Wednesday, January 30, 2008
It is an abbreviation for Home Owner’s Assocation, which Wikipedia defines as “the legal entity created by a real estate developer for the purpose of developing, managing and selling a community of homes.”
But what is it, really?
I’ve never lived in a place where I was under the auspices of an HOA, so I cannot speak with direct experience. I can only relate what I have learned through experience, both good and bad, on behalf of my clients over the years.
On the good side…
An HOA can protect the value of your property by establishing and maintaining a uniform set of property conditions for your neighborhood. That’s good, in case you get a neighbor who does something with their property which reduces the value of the surrounding properties. For example, if your neighbor wanted to put up a really tall antenna for their amateur radio operations, many HOAs would preclude that. Who wants to look out their back window and see a tall tower, and the associated guide wires to keep it standing straight?
And, many HOAs have terms in them which would make it difficult to run a home-based business when you have many visitors each day. Who wants a “commercial” operation right next door in their own neighborhood? This doesn’t mean you cannot have a home-based business, only that you have to be careful about the volume of traffic it will generate at your home.
On the bad side…
An HOA can sometimes prevent you from doing something which is otherwise good. For example, many HOAs preclude the use of clotheslines or clothespoles in your back yard. Given the concern over energy usage these days, the ability to save some electricity by hanging your washed clothes out to dry makes sense. It’s good for the environment, and it leaves your clothes with a great “fresh” smell! So, why not allow it?
Many HOAs also have terms in them which prevent the use of fences in your yard, (unless required by governmental ordinances, such as around a built-in pool). When it comes to pets, the only option seems to be with the “electronic” fences, which many pet owners see as cruel to their pets. In such a case, a small fenced-in dog run may be a good option, but how to bring it about?
How do you change things?
In many cases, an HOA is run by a board of directors made up of your neighbors. Most HOAs have terms in them which define how changes can be made to the rules and regulations. With sufficient “yea” votes from your neighbors, you can bring about a change in the rules.
If you’re ever in question about your HOA, I’m happy to help understand a situation. I’m not an attorney, so I cannot give legal advice. If it involves any legal interpretation, I would be happy to refer you to a local real estate attorney for advice.
Monday, January 28, 2008
There’s a lesson in all this, I promise you.
In a transitional part of Atlanta, there now stands a brand spankin’ new car wash. It used to be a Burger King, but that closed years ago… and after demolition, this lot sat vacant for several years.
Fast forward a few years, and a sign went up announcing the construction of the car wash. That sign was up for at least a year in advance of the car wash actually being built… so on this busy street - there was NO question that EVERYONE in the area knew a car wash was coming.
So a few weeks ago, they opened for business - all bright and shiny - and offered a grand opening special of $5.99 to wash a car. They had a guy holding the sign out at the street to make sure everyone knew they were open and that a car wash was only $5.99.
Then, the following week, the sign guy was still out on the street - waving the public in - but this time, his sign stated “$4.99″ - instead of the previous week’s “$5.99″. Hmm… maybe they’re making it up on volume, who knows?
Another week goes by, and now the sign guy is holding a sign stating “$3.99″. Do you see a pattern here? Good. You’re paying attention. Because there is one.
The car wash still does not really have any customers that I can see. And I’d be willing to guess that the owners are starting to panic. After all, they probably spent a million dollars building this place.
So here’s my analysis and how it relates to real estate:
The car wash owners obviously realized that the market did not accept their initial price - no matter how much promotion they had done… and they responded with price adjustments.
Home sellers should take note of this market economics fundamental.
However, what the car wash owners have failed to realize is that two miles down the road is a well-established car wash that has been there for over ten years… and they have a $3.00 car wash. So - unless they add more value to their proposition - the public will continue to reject their offer.
And home sellers should not miss this message, either.
As long as your home does not compete in the marketplace, you will not get any takers. And why should you? There’s a ton of competition out there.
So it will be interesting to see what the car wash owners are going to do next. I am sure that they feel like they “need” to get a certain price (just like some home sellers) but whether or not the market agrees with that price is another thing.
So maybe the guy down at the car wash gets it…
Or maybe not.
Folks, if you’re looking to sell your home in this marketplace, realize from the outset that it will not be easy. Gone are the days when buyers will “at least take a look”, and even further gone are the days when “they can at least make an offer”. No, in today’s market, if your home doesn’t offer some incredibly compelling reason for a buyer to even take a look, you have no chance.
Listen to your Realtor. The car wash guy gets it!
Friday, January 25, 2008
There can be several parts to a home inspection, including the general home inspection, well, septic, radon and environmental testing. Depending on the property, the market and your experience in home buying, you may want all or none. I always recommend home inspections, no matter the market or the buyer’s experience. These are the typical inspections:
General Home Inspection. The inspector will:
- Evaluate the physical condition: the structure, construction and mechanical systems.
- Identify items that should be repaired or replaced.
- Estimate the remaining useful life of the major systems (such as electrical, plumbing, heating, air conditioning), equipment, structure and finishes.
- The inspector may also test for radon in air, if you request.
Well Water. Homes may either be on public water or well water. If there is well water, the inspector will:
- Test for bacteria in your drinking water and the presence of radon in water, among other things.
Septic. Homes can either be on public sewer or an individual septic system. The inspection is performed by licensed septic inspector, rather than the general home inspector. A septic inspector will evaluate:
- The use of the current septic system.
- The condition and performance of the septic system.
Environmental Tests. A home buyer may elect to have a variety of environmental-related tests performed, including lead paint, mold, asbestos, and UFFI (Urea Formaldehyde Foam Insulation). Some home inspectors will test for these items but they may also refer you to other companies. Here are some things to consider if you are thinking about having these tests performed:
- Expect lead paint in a home built before 1978.
- Mold is present in every home but people with allergies or with diminished immune systems should be more cautious.
- Asbestos was a common material found in insulating products and is commonly found in wrapping on pipes and water heaters, in floor tiles, shingles, etc. It can be found in many older homes.
How Much Do Home Inspections Cost? Costs for home inspections vary, depending on the size and type of property as well as the number of tests being performed. Expect to pay somewhere around $300 -$500 and up.
Also keep in mind that the inspector(s) may suggest that you ”investigate” certain items further. For example, an inspector may note that there is a foundation crack. He/she will likely recommend that you have a structural engineer analyze the crack for you and determine if you should be concerned or not. This would be an additional expense.
How to select a home inspector
Check with your agent for referrals. While not all qualified inspectors belong to the American Society of Home Inspectors (ASHI), a national organization that enforces a code of conduct and practice standards, their website, www.ashi.org., has a referral service. Your inspector should be licensed to conduct home inspections and should have training and or experience in building and construction standards as well as experience as a home inspector. Here are some questions you should ask:
1. What does your inspection cover?
- The inspector should ensure that their inspection and inspection report will meet all applicable requirements in your state if applicable and will comply with a well-recognized standard of practice and code of ethics. You should be able to request and see a copy of these items ahead of time and ask any questions you may have. If there are any areas you want to make sure are inspected, be sure to identify them upfront.
2. How long have you been practicing in the home inspection profession and how many inspections have you completed? May I have some references?
- The inspector should be able to provide his or her history in the profession and perhaps even a few names as referrals. Newer inspectors can be very qualified, and many work with a partner or have access to more experienced inspectors to assist them in the inspection.
3. Are you specifically experienced in residential inspection?
- Related experience in construction or engineering is helpful, but is no substitute for training and experience in the unique discipline of home inspection. If the inspection is for a commercial property, then this should be asked about as well.
4. Do you offer to do repairs or improvements based on the inspection?
- Some inspector associations and state regulations allow the inspector to perform repair work on problems uncovered in the inspection. Other associations and regulations strictly forbid this as a conflict of interest.
5. How long will the inspection take?
- The average on-site inspection time for a single inspector is two to three hours for a typical single-family house; anything significantly less may not be enough time to perform a thorough inspection. Additional inspectors may be brought in for very large properties and buildings.
6. How much will it cost?
- Costs vary dramatically, depending on the region, size and age of the house, scope of services and other factors. A typical range might be $300-$500, but consider the value of the home inspection in terms of the investment being made. Cost does not necessarily reflect quality. HUD Does not regulate home inspection fees.
7. What type of inspection report do you provide and how long will it take to receive the report? May I see a sample report?
- Ask to see samples and determine whether or not you can understand the inspector's reporting style and if the time parameters fulfill your needs. Most inspectors provide their full report within 24 hours of the inspection.
8. Will I be able to attend the inspection?
- Being there during the inspection is a valuable educational opportunity, and an inspector's refusal to allow this should raise a red flag. Never pass up this opportunity to see your prospective home through the eyes of an expert.
9. Do you maintain membership in a professional home inspector association? Are you bonded and insured?
- There are many state and national associations for home inspectors. Request to see their membership ID, and perform whatever due diligence you feel is appropriate.
10. Do you participate in continuing education programs to keep your expertise up to date?
- One can never know it all, and the inspector's commitment to continuing education is a good measure of his or her professionalism and service to the consumer. This is especially important in cases where the home is much older or includes unique elements requiring additional or updated training.
Renegotiating the Contract. Many buyers attempt to use the inspection to renegotiate the purchase price, which aggravates many sellers. However, if a buyer did his/her due diligence when putting in an offer, then there shouldn’t be too many huge surprises at the inspection and the price should hold. If there are any big surprises, then it is perfectly acceptable for the buyer to request the seller repair the items, reduce the selling price or ask for money in lieu of repairs being made. Getting the seller to actually do the repairs is completely out of the buyer’s control.
As-is Sales and What if the Seller Refuses to Make Repairs? If you’re buying a house as-is, that means that the seller is not making any warranties about the condition of the property. However, that does not mean the seller will not necessarily make repairs or offer to reduce the sales price of the property if a problem is discovered that is unexpected.
For example, a buyer can see for himself/herself that a furnace is aged and that it may have to be replaced. However, if that furnace is only a few years old, the buyer could reasonably expect that furnace to be functioning. Upon inspection, the buyer discovers that the furnace was not installed properly and needs modifications. The buyer can certainly request that the seller make repairs, although the seller may still refuse.
If a seller refuses to make repairs you requested, you have three options:
- Continue to negotiate and possibly give them an ultimatum - if you don’t do X, we’re walking. Only do this if you really are willing to walk away from the deal.
- Accept the property as it is and buy it, knowing that you will have to make the repairs yourself.
- Terminate the contract - you are within your rights to terminate the contract as long as it’s done within the time-frame specified in the contract.
I hope this information is useful to you in your home-buying and home-selling journey. If you have questions about anything in this post, please contact me.
Wednesday, January 23, 2008
3177 Asher, Ann Arbor
You’re invited to visit this great condo in the Berkshire Creek development in Ann Arbor. Contemporary flair, designer décor, and inviting colors greet you upon your entry. The location is fabulous – walk to Panera Bread, Whole Foods, and Barnes & Noble. You’re only minutes to the UM and EMU campuses, the UM, VA, and St. Joseph medical centers, Gallup Park, and the Freeways. There are great views in all seasons, with a huge deck for summer entertaining. The garage is a 2-car in-line design. I look forward to seeing you there!
Monday, January 21, 2008
That sounds ridiculous, even insulting. But there’s no doubt that there is a psychological component to buying a house — and that a lot of negative publicity about the housing market can have an effect on whether you will buy, sell, or sit.
There has been some speculation that the media is usually responsible for the way the market goes. When people hear that the market is going to crash, they freak out and stop buying, which, in turn, causes the market to crash (imagine that!).
In my opinion, much of what happens in the national economy is shaped by the self-fulfilling prophecy of the national media headlines (USA Today, the New York Times, ABC, NBC, CBS, etc.) When you read, day after day, that we’re headed toward a recession, isn’t that what you’d do?
And yet, a review of history shows that the greatest fortunes are begun when “blood is running in the street”. Isn’t that what we have right now?
I’ve written previously about how our local market has fared these recent few years. Prices are down 15-25% from their peaks in 2003-2004. Has this ever happened before? Certainly not in our lifetimes – and, frankly, isn’t that all the history that most of us ever bother to know?
In the world of the major stock markets, when prices decline over 20%, it is what is described as a bear market.
Well, the bear has certainly been growling in our local area! (Either that, or a few ferocious Wolverines – who, by the way, have been known to chase away bears in the wild).
Back to the stock market: When prices decline by 20%, wise investors know that it’s time to take notice for buying opportunities. Wall Streeters use the term “contrarian investing”.
When the stock market value of a company falls below the underlying value of the assets of a company, wise investors swoop in and buy up all the stock they can handle. At worst, they will own assets of a company, which they could later sell off to recover their investment. That’s what’s known as a sure thing.
If ever there was a sure thing in the local real estate market, IT IS NOW!
Oh, sure, you can call me wacky, or a Pollyanna, or worse.
And that’s when I’ll show you how the current prices of homes in our local market have declined below their underlying value.
Talk to a builder (if you can find one who is still in business – is blood running in their streets? Hmmm…..?). Ask them if they can even build a home right now for less than $125 per square foot. They’ll say “No Way!” – not with the ever-increasing costs of concrete, lumber, copper wiring, drywall, asphalt shingles, and everything else that goes into a new home.
So, if a builder can’t build a new home today for less than the prices of some newer (3-5 year old) homes on the market, haven’t we hit our “underlying value”?
Contrarian investors are moving into our local markets in a big way. Shouldn’t you get on board?
Back in 1980, a local newspaper included a headline “Will the last person leaving Michigan please turn out the lights?” Those were pretty bleak times in Michigan – I know, I was there. Doesn’t it remind you of today?
The average price of a home in Ann Arbor in 1980 was in the $60,000s. Last year – 2007 – admittedly, a bleak year for our local real estate market – the average price of a home in Ann Arbor was in the $240,000s.
That’s a pretty healthy increase, huh?
Trust me on this. Five years from now, a few wise people will be chuckling all the way to the bank when they sell off the investment properties they bought in 2008.
Will you be one of them?
Friday, January 18, 2008
This first photo was taken mid-morning following a super-cold night. We had some fog the night before, so the fog froze to the trees. I believe it's called "hoar frost". The whole area was covered in this frost - it was beautiful!
Wednesday, January 16, 2008
A review of our market conditions here in January, 2008, reveals that the same thing is occurring in the Real Estate market, as well. Only, you’re just not seeing the big headlines.
So, let me be among the first in this area to trumpet the following headline:
Seriously, never before in our history has there been such a big sale in the Real Estate market. When has there ever been this many homes available for sale? Never!
Just like in the retail business (when a retailer orders too many of a particular item, they have to lower prices to “move the goods”), the Real Estate market has been experiencing the same thing in our area.
There are many indications that overall prices of homes have come down 15-25% in our region since their peaks of 2003-2004. This is consistent with the retailers’ approach, as we Realtors are trying to “move the goods” for our clients. How? By offering some of the best homes at the best prices we’ve seen in many, many years!
On top of all of this, interest rates continue to be incredibly low, on a historical basis. Just this week, you could get a 30-year, fixed-rate mortgage, for an INCREDIBLE 5.75%.
So, never in our history have we had such a confluence of positives for the Real Estate market – plenty of homes to choose from, fabulous prices, and rock-bottom interest rates.
So, WHAT ARE YOU WAITING FOR?
I know, I know. It’s the economy, stupid (to quote a past President of the United States).
But, back to the matter at hand:
Here’s a chart of the market conditions for Saline, as of mid-January, 2008:
The top line on the chart shows the number of homes available for sale in the Saline area, going back to 1996. The number of homes for sale began to climb in 2004, and is only now showing some signs of a retreat. So, act fast to be sure to get the home you really want, while it’s on the market now.
The lower, blue line on the chart shows the number of homes which actually have sold each month, again going back to 1996. There is a remarkable resiliency in our market, which means that you can’t go wrong buying a home in the Saline market.
I’ve got many other charts like these, including areas like Ann Arbor, and the entire Washtenaw County marketplace. Let me know if you’re interested in a particular area, and we’ll talk.
By the way, I’ll be hosting an open house this coming Sunday, January 19, from 2-4pm, at 1513 White Street in Ann Arbor. It’s an affordable home in the Burns Park school district, priced at $225,000, with 3 bedrooms and 2 full baths. There’s also a walk-up basement, and a 2-car garage. You are welcome to visit!
Monday, January 14, 2008
I received this letter from a client, in response to a phone call to him last week. He is the Sales manager for his firm, which will go unnamed. His message was sent to his sales staff. This is his exact e-mail:
A word about growing your business:
The other day, I got a phone call from my Realtor. How is it that he is "my Realtor"? Really, he's a salesman who helped me with a large purchase five years ago. He's "my Realtor" because he made my purchase easy, because he is likable, and because he does good follow-up. I get a card, a call, or an e-mail from him every 90 days, plus one on either my birthday or the anniversary of my purchase.
Would you qualify to have your customer call you "my car expert"?
When my Realtor called on Wednesday, he got right to business. "The reason I'm calling," he said, "is that I've been looking at whether I can help save you some money on your property taxes."
Do you capture your clients' interest effectively when you call them?
"Based on your State Equalized Value, the government taxes your house as though it were worth $XXX,000. I assumed that, based on market conditions, your house might be worth less than the taxable value, maybe even less than you paid five years ago."
Do your clients believe that you think about their best interests?
"But when I did the research, it turns out that your house is worth $20,000 more than the taxable value - a good bit more than you paid. Your house has done very well."
How do you go about complimenting your clients on their wise choices?
I took the bait. "Wait a minute," I interrupted, "Now, I'm not in the market, but you're telling me that if you were going to list my house today, that you'd list it for $YYY,000?" (That number would represent a profit for me over what I paid). "Yes," my Realtor replied, "that's exactly what I am saying."
Can you draw you clients into the market today, or do you wait and hope that they'll call you?
"The interesting thing," he continued, "is that when I have run the analysis for other clients in Ann Arbor, they've seen market values below the taxable values - so they can make an argument to the assessor for a lower tax bill. And, it means that there are some buying opportunities right now, especially in homes that are a next step up from yours. Would you like me to email you some of those opportunities?"
How often do you ask clients for a sale?
I said yes. Of course, he emailed me before we got off the phone!
Do you follow-through quickly and completely?
"Before I let you go, just one other question," he asked, "I know that you're not in the market at the moment, but I do have a house rather similar to yours - do you know of anyone, maybe somebody you work with, who is looking for a house like yours?"
Are your clients comfortable providing you as a referral?
If you're looking for a house, or looking to market yours, allow me to mention that my Realtor is Vance Shutes. He's an associate broker with Real Estate One, in the Briarwood Circle office. His office number is 662-8600 x430 and his email is email@example.com
Make sure you mention that I sent you - he has a referral program.
Will your clients be your advocate? Do they know about your referral program?
I won't answer the phone if someone calls and tells me that they're checking in. I won't listen if they want to know how they can help. But when a salesman calls me for a reason; with a message; because he can show me how he can help - suddenly I am interested.
Do you have a plan when you make the phone calls scheduled in Rey-Rey, or do you just go through the motions? Are you working smart and growing your business?
Like I said, this is the finest letter I've ever received!
If you’ve decided that you’re tired of the ups-and-downs of the stock market, and are bored with a simple savings account, you might be a candidate to become a landlord. Not everyone has what it takes to be a landlord, but those who do, may find that owning rental property can be a way to build wealth.
In Our Area:
In the larger community of Ann Arbor, with the influence of the University of Michigan, you’ll find more “student rental” properties near the campus, in addition to the types of property you’ll find in Saline.
Before you buy a rental property, you should have a good idea how long you plan to own it. The longer you plan to own the property, the more you'll probably need to invest in maintenance, repairs and improvements. If you're only planning to own a property for five years or less, you'll probably want to avoid making any major improvements unless you're sure you can recoup the cost with a higher sale price.
For me, I made the decision to buy single-family homes for the long term. Here’s a photo of one of my rentals in Saline.
My thought regarding a single-family home like the one pictured above is that “they’re not building any more like these”. Think about it. When you “come of age” and move out of the home you grew up in, where do you go first? Likely to an apartment. If you don’t want to be in an apartment, and want a home instead, your first rental home isn’t going to be a Taj Majal.
So, find a 3-bedroom brick ranch, like those built in the 1950s. It seems that most communities have neighborhoods like this. In Saline, you’ll find these homes around the Pleasant Ridge school, and near the Liberty School. In Ann Arbor, you’ll find these homes near Abbot Elementary, and around Scarlett Middle School.
Be sure the home has at least 1 ½ bathrooms. A garage is nice, but not required. A basement is essential, especially if it is finished (for more living space). Remember, this type of rental property is only going to have about 1000 square feet, so a small, but growing, family will really appreciate a finished basement, and be more likely to rent.
Risks and Rewards:
The primary risk associated with a single-family rental is that a vacancy means NO income from the property. With a duplex or three-unit, you would at least have income from the other unit(s) to assist with your mortgage payment. Not so with a single-family rental. So, you need to be sure that you can handle the monthly payment for a while when the property is vacant.
The upside of a single-family rental is that the increase in value is not entirely tied to the income the property produces. In general, an income property is only as valuable as the income it produces. If you have a 3-unit home, the increase in value will only come at the same rate as the increase in rents. With a single-family home, you can always sell it as a single-family home, should the market for those type of homes really BOOM in value. In the meantime, you can collect your rents, and take advantage of the significant tax benefits.
In a future post, I’ll build on this primer, so you can gain some confidence that you can do this too!
Friday, January 11, 2008
Ann Arbor - 26 homes sold, 27 buyers bought
Saline - 24 homes sold, 17 buyers bought
Ypsilanti - 11 homes sold, 23 buyers bought
Western areas - 7 homes sold, 10 buyers bought
Other areas - 5 homes sold, 14 buyers bought
All together - 73 homes sold, 91 buyers bought
So when you evaluate a Realtor, be sure to ask how well they know your neighborhood!
Wednesday, January 9, 2008
I’ve written previously about the taxable value of your home.
If you are interested in local millage rates, here is the definitive source for 2006. As soon as the 2007 publication becomes available, I will publish it here. Washtenaw County property tax rates begin on page 146.
The millage rate on which your taxes are based is made up of a composite of the amounts charged by the state, county, township, intermediate school and school district. Any requests for millage increases are voted on by us, the voters.
So what will happen to property taxes in 2008?
Could there be a silver lining to the increasing number of foreclosures in Michigan? Maybe. Maybe not.
Last year, The State of Michigan changed the laws allowing foreclosures to be taken into consideration in property tax assessments. Previously the depressed sales were disallowed as aberrations.
The State Tax Commission also changed rules allowing sales studies to be based on one year of sales instead of two. The two year ruling had helped to keep assessments low during periods of rapidly increasing sales prices, but it also kept assessments high during periods of rapidly falling prices.
For more information read the article from the Detroit Free Press.
Combined, these two changes could have a significant impact on assessments, but most home owners who have been in their homes for more than a few years will not see any difference in their taxes because of the current cap on property tax increases.
The State of Michigan also provides a website where you can get an estimate of your property taxes. I haven’t tried this website, so I can’t attest to the accuracy of their estimate.
Finally, here’s a different way of looking at the value of your home.
Monday, January 7, 2008
You couldn’t go wrong with a choice of either the Ann Arbor or Saline public schools!
Friday, January 4, 2008
I was momentarily stunned, but recovered quickly enough to retort “Why, do you need a haircut?”
Tuesday, January 1, 2008
It’s the end of an era for the Michigan Wolverines football team, but at least the Lloyd Carr era ends on a winning note! By a score of 41-35 against the Florida Gators, the Wolverines have won their first bowl game since 2004.
Congratulations to the Wolverines!
We’ll miss you on the sidelines, Lloyd. All the best in your new endeavors!