Thursday, April 9, 2009

Ann Arbor Real Estate Sales Report: March 2009

Ann Arbor Single Family Home average sales prices in March 2009 dropped by 25.9% from March 2008, and have dropped by 28.4% year to date.

Here are the latest statistics from the Ann Arbor Board of Realtors. These numbers are for Single Family Homes (SFH) Residential, and do not include condominiums:

SFH Listings in March 2008: 815
SFH Listings in March 2009: 707
Decrease: 13.4%

SFH Sales March 2008: 219
SFH Sales March 2009: 209
Decrease: 4.6%

SFH Sales Year to Date 2009: 505
SFH Sales Year to Date 2008: 534

SFH Avg. Sales Price March 2009: $150,263
SFH Avg. Sales Price March 2008: $202,569
Decrease: 25.9%

SFH Avg. Sales Price Y.T.D. 2008: $214,911
SFH Avg. Sales Price Y.T.D. 2009: $154,015
Decrease: 28.4%

6 Questions Foreclosure Buyers Should Ask

Purchasing a Foreclosure or Short Sale is a completely different animal from a traditional home sale. RealtyTrac and Realtor Magazine have published a list of six great questions you should ask if you are contemplating the purchase of a forecloure property.

1) Is now a good time to buy a foreclosure?

This is a very common question from both real estate professionals and prospective buyers. Obviously, because local market conditions vary, the answer is different from market to market. But there are questions that buyers in any market should be asking before they make an offer on a property in foreclosure.

2) What’s the first step buyers need to take?

Require buyers you work with to be preapproved for a loan before you help them shop for a foreclosure. If they’re thinking of buying a foreclosure as an investment or second home, they need to understand that financing the home will be more difficult and more expensive than financing a primary residence. Lenders typically charge higher interest rates and require a larger down payment for investment or second homes.

3) How can you tell a bad foreclosure from a good one?

Certainly there are great deals in many markets for both investors and buyers looking for a primary residence. But making a sound deal can be tricky. Buyers need to be wary of unpaid liens, including mortgage debt, taxes, construction loans, home equity lines of credit, and possibly a second or third mortgage. Any or all of these financial obligations could become your clients’ responsibility when they purchase a property in foreclosure. Unless the property goes through a foreclosure auction and becomes a bank-owned REO, the outstanding foreclosure liens and fees could be simply transferred to the new owner—your clients. Don’t let them fall into the same financial trap as the previous owner.

4) If I’m a qualifying borrower, can I appeal to banks for better loan terms?

Lenders are drowning in defaults—particularly in hard-hit real estate markets such as Arizona, California, Florida, Michigan, Nevada, and Ohio—so they may be motivated to cut a deal. If your clients have a good credit score, many banks will offer them a below-market-rate loan on a bank-owned home. Unlike paying down with points, this doesn’t cost anything in fees, and it gives them the ability to spend more for the home.

5) What are the costs of buying a foreclosure?

It takes money to make money. The best opportunities are for buyers with cash. If your clients are planning to rent out the property or even resell it for a quick profit, make sure they consider the carrying costs, including sales commissions, marketing costs, vacancies, taxes, insurance, and maintenance costs. Once you’ve calculated all the expenses, add on another 10 percent to 15 percent. If they don’t build in a "surprise fund," your clients might be the next foreclosure statistic.

6) How does choice of neighborhood affect foreclosure investments?

Clients looking for a good investment should generally avoid neighborhoods overrun with foreclosures, particularly newer subdivisions in overbuilt exurban areas. Investors will be tempted to buy foreclosures in these areas because they offer the steepest discounts—but they also carry the most risk of further depreciation. Look in well established neighborhoods with good schools and transportation. If you’re in a market where prices are still falling, encourage your clients to factor falling prices into any offer they submit on a foreclosed property.

Source: James J. Saccacio is chief executive officer of RealtyTrac, a Web site that tracks properties in foreclosure.

Friday, April 3, 2009

Potential Legal Issues in Short Sales

Short Sales are a quagmire of potential problems that do not exist in a traditional real estate transaction. If you are in the unfortunate situation of being involved in a Short Sale, you and your agent must be aware of the legal risks that exist. These include.

1. Misrepresenting tax consequences
2. Misrepresenting how secondary debt is treated
3. Acting on inappropriate lender requests for seller contributions
4. Breaching fiduciary duty
5. Providing poor oversight of a loss mitigation company
6. Lacing the required license to undertake loss mitigation
7. Facilitating transactions not listed on the HUD-1 form

Please get the advice and counseling of professionals should you get involved with a Short Sale.

Thursday, April 2, 2009

What Will Make the Real Estate Market Turn?

The most common questions we are asked are: "When will the Ann Arbor Real Estate market turn?" or "What will it take for the market to turn?"

I have come across a great explanation of what it will take, recently published in a real estate industry newsletter called Keeping Current Matters

In order for the real estate market to come back in a powerful way, five conditions must be met. Those are:

1. Increased buyer confidence in their jobs and income levels
2. Ease of housing price declines to market stability
3. Affordable housing in relation to household income
4. Access to mortgage financing with low interest rates
5. Ability to sell one's own home in order to move into a new one

Two of these conditions are in effect right now-- affordable housing in relation to household income and access to mortgage financing with low interest rates. The other three have not yet been accomplished. The market will turn around when all five forces combined can drive the rebound.