Is the real estate market in a state of limbo? “How
low can it go”? How long will it last? What is causing it to drop? Is
it a buyers market or a place to avoid? What’s my house really worth?
Having trouble making my payments what are my options? If I call one
the “We buy houses ads” will they really buy my house?
Is real estate still a good investment? On an
average home values nearly double every 10 years. During the last
three decades home values have gone up on an average of 6.6% per year.
And since most buyers put only a small percentage down their return on
the initial investment is much higher.
What is going on with the real estate market?
Without a doubt the real estate market has changed and the change has
caused a major decline in home values in many market areas. Area homes
are for sale for sometimes 3 years without selling yet some are
selling in a week. The average seems to be about 180 days. There are
more homes for sale than buyers. . In Macomb county Michigan there are
10,000+ homes on the MLS and another 6500 in neighboring Oakland
county plus a large number being sold by owner. This means buyers are
going to be able to pick the best price and the best house. If you
make your house fit both of those criteria it will be gone in a week
What is a house worth? Same as always, it is
worth “whatever someone will pay for it” those that argue this point
are the ones that can’t sell their homes. Best way to figure your best
price is to use “sold” comps of similar houses in your area
What will make my house sell? The answer is
really not that difficult. We cannot change the trend but we can react
to it. Houses are selling and people are buying. If you want to be the
one that sells their house you have to respond to the market. Not only
do you have to know what people will pay, you also have to have your house
in pristine condition. Your house has to ”wow” the buyer. When they
walk in they have to immediately be impressed. If they see problems,
it is on to the next house. If you are hesitant to put money into a
property because you are afraid you won’t get it back be prepared to
sit on the property for awhile
Should I list it with an agent or sell it myself?
You can do either or both. List it with and agent but retain the right
to sell it on your own. The market is slow so many agents have scaled
back on their time and effort to get a house sold. Before you sign
with an agent ask to speak to some of the others owners he has listing
with and see what effort he is making. The best exposure you can get
is on the agent’s MLS list. You should require it be placed on several
multi listing. In the Detroit area list it on the Macomb, Oakland and
Wayne county MLS. If you are going to sell on your own contact a title
company for help and an attorney is highly recommended. Agents will
charge between 4 & 7%. You might consider offering an extra $1000 to
What kind of price can I get from the “We Buy
Houses” or “1800buykwik” type buyers.? At first their offer might
seem impossible to take but if you will take the time to do the math
it might not be a bad deal. Start with what you really think the house
is worth. Take away the 6% agent fee. Then since the offers you will
likely get will be less subtract that amount. The buyer may ask you to
pay part of closing cost so take that amt off. Figure your monthly
taxes, insurance, utilities, and upkeep and take one or more months of
those off (avg. sale time 180 days) so consider taking that off and
compare those prices. They need to make money too so what they offer
should be at least considered. . How quick do you want to sell? Some
have had their home on the market for 3 years.
When will the market go back up? A date is hard
to predict but there are signs to watch for. When the rental markets
stop offering special; when the number of rental ads start to decline;
when apartment start raising rents; when builder start to build again;
when more job opening appear in the paper. These are all good signs
things are starting to turn around. When enough people more from the
area that employers now can’t find workers they raise the salary
creating a new group of home buyers.
Should I sell or rent? Renting makes sense if
the market will come back and you can afford to wait. You need to
analyze your monthly holding costs and compare them to the income
first. Costs include: Loan payments, taxes (use the non homestead
rate), Insurance be sure to change from a homeowners), utilities
(unless the tenant pays (be aware if water is not paid it becomes a
lien on the property), upgrades (paint and carpets if needed to rent),
landscape (cutting and snow removal), repairs, advertising, Landlord
registration and inspections, legal, and misc. expenses. Then do you
have forms needed, an advisor can help, do you know the laws in your
area. Do you have the temperament to be a landlord? Do you know what
record keeping has to be done? Will you have to pay taxes on the sale
and on rental income? You need to expect some vacancy time and
expenses during turnover of tenants. Will you have the time & shills
to do repairs? Do you have access to credit and criminal reports? Do
you have a handyman you can use? Renting can be a good alternative if
you are prepared. You can also turn it over to a professional manager
for about 10%
Is there money available to borrow? At what rate?
In 2000 there was some $4 billion loaned out in home equity loans.
During the first 6 months of 2006 borrowers pulled $2.2 billion out of
their equity, but in 2007 the number was only 200 million. In metro
Detroit the home equity financing market as dried up. In the early
2000 this money was used for almost anything but when the house values
took a dive that market disappeared. The loss of these funds has had a
ripple effect across the country. People just aren’t spending money so
manufactures and stores also feel the pinch and lay off people making
it harder for that group to purchase quality products. Some gurus are
predicting housing prices will continue to fall. Recently equity loans
were available at 4% now they run about 7.64
What are lender looking for now?
Credit scores are more critical then ever. January lenders
were requesting a 620 score. In May one had to have 68- to
be considered . What is a credit score and how is it
assigned? About 300 items are considered to arrive at your
score. And it tells lenders about you financial stability at that give
point in time. Can I raise my score? Yes, first get
a copy of all three reports and check them for mistakes. The older
your credit the higher the score, so don't discard old cards. Avoid
being late with your payments. Keeping your credit below half of the
limit will help/ Keeping it below 30% of it limit will help even
more/ Pay off the balance on some cards.
How low have house prices dropped? Some home
have dropped 20% in value over the last 6 months. Houses once
appraised for $380,000 several years ago recently sold of $285,000.
Comerica and Chase banks no longer loan out 100% of a house’s value
but limited it to 90%. Lower home prices have also push homeowner out
of qualifying for home improvement loans further hurting the economy.
The average home in The Detroit area is predicted to lose about 25% of
it’s value when it is all over. Currently prices are down about 14%.
Detroit, Livonia, and Dearborn are listed as some of the riskiest
markets to invest in. On the other hand banks are looking for good
borrowers and that money is available. Shop around for the best deals.
Bottom line: Can one make money in real estate?
People are continuing to make money and you can also. The key is to
make it when you buy not when you sell. Don’t pay too much and
determine what type of investor you want to be, Will you be a
landlord, rehabber selling retail, wholesaler, note buyer, money
lender, etc. Joining a local investors association can be very
Looking for investment property visit our K-Lin
site & fill out our “buyers
Have a question click on “Quick