work they can, so don't rely on your cousin with the real-estate license or your best friend's wife.

Ask, instead, for the local real-estate office's top salesperson. All offices have one or two sellers who greatly outperform their colleagues. That's who you want.

Interview various agents and insist that they present you with a well-conceived marketing plan that goes way beyond the usual Internet page, one or two open houses and a yard sign. (Think about using a professional photographer for multiple shots on the primary Web listing, your house as the featured "home of the week" in the local newspaper, a decorating segment on a morning chat show, a stop on the local garden club's spring tour.)

Sellers of higher-end properties should be able to negotiate a lower commission percentage, but this is no time to quibble over a couple of percentage points. Also, offer the agent a big bonus if he or she sells the house in 30 days or at your asking price. Offer other agents bonuses if they bring in the ultimate buyer.

5. PROMOTE. PROMOTE. PROMOTE.

Don't rely on the agent to do all the work. The agent should pay the usual marketing costs, but you should be prepared to pony up for extras, especially if you insist on more expensive or untraditional promotions.

You want the house listed regularly in local newspaper classifieds and, if it's a special, high-end property in a desirable location, in national publications, too.

Make sure your house is on the leading real-estate Web sites; Trulia, Zillow, Cyberhomes, Eppraisal and Realtor.com are some of the top ones.

Beyond that, get really creative. Advertise in corporate newsletters and intranet listings. Check in with local relocation firms that help transferring corporate executives find new homes. List the house on eBay. Put it on Craigslist. Put it in your church bulletin.

Trophy house in an upscale neighborhood? Hire a string quartet for the open house. Something a bit more midmarket in a family-friendly subdivision? Put a clown on the corner handing out brochures.

6. PLAY THE BANKER.

As bad as things are, there's one big factor in your favor: the tight credit market. If you have no mortgage you have to pay off, your strongest selling point might be your ability to finance all or a substantial part of a buyer's purchase.

You're a lot more flexible than a bank that has the Federal Reserve looking over its shoulders, so you might even be able to charge a higher interest rate than a commercial lender as well as command a higher sale price. (You'll need a real-estate lawyer to make sure everything is done to protect you and an accountant to set up a payment system.

Worst case? Your borrower defaults and you take the property back. And sell it again.

7. TAKE THE OFFER.

If any qualified buyer comes in with a reasonable offer, be prepared to accept it.

You don't want to lose the deal by digging in your heels over a few dollars. Every real-estate office keeps records that show the percentage difference between asking and selling prices, so it's easy to figure what's an appropriate offer and what's not.

Negotiate, of course, but recognize that the buyer has a lot more clout than you do. Your house, as wonderful as you think it is, is worth only as much as someone is willing to pay for it.

And that, unfortunately, will probably be a lot less than you think.

IMPROVE PERSONAL CASH FLOW

One commonly overlooked form of "predatory lending" is when banks and mortgage companies repeatedly encourage people to take out larger mortgages and home equity loans for "debt consolidation" or to free up your cash flow by basically consuming your home equity. This often results in spreading car loans and credit card balances over 30 years with no real plan to help you become debt free or achieve financial freedom. Unlike many traditional bankers and brokers, mortgage planning  professionals help you conserve your home equity, not consume it. This involves helping you implement financial strategies that will improve your personal cash flow while helping you achieve financial freedom and become debt free. Develop a Personal Cash Flow Improvement Plan: The best way to approach cash flow improvement is by reexamining your spending habits and the way your monthly cash flow works. This doesn't necessarily mean that you need to spend less or earn more. It just means that you need to spend your monthly cash flow differently. You see, most people who want to improve their cash flow can do so by just managing their cash flow differently. Mortgage planning professionals help you establish a financial reserve account specifically to prepare yourself for unexpected financial obligations. This will enable you to pay cash, instead of using credit cards, for everything such as home improvements, cars, furniture, vacations, children's education and other living expenses. "Exotic mortgages" such as interest only loans and deferred interest option ARMs represent up to 50% of all new mortgages in some local markets. These loans can be very dangerous unless they are used as part of a viable financial strategy. Mortgage planning professionals help you determine when these types of loans make sense for your individual circumstances. Furthermore, mortgage planning professionals help you implement viable financial strategies to improve your personal cash flow without endangering your financial future. Implement the Plan of Action: There is a reason that professional athletes have coaches. No matter how good the athlete is, the coach can help keep them accountable in identifying weak spots and improving their performance. You can also benefit by having a team of "financial coaches". Mortgage planning professionals are able to "coach" you in implementing your cash flow improvement plan. Mortgage planning professionals also work in a team environment with CPAs, CFPs, attorneys and other financial professionals in order to help you better achieve your goals in life. Review and Modify the Plan of Action: We all experience changes in our lives that involve our income, career, family, health, lifestyle, etc. Mortgage planning professionals help you review and make modifications to your cash flow improvement plan as changes arise in your personal and financial situation. Additionally, there may be new types of mortgage planning products and services that could help enhance your cash flow situation. The plan review and modification is often referred to as an "Equity Management Review", or an "Annual Mortgage Review." Contact Michael Price and learn the difference between getting a loan and intergrading your overall financial plan into your mortgage.

Governor Granholm Passes Michigan Real Estate Property Tax Relief

Sunday, April 20, 2008

Governor Granholm signed legislation allowing Michigan property homeowners to keep two prinicipal resident exemptions for property still on the market after the seller has moved elsewhere in the state.  The signing of this legislation is a huge step in aiding struggling sellers who have had homes on the market for over a year and have lost their prinicipal residence status on that property. 

Prior to this legislation, if a homeowner still owned two homes and May 1 rolled around, the homeowner would lose their homestead credit and property taxes would go up nearly 1 1/2 times what it was as their principal residence.  Now homeowners in Michigan can keep two properties homesteaded at the same time, receiving a tax break on both properties.

House Bill 4215, now Public Act 96 of 2008  sponsored by Representative Ed Gaffney enacts that the seller can retain an additional exemption for up to three years on property previously exempt as the owner's principal residence if the following circumstances are met:

       1. The property is not occupied
       2. The property is for sale
       3. The property is not leased or available for lease
       4. The property is not used for any business purpose              

Retention of an existing homestead credit for an unoccupied home that is currently for sale would offer relief to sellers who have had to relocate for any reason.

Download Form #4640

Understanding the Higher Loan Limits

We have seen a whirlwind of legislative activity these past few weeks! There is much confusion surrounding the recently passed Economic Stimulus Package and higher loan limits. Unfortunately, the new law can be confusing to decipher, and not everyone will benefit. For this reason, we have provided an outline below that clarifies what this new law means for you and how you can benefit from the higher loan limits.

Description and Overview:

An economic stimulus package just passed Congress on February 7, 2008 and was signed into law by the President on February 13, 2008. This new law is effective immediately and includes a temporary increase in both the FHA and conforming loan limits to as high as $729,750 in high cost areas. This means that the interest rates on many mortgages will go down because these loans are now eligible to be purchased by Fannie Mae and Freddie Mac or insured by the Federal Housing Administration (FHA). Previously, the FHA was only allowed to insure loans with balances lower than $200,160 - $362,790, depending on the county where the property was located. Also, Fannie Mae and Freddie Mac were only allowed to purchase loans with balances at or below $417,000. This resulted in limited options and higher financing costs for those with loan balances above these limits. The new law substantially increases these limits in high cost areas and opens up new options and lower financing costs for many people.

How to Determine "High Cost" Areas

There are two things you must know in order to determine if you are in a high cost area:

1. Understanding the Formula

If 125% of the local area median home price exceeds $417,000, the temporary loan limit would be that 125% of the median home price with a cap of $729,750. Here are three examples to illustrate this concept:

• If the median home price in your area is $225,000, 125% of that number is $281,250. This is below the current $417k conforming loan limit. Therefore, the conforming loan limit in your area will not change. However, if $281,250 is greater than the FHA limit in your county, your FHA limit will go up to $281,250.
• If the median home price in your area is $375,000, 125% of that number is$468,750. This is above the current $417k conforming loan limit. Therefore, the conforming loan limit in your area WILL change and go up to $468,750. This number is also higher than the highest FHA loan limits, so therefore your FHA loan limit will also go up to $468,750.
• If the median home price in your area is $650,000, 125% of that number is $812,500. This number is greater than the maximum cap of $729,250. Therefore, the conforming loan limit in your area will increase to highest allowable amount under this new law which is $729,250.

2. Determining the Median Home Price in Your Area

As required by law, on March 6, 2008, the Secretary of Housing and Urban Development (HUD) published the median house prices and new loan limits for the various areas across the country. Contact me today and I'll research your info and let you know exactly what the median home price and loan limits are in your area and how you can benefit from this information.

What do all the dates mean?

There is some confusion because the bill has a provision that says the higher limits are only effective for loans originated between July 1, 2007 and December 31, 2008. In short, the reason it is effective beginning July 1, 2007, is because the credit crisis started to unfold in July and August of 2007. Mortgage market conditions rapidly deteriorated almost overnight. Many secondary market investors suddenly refused to purchase loans that couldn't be sold to Fannie Mae and Freddie Mac. (For more info on how this process works, please see the article entitled Saga of the US Mortgage Industry.)

Unfortunately, many mortgage banks had already funded these loans in their own portfolio or through their warehouse lines of credit. Their intention was obviously to sell these loans on the secondary market after the loans were funded. However, the credit crisis prevented them from doing so, and they were stuck holding these loans in their portfolio. The July 1, 2007 date in the bill is designed to allow these lenders to unload these mortgages and sell them on the secondary market to Fannie Mae and Freddie Mac.

However, the July 1, 2007 date has no bearing whatsoever on new refinance transactions! In other words, it doesn't matter when the loan you are refinancing was originated. The old loan could have been originated in 2005, 2006 or anytime before or after July 1, 2007 and it would have no effect whatsoever on your current purchase or refinance transaction. If you are financing a new loan today, whether it is a purchase or refinance transaction, that loan is subject to the new limits set forth in the bill.

The other date of December 31, 2008 means that the old limits will go back into effect after this year. In other words, now is the perfect time to buy a new home or refinance your mortgage because after this year, your costs will be higher and your options more limited again.

When does this all go into effect?

Immediately! However, Fannie Mae, Freddie Mac and various lenders have different policies as to how these loans are priced and underwritten. That is why it is imperative that you work with a mortgage lender who practices the mortgage planning approach and who is committed, qualified and equipped to give you timely information and expert guidance every step of the way.

Contact me today for a complimentary consultation. I can look up the new loan limits in your area and see whether you can save money in any way. Also, please pass along this update to anyone you know who may be able to benefit, and I'd also be happy to look up the new loan limits in their area and discuss with them whether they could save money.