Friday, February 29, 2008

Our Long Winter of Discontent

It’s snowing again. And so continues our long winter of discontent here in Michigan.

So far this winter in Saline and Ann Arbor, we’ve had a lot of snow. But by the end of February, most of us are thinking about Spring. Our typical winter gives us about 42” of snow. Global warming, anyone?

While the snow is beautiful, it tends to make driving more difficult – especially when buyers want to get out to see homes. So what happens? We run low on salt available for our roads. Meanwhile, Detroit sits on top of huge salt mines. Go figure.

The largest city in Michigan has become a national joke due to a mayor with complete disregard for the station of his office. The will of the voters? The mayor claims to “be about the work of the people.” Maybe the judiciary will have something to say about that. Still, the city serves as the butt of jokes on late-night talk show monologues, and Michigan suffers further in public image.

So what are we to do on snowy evenings? Order out for Pizza, and swizzle some adult beverages to forget the problems going on all about us in Michigan. But wait! Now we find that pizza prices will be rising substantially. What’s the reason? Oh, wait! I know! We have such a demand for corn (for our E-85 vehicles) that the wheat crop is declining sharply. Man, those ethanol vehicles sure taste great!

Last Sunday, as many local Realtors® prepared for their open houses later in the day, we pick up the local newspaper to catch up on the news. There, above the fold on the front page, is an article about foreclosures remaining on a record pace in our County. Thanks, newspaper! That sure encouraged buyers to get out to visit open houses. Nice way to scratch the back of one of your largest advertising revenue sources. We’ll think kindly of you as we wad up your publication to serve as kindling in our fireplaces while we dine on pricy pizza. Besides, the future of Real Estate advertising lies on the web. Goodbye, newspaper!

Meanwhile, the general populace cries out for some good news – in our long winter of discontent.

Wednesday, February 27, 2008

Lockbox? What's that?

When your home is listed for sale with a Realtor®, other Realtors® will be interested in showing your home to their prospective buyers. It is best that you are not at home during any showing. If you’re in your home during a showing, the prospective buyer will feel uncomfortable about the intrusion into your home, even if it was cleared by their Realtor®. The best way for a showing to occur is for you to allow the placement of a secure lockbox on your home.

In the Saline and Ann Arbor area, there are a couple of lockbox options which most Realtors® use on a regular basis. The first option is an electronic lockbox (which most Realtors® refer to as an “iBox”).

iBox Supra electronic KeyBoxes are used on over 2.3 million homes nationwide.

The iBox works as follows:
1. It usually hangs on your front door knob, or a secure home feature near the front door (perhaps a water faucet or a porch railing).
2. One of your front door keys is kept inside the lockbox.
3. Realtors® will open the iBox using their own security device. The security device must be updated each day by the Realtor®, so you are assured that only a Realtor® can open the lockbox.
4. After the showing, the Realtor® will replace your home key inside the iBox, so it is available for the next showing.
The next option is a combination lockbox. There are several types of combo boxes – alphabetic rotating dials, numeric rotating dials, and numeric push buttons.
Supra - Push Button Portable Lockbox -- Push-button key boxes make access easier, Codes are easily changed, Great during escrow for appraiser, termite, repair, etc. Trusted by real estate agents for over 40 years.

The combo boxes work as follows:
1. As with the iBox, it usually hangs on your front door knob.
2. One of your front door keys is kept inside the lockbox.
3. Realtors® will open the combo box using the combo provided by the listing Realtor®. Note that once an agent knows the combo for the lockbox on your home, they can re-enter at any time. Note also, though, that no right-minded Realtor® would ever jeopardize their professional status by an un-authorized entry of your home.
4. After the showing, the Realtor® will replace your home key inside the iBox, so it is available for the next showing.

So when it comes to putting your home up for sale, be sure to ask your Realtor® about the lockbox they will be using on your home.

Monday, February 25, 2008

What Every Seller Should Know - Part III

Once you have an accepted offer on your home, there are a few things that you should know. For the most part, these are general ideas, applicable to most forms of real estate. Check with your Realtor® to be sure.

1. The Earnest Money Deposit

When the prospective buyer writes an offer to purchase your home, they are requested to provide to their representative agent an earnest money deposit (EMD). The amount of the EMD can give you, the seller, an idea how serious the buyer takes the offer. The more the EMD, the more serious the offer. In general, and EMD of less than $1000 is considered to be not a serious offer, but your Realtor® can advise you how to proceed with the offer.

2. Clouds on the Title

The title to your property is recorded in the public records. A “cloud” on the title to your property is a charge against your property which has been filed in the public records. Examples of common clouds are unpaid property taxes, mechanic’s liens (an unpaid bill from a contractor who did work on the property), and unpaid Federal taxes.

The buyer will expect you to provide a clean title to the property, so you will be responsible for removing any clouds. Your Realtor® and your attorney can assist you.

3. Contractor’s Inspection

Before the buyer prepared their offer on your property, they reviewed the “Seller’s Disclosure Statement”. Still, the buyer will likely put a contingency on their offer that your home be subjected to, and the buyer accept the results of, a thorough inspection by an experienced home inspector. In many cases, the inspector is a former builder. If there are any “surprises” which result from the inspection, you may need to bring about some repairs to your property. Your Realtor® can best advise you here.

4. Pest Inspection

In addition to the contractor’s inspection, your buyer will likely insist on a pest (termite) inspection. While a contractor’s inspection might kill the deal (if major problems are discovered with the home), it is unlikely that a pest infestation will kill the deal. Most likely, the buyer will insist that you, the seller, provide a “clean bill of health” for the home prior to closing the deal. In the worst case, this would likely take the form of a total fumigation of the property.

5. Real Estate Transfer Tax

On January 1, 1995, the State of Michigan increased the real estate transfer tax, taking the total transfer tax from 55 cents per $500 value of the sale to $4.30 per $500 value of the sale. As the seller, you pay this transfer tax when the title transfer is recorded in the public records.


I hope that this series of three reports has been helpful to you in understanding what you must know when you sell your Washtenaw County home.

If you have any questions about any of the topics covered in these reports, please let me know. I’m here to serve you.

Friday, February 22, 2008

What Every Seller Should Know - Part II

While your your home is up for sale, there are a few things that you should know. For the most part, these are general ideas, applicable to most forms of real estate. Check with your Realtor® to be sure.

1. Curb Appeal

Curb appeal is the term used for the first impression a prospective buyer has of your home. Approach your home from both directions on the street and the sidewalk. What do you see? Is it what the modern home buyer wants to see? Is the lawn mowed, and are the trees and hedges trimmed? Are your outside windows clean and shiny?

2. Inclusions / Exclusions

When you list your property for sale, you must determine what you want to include and exclude from the sale. If the removal of an item will damage the property, it is considered a fixture, and would otherwise be included in the sale, unless you specify otherwise. For example, if you have a stained glass window in the dining room that is a family heirloom, or if you have a flower or shrub that is special to you, you may want to exclude it from the sale.

On the other hand, personal property is an item that may be removed without any detriment to the property, so you may take it without specifically excluding it. For example, if you want to leave your washer and dryer for the new owners, you may specifically want to include them in the sale.

3. Seller’s Disclosure Form

When you sell your home, you must prepare a “Seller’s disclosure statement” form. This statement is your disclosure of the condition of, and information about, your property. As the seller, you are not expected to have any expertise in construction, architecture, engineering, or any other specific areas related to the construction or condition of the improvements on the property or the land. You disclose the information with the knowledge that even though it is not a warranty, you make the representations based only on your own knowledge.

4. Agency Disclosure

All real estate licensees act as agents or sub-agents of the home seller or buyer. The subject of agency could fill a volume, so this guide will only briefly cover the main issues.

In Michigan, there are three primary forms of agency in real estate. The “seller’s agent” is the most common – as the licensee represents the home seller’s best interests. The “buyer’s agent” has become equally common, as the licensee looks out for the best interests of the home buyer, perhaps at the expense of the seller. The “dual agent” is the licensee who lists your home, and then represents the home buyer, as well. A dual agent must be disclosed to both parties, who agree in writing, their consent that the dual agent is looking out for both parties’ best interests.

5. Effective / Efficient advertising

Effective means “doing the right things”, while efficient means “doing things right”. When it comes to advertising your home for sale, do you know the difference? Your Realtor® does, and can design an advertising campaign for your home which will result in direct interest from qualified buyers.

6. Financing Options

Many prospective buyers for your home don’t know much about financing – how or where to get the best mortgage. Your Realtor® knows just about all there is to know about financing. The Realtor® knows how to work closely with all kinds of financial institutions, and knows their methods and requirements. The Realtor® can also get the buyer to the right lender for the specific financing needs. Did you know that one local lender has 22 different financing options for the purchase of a home?

7. Qualifying the Buyer

How do you feel about discussing your finances with a stranger? About the same way that most home buyers do, too. Your Realtor®, as a third party, has been specifically trained to ask just the right questions to determine if the buyer is qualified to purchase your home, without unnecessary prying into the buyer’s financial situation.

8. Environmental Issues

In Washtenaw County, there are at least four environmental issues that you must be aware of when selling your home:
1. Do you have an underground oil or gas storage tank? If so, you may have to dig it up before you sell.
2. Do you get your water from a well? Has the water been tested?
3. Do you have invisible radon gas in your basement?
4. Does your furnace, water heater, or gas stove give off carbon monoxide (CO) gas?

Each of these four issues will be reviewed during the contractor’s inspection (covered in part III – my next post).

9. Closing the Deal

How good a salesperson are you? Getting a reluctant and indecisive buyer to make a decision will be the test. Saying just the right thing, and knowing when not to say anything, can make a big difference. Successful selling is an art and a science. And since buying a home is the biggest investment most of us ever make, highly sophisticated sales techniques are demanded. This is where your Realtor’s® specialized training and experience really pays off.

Wednesday, February 20, 2008

What Every Seller Should Know - Part I

Before you think about putting your home up for sale, there are a few things that you should know. For the most part, these are general ideas, applicable to most forms of real estate. Check with your Realtor® to be sure.

1. Selling is a 4-step process

Sale <-> Offer <-> Showings <-> Competitive Price

A: In order to get a sale “A”, you must:
B: Get an offer. In order to get an offer “B”, you must:
C: Get showings. People do not buy a home without seeing it,
at least once (usually twice). In order to get showings “C”, you must:
D: Have a competitive price. Your Realtor® can help you price your home
competitively, while earning the top dollar for you. If your price is not competitive, prospective buyers will not even look at your home, since you cannot be objective about the price of your own home, and they do not want to insult you with a low (but fair) offer, when there are other, more realistically-priced homes available.

2. The Seller’s Job

Your job, as the home seller, consists of two critical tasks:

A. You must price your home competitively, and
B. You must “stage” it well (in other words, make it look its best for prospective buyers).

If you, the seller, do your job well, your Realtor® will be more able to do their job well – get your home sold for the most money in the fastest time possible.

3. The Market Analysis

A Comparative Market Analysis (CMA) gives you a range of value that a ready, willing, and able buyer may pay for your home in a competitive market. If you price your home above the CMA range, you risk ever getting a sale (based on the 4-step process described above). If you price your home in the CMA range, you are doing your job of pricing your home competitively.

4. How Much Is Your Time Worth?

Selling a home looks easy. But if you stop to add up all of the time, effort, and money put into advertising, phone calls, showings, paperwork, negotiating an offer, dealing with lenders, title companies, building inspectors, obtaining public records, and shouldering the liability of the sales process, you quickly find that the Realtor® earns their commission at a fair wage.

5. Third-party Negotiators

When an offer is received on a home, there is likely to be several thousand dollars between your asking price and the offered price. Should you stick to your guns? If you do, you may lose the sale. If you don’t, you may cheat yourself. This is likely to be a time of compromise, of give-and-take. But knowing how much to give, and whether to give at all, demands knowledge and negotiating skill. The fact is that you are in an awkward position to best advance your own interests.

At this point, your Realtor’s® advice is invaluable. As a third party, your Realtor’s® objective viewpoint will be reassuring to the buyer. And as a seller, you’ll have an experienced professional in your corner to bargain for you.

6. Cooperating Brokers

Did you know that there are over 1100 licensed Realtors® in the Ann Arbor Area Board of Realtors®? When you list your home for sale with a cooperating broker, you immediately gain not just the listing broker and their agents, but all those other 1100 salespeople working to help sell your home. When you consider the commission paid, how could you hire 1100 experienced salespeople to work for you at the same total compensation?

7. Improvements That Will Pay Off

There are two primary improvements that will have an immediate positive impact on selling your home – the condition of the kitchen and bathrooms.

In both cases, make sure the rooms are clean and freshly painted – preferably white, or a slight off-white. Make sure the faucets work, with no drips. Make sure the sink drains do not leak – and, by all means, do a spotless clean-up job in the cabinet under the sink. Clean the windows and curtains, and clean the light fixture. It might help to put in a brighter light bulb, too.

Monday, February 18, 2008

What it means to be an Associate Broker

When you see the term “Associate Broker” after my signature, what does that mean?

In each Real Estate sales company, there can be one, and only one, Broker. In my case, the Broker is “Real Estate One”, a Michigan corporation. Yes, an inanimate corporation can be a Broker – Michigan allows such a designation. For anyone else at Real Estate One who wishes to earn their Broker’s license, they must submit to being an “Associate Broker” of the primary Broker.

An Associate Broker is the term for the type of real estate license which I hold in Michigan. A real estate license, of some type, is required in the State of Michigan if you are to be involved in the business of real estate sales. Anyone can sell their own house without a real estate license, but to be involved as an agent of others in the sale of their real estate, a license is required.

So what does it take to become a real estate Broker?

According to the requirements of the Michigan Department of Labor & Economic Growth
Bureau of Commercial Services - Licensing Division, Board of Real Estate Brokers and Salespersons, the following are the requirements to become a Broker / Associate Broker:
1. Submit proof of 90 clock hours of approved classroom hours in real estate. Nine of the 90 clock hours must be instruction in civil rights law and equal opportunity in housing. The 90 hours are in addition to the hours required to obtain a real estate salesperson's license.
2. Submit proof of three years of real estate experience. Experience gained while licensed as a real estate salesperson is verified by past/present employing brokers.
3. Successful completion of the Broker’s Examination.
4. Candidates receive a Broker’s license application with their passing exam scores.
5. Once licensed, the licensee needs to complete at least 6 hours of continuing education each year. Thus, during the regular three-year renewal period the licensee will need 18 hours of courses.
6. There is no reciprocity between Michigan and any other states. All applicants must meet the full Michigan requirements.
7. Both real estate broker licenses and salesperson licenses expire on October 31st. They are valid for a three-year period. An agent may renew an agent license between November 1 and December 30 by paying a late penalty in addition to the regular renewal fee. They may not legally practice until the fees are paid and continuing education courses are completed.

What does this mean to you?

A Broker’s license demonstrates a long-term commitment to the business of real estate sales. With the additional experience (3 years) and education (90 hours) beyond just a salesperson’s license, you are assured of gaining the most advantage in your real estate experience. As I often say, “Let my experience make yours better”.

Be sure that your agent is an Associate Broker.

Friday, February 15, 2008

What's That Smell?

Oooh, that smell! Can you smell that smell?

Other than being a great song from Lynrd Skynrd, it’s not something we, in the Real Estate business, ever like to hear.

One of the things my parents taught me, from an early age, is that you never get a second chance to make a good first impression. That said, can you imagine a worse first impression of any house than a bad smell when entering? Yuck!

The possible sources of bad odors in a house is endless – far more than I could ever list in this article. I’m reminded of the gist of a definition from the Supreme Court – You can’t really define it, but you know it when you see (smell) it! Here’s a “short list” of possible bad odors you can leave in your home, which will turn off most buyers:

1. Cooking odors – especially regional spices.
2. Animal odors – food, dander, litter box, you get the picture.
3. Smoking – both legal and illegal materials.
4. Mold – more on that later.

Let me relate some experiences (each of these with different buyers) I’ve had in my years in the business:

A. I recall showing a house in the country, which was occupied by tenants. Evidently they liked living in the country for law enforcement reasons, as the house reeked of freshly-smoked marijuana! They must have stubbed out the joint right before we got there. Wheeeeee!!!!

B. Another house smelled so terribly of dog (it must have been a “water” dog, like a retriever) that the buyer and I both coughed terribly upon entering. We tried to make it into the next room, hoping the odor would dissipate, but no luck. That house stunk so bad, even a dog lover wouldn’t touch it!

C. In another house, the buyers and I arrived soon after dinner. We coughed and sneezed at the spices in the air – throughout the whole house! It wasn’t just the kitchen. When I called the other agent to report what we had found, I was told that they had prepared their special (insert country name here) “death sauce”. Lovely! Right before you want to show your home to potential buyers? Brilliant!

D. You can never predict your pets. I’ve lost track of how many times I’ve walked past a freshly-used litter box. It’s like the cats know that strangers are about to enter their home, so they like to leave a present for the guests. Yikes!

Earlier I mentioned mold. We’d all like to think that we don’t have mold in our homes, but the sad fact is that it’s everywhere. Given the increasing use of products like Tyvek in home construction these days, there is plenty of moisture available in most homes to breed a nice crop of mold.

I found a nice checklist from the government about problems with mold, and copy it here below:
Here are 10 things to consider regarding mold:

1. Potential health effects and symptoms associated with mold exposures include allergic reactions, asthma, and other respiratory complaints.
2. There is no practical way to eliminate all mold and mold spores in the indoor environment; the way to control indoor mold growth is to control moisture.
3. If mold is a problem in your home or school, you must clean up the mold and eliminate sources of moisture.
4. Fix the source of the water problem or leak to prevent mold growth.
5. Reduce indoor humidity (to 30-60% ) to decrease mold growth by: venting bathrooms, dryers, and other moisture-generating sources to the outside; using air conditioners and dehumidifiers; increasing ventilation; and using exhaust fans whenever cooking, dish washing, and cleaning.
6. Clean and dry any damp or wet building materials and furnishings within 24-48 hours to prevent mold growth.
7. Clean mold off hard surfaces with water and detergent, and dry completely. Absorbent materials such as ceiling tiles, that are moldy, may need to be replaced.
8. Prevent condensation: Reduce the potential for condensation on cold surfaces (i.e., windows, piping, exterior walls, roof, or floors) by adding insulation.
9. In areas where there is a perpetual moisture problem, do not install carpeting (i.e., by drinking fountains, by classroom sinks, or on concrete floors with leaks or frequent condensation).
10. Molds can be found almost anywhere; they can grow on virtually any substance, providing moisture is present. There are molds that can grow on wood, paper, carpet, and foods.

For more information on mold, visit the EPA’s mold site.

Thursday, February 14, 2008

Open House - Sunday, Feb. 17, 2008

202 Commons Ct., Saline, MI 48176

You're invited to visit this terrific ranch-style condo in the Austin Commons of Saline.

I'll be hosting an open house on Sunday, Feb. 17, 2008 between 2-4pm. You're welcome to visit during that time.

This is truly "no steps" living. You have your own attached garage, and a full basement, if you need the space.

The kitchen features light oak cabinetry, and overlooks a quaint eating space. You also have access to your own private patio.

I look forward to meeting you on Sunday!

Wednesday, February 13, 2008

Should I Go For Sale By Owner?

When it comes time to sell your home, one of your options is to sell your home yourself. Since it’s always a good idea to consider the “flip side” of your decision, let’s look at your “for sale by owner” (FSBO) from the perspective of a buyer.

Buying FSBO real estate has its own particular problems and opportunities. Dealing with an uninformed seller who thought he knew enough to handle everything by himself can be frustrating, but it can also be very profitable if you are prepared. First you need to understand the FSBO seller.

People try to sell a house on their own for one primary reason: To save the sales commission. Unfortunately for them, they usually underestimate the cost and complexity of going it alone. They'll often get frustrated and tired of the process, and be ready to drop the price and be done with it. As a buyer, if you can help them solve their problems, your reward can be a good price on a good investment. Just keep the following in mind:

1. A seller isn't an agent. You have to be more careful in what you say and ask. Avoid negative comments about the house. Like it or not, the truth is that it's difficult to get a good deal if the seller doesn't like you.

2. Sellers think they're being smart. If you encourage that belief, they'll be more open to your offer. If they have a good idea, tell them so. It's not unethical to make people feel good about themselves when negotiating.

3. FSBO real estate has often been on the market a long time. Sellers are usually tired of the process, and want it to be done. This means you'll get a better price if you are willing to close quickly and easily.

4. Sellers usually don't have a plan. They don't know where to close, where to buy a title policy, where to keep an Earnest Money deposit, etc. Have simple solutions ready for all these problems. If you walk the seller through the process while letting him feel in control, you'll both be happier.

5. Skip over problems and return later. After a seller has invested more time with you in a negotiation, he'll be more inclined to give you what you want.

6. Sellers have often spent more than anticipated. Classified advertising and other costs have already eaten into their imagined extra FSBO profit. You may want to be generous in negotiating the many closing costs - as long as you get your price and/or terms.

Realtors will tell you that most houses "for sale by owner" net the seller less than those sold by an agent. By the time a seller realizes this, it's often too late to recover his money and time spent. At this point, he usually just wants to get the thing sold as easily and quickly as possible. If you help sellers with that, you can get a good deal on FSBO real estate.

Monday, February 11, 2008

What does it mean to be a GRI?

When you see the letters GRI as one of my professional designations, what does that mean?

Developed for members of the NATIONAL ASSOCIATION OF REALTORS® and offered through State REALTOR® Associations, the GRI designation is obtained by attending a specific, intensive series of a minimum of 90 hours of classroom instruction, covering subjects in contract law, professional standards, sales and marketing, finance and risk reduction. The subject matter has been chosen to educate Realtors® about local, state and national real estate practices that affect them and their clients. GRI courses are taught by leading real estate professionals from around the country.

In today’s competitive business environment, Realtors® (and their clients) need more than just motivation and initiative to succeed, they need the advantage of the education received in the GRI program.

The Graduate REALTOR® Institute (GRI) designation indicates to buyers, sellers and other real estate industry professionals that I have made the commitment to provide a high level of professional service to my clients by securing a strong educational foundation.

The REALTOR® Institute is more than twenty-five years old and has graduated thousands of REALTORS®. According to data in the 2003 National Association of REALTORS® Profile, only nineteen percent (19%) of all REALTORS® have earned the GRI designation.

Why Choose a REALTOR® With a GRI designation?

Buying property is a complex and stressful task. In fact, it's often the biggest single investment you will make in your lifetime. At the same time, real estate transactions have become increasingly complicated.

New technology, laws, procedures and the increasing sophistication of buyers and sellers require real estate practitioners to perform at an ever-increasing level of professionalism.

So it's more important than ever that you work with an agent who has a keen understanding of the real estate business. The GRI program has helped the best and the brightest in the industry achieve that level of understanding.

GRIs are:
· Nationally recognized as top performers in the real estate industry
· Professionally trained
· Knowledgeable
· Dedicated to bringing you quality service

A GRI can make a difference

When you see the letters "GRI" after an agent's name, you can count on receiving the knowledge and guidance you need to make your transaction go smoothly. In short, you can count on getting the best service available from a real estate professional.

Don't you deserve the best?

I earned my GRI designation in 1997. Since then, I have taken courses to earn additional professional designations. Each year, all Realtors® in Michigan take a minimum of 6 hours of continuing education. All this training and education is always approached with the basic theme – how will this benefit my customer?

So when you’re looking for a Realtor®, be sure to ask if they are a graduate of the Realtor institute (GRI).

Friday, February 8, 2008

OK, I've been Meme'd

OK, I’ve been meme’d by Missy Caulk, my nearby neighbor in Ann Arbor, MI. This happened a couple of days ago, but being the “by the rules” kind of guy that I am, I’ve stayed with my existing blogging schedule for the week. So, now I have the time to respond.

If you don’t know what a meme is, think of “tag, you’re it”. Meme rhymes with dream.

The rules are that I am to share 7 things you might not know about me. If you want to know the subject matter for these 7 things, you’ll have to visit my blog on ActiveRain.

So, here goes:

1. I’m an avid golfer. Being in this line of work (Realtor), it doesn’t allow for me to get out to play as much as I’d like. Still, any time on the golf course is a good time for me. My handicap index is around 11, and Radrick Farms is my home course.

2. Ever since I was a kid, I’ve been fascinated by insects. Back then, I put my insect collection in the 4-H fair each summer. There is a moth in the Michigan State collection which I caught in my parent’s back yard in Ann Arbor.

3. Outside of real estate, my primary goal for 2008 is to read at least one book per week – so, 52 books for the year. So far, I’m on track, having just finished my 5th book of the year. My favorites are biographies. You know, you learn from your mistakes, but you can become brilliant by learning from the mistakes of others.

4. Back in college (Michigan, ’81), I had a friend who owned his own airplane. He called me one sunny Saturday morning in the spring and invited me to go flying with him. Taking the controls mid-flight, it was a thrill that I’ve never forgotten. When my kids ask about what it’s like to fly, I just tell them that it’s like driving in 3-D.

5. Between my junior and senior years in college, I visited a friend in Colorado for the summer – he was overseeing the construction of a home for his parents. While there, we climbed Mt. Sopris, at 12,951 feet. If you’ve ever been to Aspen, then you’ve seen Mt. Sopris, as it dominates the skyline just south of Glenwood Springs, on the way to Aspen.

6. For my 30th birthday, my wife and I celebrated in Freeport, the Bahamas. We went snorkeling – beautiful turquoise water, and the fish! Amazing!

7. When my son, Trevor, was very young, we went to a book signing given by Bo Schembechler. Trevor sheepishly approached Bo and told him that they shared the same birthday – April 1. Bo ruffled Trevor’s hair and asked “Do you know what that means, young man?” Trevor nervously shook his head. “It means that you’re going to be GREAT!” Trevor was beaming for days afterward. When Bo passed, Trevor understood the loss at a very deep level.

Wednesday, February 6, 2008

Don't Buy a Home?

Don't Buy a Home.

What? Are you kidding?

As a Realtor®, my job is to help people to buy or sell their real estate. When someone wants to hire me to solve their real estate needs, I am very gratified.

But, sometimes it’s better for my client to NOT buy (or sell) a home. How so?

You've probably heard all the perks about buying a house and how it's the centerpiece of the American Dream. But the American Dream is less about owning a house than the change it brings about in your lifestyle.

As a Realtor®, I want you to be ecstatic when buying a home. With an approach like that, it means that there are times when I recommend to clients that buying a house isn't the right way to go yet, particularly when the financial risk of keeping your home takes away from the enjoyment of it.

Here are five times when I counsel clients to wait on buying a house.

1. You're uncertain about your job.

Having a stable income is paramount in ensuring that your home doesn't turn into a financial burden, and almost everyone needs to work to bring in that money.

But if your company is considering layoffs, or moving their headquarters — or you're considering a career change — you may be forced into selling or renting out your home in short order. Doing so is time-consuming and costs money.

Generally, if you have to sell a home within five years of buying, you’ll be lucky to get away at a break-even. I’ve had clients having to bring funds to the closing when they sell, rather than walking away with a check for their proceeds.

You may be mentally prepared to sell your house quickly, but the market may not be so kind, and you might have to take a large loss in order to do so.

2. You have bad credit right now.

When you take out a mortgage to buy a house, your lender charges you interest every month for the privilege, but when you have bad credit, your lender will charge you a lot more.

Why? Because people with bad credit cost lenders money by not paying promptly or not paying at all. And what they charge you may end up being several hundred dollars a month! Bad credit is any FICO score below the national average 720. But be of good cheer! With a few months of "good behavior" you can increase your FICO score and save yourself all that money.

3. You're already in a lot of debt.

I not only want you to be ecstatic after buying a home, I also want you to be able to keep it for as long as you want to. The total of a lot of student loans, credit cards, car payments, etc.: all of this not only hurts your ability to buy a house but also your ability to keep it.

The challenge is that if you take on more debt in the form of a mortgage, you may take away your ability to pay off other more expensive debt. At that point, you're basically paying a lot of money for money you no longer have — a lose-lose scenario.

For people in this situation, the rule of thumb is to pay off your debt with the highest interest rate first and be careful taking on new debt.

4. The only way you can afford the house is using a “creative” mortgage.

Can you imagine a world where everyone had to buy a house using only cash on hand? Very few people would own a home if the world were like that.

Lenders know this and have come up with a number of loan types (they call them products) that are designed to help people get into their dream houses. The most notorious of these loans is the option ARM, sometimes called a "pick a payment" mortgage. The possibility of negative amortization from this loan means you pay less monthly but end up owning less of your house every month too.

I would never do business with someone who recommended one of these loans to my clients, and I recommend you don't do business with anyone who tries to sell one to you.

5. You don't have (at least) some reserves after your downpayment and closing costs.

Buying your home is only the first step. The freedom that comes with home ownership also comes with additional costs like property taxes, special assessments, home maintenance and repair work, none of which were applicable when renting.

I'd argue that if you're stretched to the point where you have zero savings left over to take care of unforeseen expenses after purchasing your home, you risk a lot of unnecessary stress, losing your house or having it fall into disrepair.

The amount you have in reserve doesn't have to be huge, but a couple month's worth of your mortgage in a readily available form like a high-yield savings account, or even stocks, can ease your mind.

Purchasing a house is a major financial decision that stretches the finances of many families, but there's a difference between having to pack your lunch versus risking foreclosure because of a bad month.

There are a lot of folks who want to you stretch to buy a more expensive house than you need or one sooner than you might be comfortable with. My real estate advice is geared so that you're in a position to own and enjoy your home for a long time.

Monday, February 4, 2008

What It Means to be an e-Pro

When you see “e-Pro” as one of my professional designations, what does that mean?

e-PRO Certification is an online training program offered by the National Association of Realtors® to certify real estate professionals as Internet Professionals.

Now, as an “internet professional”, having the e-Pro designation does not mean that I spend all of my time working on the internet. The internet is a tool which the e-Pro uses in their business to serve their customer’s needs. You can do many things to buy or sell a home using the internet, but nothing can replace the ability to actually visit the home you want to buy or sell.

The Connected Consumer has very different expectations than offline consumers and dealing with them effectively requires a different approach. The e-PRO Certification course guides students through completing a Technology Plan of Action for their business and introduces them to many techniques for evaluating and using Internet tools.

e-PRO Certification is not only about technology. The e-PRO Certification Program establishes a baseline of online competence, and it also introduces its students and graduates to the best aspects of Online Community...the Internet is about the power of people connecting with people.

I earned my e-Pro designation in 2004.

Since then, my curiosity about the internet has only grown, and is always centered around the basic theme – how will this benefit my customer?

There are so many ways that I’ve grown my arsenal of marketing tools since earning my e-Pro designation, including my own website (so buyers and sellers can learn about my service), floor plans and virtual tours of my listings (so buyers can preview a home before driving over to see it), mobile e-mail and text messaging (for instant access), and blogging (so buyers and sellers can learn a little bit about who I am and how I work).

So when you’re looking for a Realtor®, be sure to ask if they are e-Pro certified.

Friday, February 1, 2008

We Hold These Truths

OK, I have to get something off my chest!

We live in the land of the free and the home of the brave. Lately, though, it seems that we want less of each – less freedom, and certainly less bravery. For example, we are willing accomplices as we allow our local, state, and federal governments to trample on our freedoms of land and property ownership. Remember the words of the Declaration of Independence (emphasis added):

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

As a Realtor®, my primary interest has to do with our freedoms as it pertains to real estate – land, and improvements on the land. As a former president of our local Board of Realtors, I know well the Preamble to the National Association of Realtors – Code of Ethics (emphasis added):

Under all is the land. Upon its wise utilization and widely allocated ownership depend the survival and growth of free institutions and of our civilization. REALTORS® should recognize that the interests of the nation and its citizens require the highest and best use of the land and the widest distribution of land ownership.

So, what have you been up to?

Lately, I’ve been doing some work on behalf of my clients, which will hopefully save them some money. Specifically, I’ve been preparing estimates of (present) market value for my clients’ homes, and comparing the estimates with the taxable value (as determined by the local taxing authorities). In some cases, market values are still well above the taxable value. In many cases, though, market values have fallen below (sometimes, significantly below) the value upon which my client is paying property taxes. The next step is for my clients to appeal their taxable value during the upcoming opportunity within their local taxing authority. Needless to say, my clients are quite happy to learn that they may have a way to lessen the burden of property taxes that they pay each and every year.

Income and Expenses

In this great country, we all have the freedom to earn whatever level of income we desire. We also have the freedom to do with our income that which we wish to do (within the bounds of the law and of our ethics). That is, after we have paid our taxes.

I don’t know how it is in your household, but I’ll tell you how it is in mine. Every year, about this time (tax prep time), we draw up a new budget for the coming year. We first tally our income, then list (and prioritize) our known fixed expenses (including taxes), our planned savings (you know, “pay yourself first”), and finally our discretionary expenses. As we reduce the income line by each line of fixed expenses, savings, and flexible expenses, we have to STOP when we run out of income. Anything on our list beyond when we run out of money becomes a “wish list”. At some times during the year, we may re-prioritize our listed discretionary expenses, depending on needs. But when the money has run out, we just stop spending on discretionary items. We don’t look to our employers (in my case, my clients) and say “Uh, we’ve run out of money, so we need to take more from you”. Can you imagine the response that would get?

It goes without saying that our governments – at all levels, sadly – do not budget the same way that my family does. No, it seems that our elected officials are either unable or unwilling to prioritize spending in any way. Goodness knows, that would expose them to the harsh realities that some people might be hurt by where their “pet” projects actually fall on the scale of urgency of need. At all levels, our governments routinely run out of money to spend – there is never enough!

Our governments turn to us, the so-called “silent majority”, to help them make up the differences between their income (in other words, the taxes we are ALREADY paying) and their desired spending.

A Howard Beale moment

Frankly, I’m tired of this practice, and, like the character of Howard Beale in Network, “I’m mad as he** and I’m not going to take this anymore”.

A pebble here, a pebble there…

Our elected officials first turn to property taxes to fund their shortfalls. Remember, “Under all is the land”. With the annual increases in our property taxes (as I found during my research on behalf of my clients), we’re slowly letting the land under us be taxed away from us.

Next, our elected officials turn to “special assessments” to fund even more “pet projects”. We hear the same refrain each time – “on an average home, valued at $200,000, the increase for this assessment will ONLY be $25 each year. I don’t know about you, but $25 here and $25 there, and pretty soon, you’re talking about real money. And so goes another few pebbles of “under all is the land”.

The words of Thomas Jefferson, written more than 230 years ago, still ring true today. Jefferson anticipated that governments would eventually try to become all-powerful potentates over their subjects, so he made clear that the power of government is derived from the consent of the governed (meaning US). That’s why I stated earlier that we are willing accomplices as our freedoms are taken away.

So how does this all tie together?

A few years ago, a terrific book was written which touches on this important subject. The title? The PRICE of GOVERNMENT: Getting the Results We Need in an Age of Permanent Fiscal Crisis, written by David Osborne and Peter Hutchinson. The authors recommend a process for governmental budgeting not unlike what I do with my family.

As you can imagine, the book fell on deaf ears within the governmental ranks. I mean, come on! What do you mean we ran out of money? We’ll just “tax ‘em” some more!

It’s time to make sure our elected officials, at every level, understand our anger and frustration over their (apparent) disregard of basic home economics. Balance your (profligate) spending with your income (the taxes that WE pay). Tighten your (overhanging gut) belt. Prioritize what is important and make sure the critical stuff is adequately funded (uh, that would begin with our security). Cut out all the “fluff” – even if that means a diminishment of your (precious) power of authority.

Do you get it?

People - remember Howard Beale!

How long are you willing to let the pebbles underneath you be picked off?