What Updates and Remodeling Projects Pay Back in Michigan?
I get questions all the time about what a potential seller should do to get their home ready for sale. Property owners who have just completed a big project are also curious about how much this has increased the value of their home. Well, a recent study in Realtor Magazine attempts to answer these questions. The long and short of it is that in Michigan, there are no remodeling projects you can do that will get you more than a dollar payback for every dollar you spend. What does this mean to you as a homeowner? You should focus on remodeling projects because it is something you really want for your home, not because you are looking for a return on your investment. The table below outlines the payback on different project, from replacing your front door, to remodeling a kitchen or bath and other common projects. This information was found in a recent issue of Realtor Magazine and the detailed info and how the information was derived can be found at the Cost Vs. Value Report Online. There is also detailed info available for the top markets in the country. There is no data for Lansing, but you will find info on Grand Rapids and Detroit at this site.
Photo Credit: http://www.flickr.com/photos/tornatore/4504291586/
Info for Cost Vs. Value: www.realtor.org/realtormag
How much has my Lansing area house gone down in value?
Anyone who has watched the news in the last 5 years realizes that home sellers nationwide has been taking a beating. I wanted to see how local values have been affected, so I pulled the numbers. Here are the results.
I analyzed the MLS sold statistics for single family homes for Lansing and the first ring suburbs, including: DeWitt, East Lansing, Okemos, Haslett, Holt/Dimondale, Mason, Grand Ledge, Bath, and Waverly. I compared the sales numbers from 2005 through this year and the results are fascinating. Overall, these areas are down an average of 23.5% since 2005. DeWitt, East Lansing, Haslett, Mason, Grand Ledge, Bath, and Waverly got better in 2010 over 2009, but Lansing, Holt, Okemos saw modest price declines in the same comparison. The most interesting fact to me, however, is how unevenly these areas have depreciated. If you own a house in Haslett, the average house has only declined in value by 10.5% since 2005, whereas Lansing has declined, on average, by 53.9% in the same period.
One other interesting note. Since Lansing has suffered more than any other town in the number of foreclosures, I thought it would be interesting to take out the foreclosure sales and see how home sales of “real people” have fared. I don’t have a great way to get these numbers, but I removed from my search any sales by any of the agents in our MLS that are doing majority foreclosures and from what I can gather when foreclosure sales are removed, the average rate of depreciation in Lansing is 42% (with some margin of error because of my less than scientific method of calculation).
Finally, there are other “micro-niche” markets that have fared even better or worse. For example, homes in DeWitt built after 2000 have seen 18.5% depreciation since 2005, whereas homes in DeWitt as a whole have declined about 25%.
I thought it would be interesting to pull stats on certain neighborhoods in Lansing as well and found that Groesbeck and The Westside Neighborhood are off 23% and 35% respectively, whereas the Baker-Donora Neighborhood has declined on average by 70% since 2005.
Here are the numbers:
DO I QUALIFY FOR A SHORT SALE IN THE GREATER LANSING AREA?
AVOID FORECLOSURES IN THE LANSING AREA
Photo credit: http://www.flickr.com/photos/stevendepolo/
Should I Rent My House: The Accidental Landlord
As you probably know if you are reading blogs about Lansing real estate, many homeowners in the area are upsidedown on their homes, meaning they owe more than the property could sell for in today’s market. One option for a homeowner who is upsidedown is to rent their current property out and move on to a new home themselves. This can be a great option for the right person, but here are some pros and cons to consider:
Pros:
1) A way to move on without having to sell into a buyer’s market and take less than you would like on your home or come up with a huge sum of money all at once.
2) Loss on taxes, If you sell your home for a loss you can not take the loss on your taxes since it is a personal loss, however, once it is a rental you can begin to take the loss (always check with your CPA for tax related questions)
3) Principal Reduction, over time your new tenant will continue to pay your mortgage and reduce the principal balance
Cons:
1) Ongoing maintenance. If your roof, furnace, water heater, etc. needs to be replaced in the next several years, don’t forget that you will have to budget for these big-ticket expenses when you are figuring out your monthly costs
2) Monthly Shortage: many people are in a situation where the rent will not cover the mortgage payments, let alone ongoing maintenance. You MUST be in a financially sound position where you will be able to cover a vacancy and/or monthly shortfall. If you need the security deposit to pay your mortgage, becoming a landlord may not be the best option for you. For financially strapped homeowners, a short sale may be a better option (see previous post)
3) Property taxes will go up. In Michigan if you do not live in a home you own, you must pay a higher property tax rate. Check with your local municipality to see how your taxes would change.
4) Wear and tear on property. When you do decide the time is right to sell the property, remember that you may have to invest some additional money into the home to get it ready for sale after years of having tenants in the property
5) Tenants and toilets. Becoming a landlord can mean midnight calls that the sink is leaking. If you are not in town you will need to figure out who you will be able to call for issues with the property.
In the end, renting a home may be a great option for some homeowners and not for others. Make sure to discuss all possible scenarios before you make a decision.
Photo Credit: http://www.flickr.com/photos/joeltelling/309321879/
Foreclosures Down in 2009
New stats are out from Ingham County, and lansing real estate foreclosures fell 8% in 2009. According to WLNS News, filings for Sheriff Sales (the first step in the foreclosure process) fell from around 1800 in 2008 to around 1700 in 2009. This realtor is not surprised to hear this fact. Pair this info with the fact that prices rose in November (December stats are still not out yet) and I fully expect 2010 to be the beginning of our housing recovery. I said last September that I thought our market had bottomed out when I got outbid on 5 offers in a row. Anyway, you can view full story on foreclosures on the Channel 6 News Site.
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Lansing Realtors: 6 Questions to Ask Before You List Your Home
Since there have been almost 5000 real estate transactions in the Lansing area in the last year I know I can’t be EVERYONE’S real estate agent. There are lots of good agents in the area so I wanted to help you out with some advise on questions I would ask if I were interviewing Realtors to list my house.
1) Photos sell! Statistics show that properties with multiple photos are anywhere from 300-500% more likely to sell than those with no photos or just an exterior photo. Make sure to ask you agent how many photos they will post on top real estate sites like realtor.com, trulia.com, and of course in the MLS system (the Realtor database)
2) The next trend in real estate marketing is towards virtual tours. If I were listing my house it would be with someone who was going to post a virtual tour link on as many sites as possible
3) Communication. The number one complaint from clients is that their agents do not keep in touch with what is going on. Does your agent have a system in place to keep you updated on activity on the house?
4) Full time agents. To really know the business and be able to anticipate possible stumbling blocks make sure you are hiring someone who is working full-time in the business. They are working all day, every day with issues with inspections, appraisals, title, perks, etc. and will be better equiped handle possible problems. This is an easy question to ask on the phone before you even set up the in person meeting.
5) The internet. We know that upwards of 90% of home buyers start their search online. Make sure to ask your agent what websites you will be on. This is a good chance to see how knowledgeable they are about what sites are out there as well.
6) Open Houses. Lots of agents are getting away from open houses and statistics show they sell less than 1% of homes. If this is something that is important to you make sure you ask up front.
Good luck and Happy Selling!
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How to Respond to a Low Offer
I just checked the stats and in Greater Lansing since the first of the year, the average list price/sales price ratio has been 95%. (This figure does not account for seller concessions…that is money the seller pays for buyers closing costs and other things) That seems pretty good, however, we continue to hear about “low ball” offers every single day. So, as a seller how do you respond to a low offer? First step…breath and take a step back. Buyers are savvy enough to know that it is a buyers market (Katie Couric has been assuring them of this ever night for over a year) and most of them are going to “try something” to feel you out with their first offer. It is hard to remove yourself emotionally from the house and not to get offended but that is what I will ask you to do. Many sellers first inclination is to reject right away when they receive what they consider to be an offensively low offer. In a market like this NEVER reject an offer outright…even countering full price will let the buyer know “I want to work with you but we are not even in the same galaxy right now” and it leaves the door open for them to come back.
If you did not pull recent sales before you listed your house now is the time to see what other similar properties have sold for recently. Review this information with your agent and pair that with your motivation to get the deal done before you decide on your counteroffer. Each situation is different and there may be other factors in the offer that would make you consider a slightly lower offer (cash deal anyone?) Try to swallow your pride and remember that, for now, it is a buyer’s market, and low ball offers are sometimes a reality.
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Why energy efficient light bulbs may hurt your chances to sell your house
Compact Flourescent Lights or CFLs are wonderful for the environment. They save on energy costs and are a green product. That being said, before you put your house on the market I would change every single one back to the good ‘ol incandescent energy hogs. When a buyer comes through your house you have about 10 minutes to make a good impression. CFLs take too long to get bright and are not as warm a light. They may leave the buyer with the impression that your home is darker than it really may be. The exception to this rule is if you are planning on turning all the lights on before the showing so that they have already had a chance to get bright. Thanks, I will step off my soapbox now.
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10 Things you must do to sell your house
It is a tough real estate market for sellers right now and anything you can do to give yourself the edge is important. We have all heard the obvious things: declutter, fresh paint, nice landscaping, etc. Here are a few other items to consider to help sway potential buyers toward your property.
1) Leave when buyers come through your house. There is no easier way to make a buyer feel uncomfortable than to be home when they walk through the property. You want to create an atmosphere where a buyer feels comfortable speaking their mind and envisioning themselves in the space.
2) Take out security systems. Buyers may not know the neighborhood as well as you do and the best way to make them think it is a terrible area is to have a security system. Many buyers will assume that this means the area is unsafe.
3) Remove bars from doors and windows. I see bars on basement windows all the time. For the same reason that security systems should be removed, so should bars.
4) Make sure locks are easy to operate, and replace if necessary. The front door is the first impression that the buyer will have of your home. If it is a struggle to open the door it will leave a bad first impression.
5) Recaulk your tub. This is something that is simple and easy to do and will give the tub a fresh, clean apperance (assuming the tub is also clean of course!)
6) Remove photos of your family. Again, you want the buyer to envision themselves in your space, so remove personal photos that will distract the buyer.
7) Take advanced degrees off the wall. You are proud of your PhD in physics..and you should be. However, if a buyer sees this degree on the wall they may assume things about your income and your ability to take a lower price.
8) Leave the lights on. You may know where all the switches are in your house, but a buyer does not. They may skip over basement storage rooms or others altogether if they are dark and the buyer can not find the switch.
9) Make sure your house does not smell. It is important to remove any odors from the house, especially those from smoking or pets. However, don’t just use an air freshener or the buyer will assume you are trying to cover something up.
10) Take animals with you. Never leave animals in the house. You may love your friendly cat or dog, but not all buyers are animal people and this is a sure-fire way to make them feel uncomfortable. The exception is a cat who will run and hide under the bed when people are walking through the house.
Lansing Real Estate: Selling Your Upsidedown House
Do you owe more on your Lansing real estate than your house is worth? If so, you join the ranks of 50% or more of homeowners in Michigan (not to mention 3 of this bloggers rental houses) So what is one to do when you owe more than your house is worth and it comes time to sell? Here are a few ideas.
1) Take out a personal line of credit to cover the deficit. A first step would be the check with your mortgage company to see if they could offer you an unsecured line of credit. If not, you may have more luck with smaller local banks so check with your local credit union to see what they can offer.
2) Savings – Of course you could always cover the deficit with money from your savings. This might be a hard pill to swallow, but if you are buying something is a higher price range just think about how much more you would have had to pay for that house a few years ago.
3) Rent your current house – You could become a landlord. If you aren’t into tenants and toilets you can always hire a local management company to cover the day to day issues.
4) Friends and Family – perhaps you could convince your friends or family for a personal loan.
5) Short Sale – A short sale is when the price you sell your house for is less than what you owe to your lender and your lender agrees to eat the defecit. A couple of quick notes on this. First, you MUST have a hardship in order to do a short sale. So if you have money in the bank, can continue to pay your mortgage, or any other options you are not a good candidate for a short sale. Second, a short sale is anything but short. Expect the process to take many many months. Finally, your credit will suffer if you pursue this option.
6) Trade – Perhaps you could find someone to trade with. Some builders are even considering trades to get their model homes occupied, so if you are moving from a smaller home into a much more expensive home you may check with local builders and Realtors to see if anyone would consider a trade.
7) Stay Put – Yes that’s right, a real estate agent telling you to stay put. If you can swing the payment and are not bursting at the seams, it may make sense to stay where you are for the time being.
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