Macomb County MI real estate - 1st time home buyers info & advice

Last week I received an email from someone who wanted to know if there is a list of HUD approved condos that she could look over.  I directed her to HUDS site that is updated when condo sites are approved, searchable by state, city or zip code.

This morning I had some free time to read and decided to more thoroughly delve in to the FAQs that are posted by HUD regarding all the new guidelines that must be met in order for a buyer to purchase a condo with a FHA mortgage.

I have to tell you, while scrolling through one of the FAQs I was outraged to read the following (question #25 in the above linked FAQ):

A HUD owned REO does not need project approval.

How's this for a scenario?:    2 condos are for sale in Mystic Village (made up name).  One of them is owned by HUD, the other is owned by Mr. Jones.   

The HUD owned property can accept an offer by a FHA buyer and smoothly sail to closing. 

Mr. Jones cannot sell his condo to an FHA buyer unless his complex receives approval.

Excuse my language for a moment please...but how in the hell can this type of double standard be
allowed to happen???

A few days I wrote an article about the National Association of Realtors® taking a stance and adding to
their Standards of Practice the verbage "don't give out the lockbox code!".   While reading and commenting
it reminded me of something that is taking place with HUD owned homes:   The locks are re-keyed with
the same HUD key being able to open any HUD home in my area. 

This past December I had another buyer client purchase a HUD home.   Thankfully, she was a cash buyer
so closing happened relatively quickly (Start to finish 30 days).  One of my (and her) biggest concerns during
the process was the security of the home post offer to the time it was legally hers.

Here are a couple of things that you can do to protect yourselves prior to closing on your HUD owned
home  and changing the locks:

If you do all of the above you will be much more successful in getting HUD (and it's designated agent in your area) to repair or replace anything should anything come up missing or vandalized prior to your closing on the home.

I knew it wouldn't last forever, but I was kind of shocked to get the information in my email that the HUD incentives for Michigan are ending soon.

As of February 12th of this year (yes, less than 2 weeks away) HUD is putting an end to the wonderful incentives that they've been offering for the since the fall of 2008 in Michigan.

The $100 down FHA program will be gone, as well as the $2500 buyers "gift" on home purchases over $25,000.

Please please PLEASE if you are considering putting a bid on a HUD home and want these incentives your bid has to be accepted by February 12th.  Any bids  accepted after that date will not be able to use these incentives.

Agents and mortgage brokers:  If you have clients who are starting the process to purchase a HUD home and are counting on the $2500 or the $100 FHA down payment you will want to pass this information along to them quickly.

To read the announcement from HUD please visit Mcbreo.

I wrote a blog post earlier about appraisals, and what we as buyers agents can do to help our buyer clients to understand current market value and to avoid appraisal issues.

One of the comments I recieved said something like "You may not make the sellers happy..." 

I'm a nice person.  I like to think that I'm an easy agent to co-op with, and that I do perform my duties with care and diligence.  My brokers have never received a complaint about me, nor do I ever expect them to. However, being nice and co-operating with the sellers agents doesn't mean that I won't do my job to the best of my ability for my client - the buyers.

My fiduciary responsibility as a buyers agent is to my buyers.  When they find a home they wish to purchase my responsibility kicks in to high gear.  I will analyze the current market for them and present them with all of the facts that I have on hand.  They will then be able to make an educated decision about the price to offer for the home. I will then take their offer to purchase, along with my data and present it to the sellers. 

Not long ago I heard these words from a sellers agent after my buyers offer was presented to them: "My seller is a nice man.  He's worked hard, and his home is in good shape.  He really deserves a better offer and isn't happy with this one."

My reply?  "I'm a nice lady.  I work hard.  My home is in nice shape.  I deserve good things to happen to me. But my home is still only work XXX and it wouldn't appraise for more than XXX, and I surely wouldn't expect a  buyer to pay more than XXX."

               My buyer didn't overpay for that home, and we moved on to find them another home.

Listing agents need to keep their sellers in the loop.  Sellers need to know current market values.  They need to understand the danger of overpricing their home, and have realistic expectations of a sales price.  All sellers  deserve this information from their agents on a regular basis - not just the nice sellers :-)

When you plan on purchasing a home using mortgage money it doesn't matter what type of mortgage you are applying for (FHA, VA, Conventional) - your mortgage lender is going to order an appraisal of the homes value.   They will want to make sure that the amount of money you are asking to borrow is not more than the home is worth in todays market.

Below are a couple of things that I do as a buyers agent to help make sure that my buyer clients are not wasting their time and money on a home prior to writing the offer:

Investigate the last 90 days of sold homes within a 1 mile radius, in the same school district and of similar construction & features.  (Do not consider sales data greater than 90 days unless you have fewer than 3 comparable sold homes in that initial look back period.)

Include the distressed sales in the search of sold homes.  (They are the norm now, unfortunately, and you can bet that the appraisors are going to use this data in their reports.)

Deduct sellers concessions that were paid by the seller of the sold homes to the buyers from the "sold" prices.  This deduction will reflect the market value of the home that sold more accurately.

Ask your agent to prepare an analysis using this type of data to present to the seller and their agent when your offer is presented.   It is much easier for the seller to understand how you came to the price of your offer when they have hard raw data in front of them.  It then becomes more of a business decision to them, and less of a personal affront if your offer is much lower than their asking price.

If your offer is a sound one, based upon recent data and your own personal view of the homes value, and it is not accepted by the seller don't be shy about walking away and finding another home.   A buyers agent who is working for you would much rather have you walk away then to spend emotional energy and financial resources to continue the process of purchasing a home without much of a chance of it passing the lenders appraisal guidelines.

Just as we suspected would happen, FHA has now had some major changes and it is now going to cost you more out-of-pocket money to purchase a home.

            New - Sellers concessions are limited to 3% of the purchase price.

            New - Upfront mortgage insurance premium is increased to 2.25%.


Here is an example of what the lower sellers concessions to the buyers will look like for you:

If you are purchasing a $50,000 home the seller will only be able to  contribute $1500 to help you with closing costs, pre-paid items and/or tax prorations.   (This same purchase before the new FHA guidelines  would have meant $3000 in help to you.)

Many of you are thinking of using your income tax refunds to help you purchase your first homes this year.  Often you think that it will be more than enough money with some extra for furnishings, repairs, etc.  That may not be the case anymore.  You may need every last dime of that  refund for your FHA down payment (3.5% of the purchase price) PLUS money for closing costs and pre-paid items.

When you receive your income tax refund tuck it away in your savings account. Have a conversation with your mortgage lender about how much you will need to bring to the closing table for that new home purchase.  Save every penny that you can - you're going to need it.

I've heard it so often that I cringe each time I hear it from a potential home buyer: "So-and-so told me to never offer more than 50% of the list price" or some version of that sentence.

My response?   If the homes list price is double what the market value is, then by all means an offer of 50% off the list price is justified.   Otherwise, expect your offer to be rejected. 


Most homes in the Macomb County area that are for sale are already market value priced.  It doesn't matter whether the home is a foreclosure (bank owned), a short sale (lien holder negotatied sale) or a private non-distressed home for sale.  In order to compete with todays market values home owners are pricing their homes to sell. It's as simple as that.

The 1300 square foot brick ranch in Chesterfield Township that once sold for $180,000 in 2001 is now listed (and selling) for $90,000 to $125,000 depending upon the condition of the home.  

If you listen to "So and so" and offer $45,000 for the home without taking in to consideration the condition of the home, the current market values for the neighborhood and the buyer activity in the area then you are setting yourself up to be rejected.  Over and over and over again.

Be smart.  Hire a buyers agent to work for you and to assess market value that is current.   This is your best shot at receiving value in your new home purchase, not listening to "So and so" who are not in the trenches every day.

One of the common misconceptions for home buyers (and some real estate professionals) is that the first time home buyers tax credit is $8000 for all buyers. 

When reading the fine print of the IRS form 5405 there is an entry line to fill out asking for the smaller of 2 items:  $8000 or 10% of the purchase price.

Reiterating:  The tax credit is for 10% of the purchase price of the home up to $8000.  It is not a full $8000 for every home buyer.

           Let's all help to stop the confusion to home buyers by using the words "Up to" in our articles.

Edit:  The chart that NAR put out for their members to use states "$8000" but it doesn't say "Up to $8000".  You may want to add the language to your own charts for accuracy.

One of the cities in my area has a wonderful online service in which you can find out the current taxes,
utility bills (water and sewer) and also check to see if there are any permits that have been pulled for
repairs or renovations.

In the case of vacant homes (foreclosures, REO's, etc.) there is also one more check that you as a purchaser
need to do:  Pick up the phone and call the city and find out if a certificate of occupancy is needed prior
to moving in to the home and if an inspection is needed by the building department.

A buyer client and I are in the middle of a "counter offer" purchase on a bank owned home, and one of the
things that I asked her to do was to call the city building department and find out if this home needed to
have an inspection prior to her being able to move in to it.   As it turns out, this home was red-tagged (although the tag was not readily visible when we viewed the home) and does need to be inspected by the building department.

It will cost the buyer $200 for the city building inspector to come out and look at the home, as well as additional fees if permits need to be pulled for any city mandated repairs.   Most small repairs can be done by the potential home owner, but those needing more expensive work (electrical, plumbing, heating & cooling, etc) will require additional inspections and permits.

Please don't assume that just because there isn't a notation on a city / township online service about an inspection being required that this is truthful.  Data does "fall through the cracks" and entries are sometimes not made in a timely fashion.

                                                Pick up the phone and call.  

For those wondering why I don't make the call myself for my buyer clients:  Third party translations can sometimes fall short of accuracy.  I want my buyer clients to hear for themselves what the city / township building department has to say.  They can also ask specific questions while they are talking to the representative while those questions are fresh in their minds.

The common misconception about Buyers Agents is that we take people out to look at a few homes, write the offers, then sit back and collect a paycheck.

Misconception?   What an understatement!

Take for example what goes on behind the scenes before we ever step foot in a home with our buyer clients:

• Talk with the buyers about their wish list / want list / must have list in a home.
  
  
• Sort through all of the thousands of listings in the various MLS databases, narrowing
  down only those that fit the buyers criteria.
  
  
• Research the property taxes on the properties.  (I'll let you know about the importance
  of this in a separate post.)
  
  
• Check the ownership of the home (looking for conflicting information in public records)
  
  
• Sifting through the comments and photos to ascertain whether a home meets your financing
  criteria (Will the condo be HUD approved?  Will the home pass FHA or VA muster?)
  
  

A good buyers agent will spend hours behind the scenes working in the buyers best interests before they ever step foot into a home.    But you the buyer don't know that, because we don't give you a detailed invoice of work performed like other professionals do.   The list above is only  a snapshot of what a buyers agent does for you.  The list goes on and on during the process of purchasing your home.  

How do you know if we have done a good and thorough job for you?   When you get to the closing table thrilled with the purchase of your new home, with as little stress as possible, and without any surprises.   We willingly take on the stress and sleepless nights so that you don't have to.