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The most important factor if you are a buyer is to realize that even if you have reached an agreement with the seller of the property, you must wait for the underlying lender to approve the sale.  This can take 3-6 months and then the lender may not provide an approval.  For a seller, there are many other considerations.  First a short sale is a transaction where a seller wishes to sell their home, but the mortgage exceeds the “fair market value.” The reason for sale is typically due to a personal hardship, e.g. death, divorce, loss of income or job relocation.  In fact, you must be able to prove a hardship.  It is my experience that lender’s generally prefer any resolution over a foreclosure.  It is also my experience that your listing agent should have an established relationship with a “short sale negotiator”.  This is a middle man who is versed in this process and limits their business to this segment of the market.  Before the Mortgage Debt Relief Act of 2007, the amount of debt forgiven by your lender would be taxed by the IRS.  However, the MDRA, allowed the amount forgiven to be tax exempt, as long as the debt incurred was for the purchase of a house, build a house or substantially improve your house. So, if you had a first mortgage and then took out an equity loan to buy a car, that amount would not qualify.  The other caveat is lenders do not have to forgive the entire amount; they can demand a note for all or a portion of the debt. However, the most significant issue on the table now is that the MDRA expires at the end of 2012.  At that point, all bets are off as to how the IRS will treat forgiven debt. 

Today, Governor Snyder signed legislation providing home-buyers a fair process when it comes to their property taxes.  Senate Bill 349, sponsored by Senator Dave Hildenbrand (R-Lowell) creates 2 Principal Residence Exemption (PRE) dates; June 1st (compared to May 1st), and the other on November 1st.  So for the first time buyers and sellers now have 2 rather than 1 date to change homestead status. Additionally, this legislation allows bank-owned properties to retain their PRE so that buyers can qualify at the lower rate of taxation.  This is particularly important since foreclosures have flooded the market in recent years.  The law is effective immediately.

To make up for the lost school revenue, banks will be assessed a newly defined tax that will keep the 18 mills (which they presently pay on any foreclosed property) when a property can no longer qualify as a principle residence.

I have a German Shepard.  I have always had dogs, usually hunting dogs.  This is my first Shepard.  The photo attached is not my dog.  He belongs to Officer Steve Scarpino and the Jackson Police Department. His name is  Zygos and isn’t he pretty?  But don’t let the innocent look fool you.  He loves to work.  And to him work is finding bad people, illegal drugs, guns and the like.  I met Zygos this last weekend doing a ride along. Zygos is all business.  He likes it when the police car goes fast, especially if the overhead lights are on.  He knows a job awaits. Riding along with a police officer is interesting. You realize the inherent dangers to their job.  The City of Jackson has a long and proud history.  They like many public service entities are under the budget gun.  I was able to witness what this has meant to the Jackson Police Department.  Even though the cities population has declined, there is no decline in the number of 911 calls. And since staff has been dramatically cut, this puts extra stress on those who remain.  Fortunately, there are dedicated servants like Steve Scarpino and another officer I met on Saturday, Sargent Rob Jenks and a fellow YMCA member that I know, Lt. Chris Simpson. Our city is fortunate for all the officers who serve.  And if I lived in the city and wasn’t so old, I would join the police reserves.  But I will do my part by being an ardent and vocal supporter.  And we can all help by obeying the law and taking a moment to say thank you.

The people.  Yes, it is the people.  Oh there are some who are very challenging but by in large I have met fascinating people. For example, one of the agents who works for me was unable to pick up a client for a closing and asked me to fill in.  The client is a Palestinian who grew up in “Old Jerusalem” and came to this country several years ago because it was his dream.  During the drive to the office and then back to his business, I asked him to share his perspective of what was happening to his people.  I heard no hate for anyone as he told of his childhood.  He shared objectively and articulately. 

This summer I worked with a young couple buying a vacation home on one of our lakes.  Mrs. Buyer is an attorney for a large international corporation.  Her husband an engineer with a large Detroit architectural firm.  They had very high expectations and great questions.  I enjoyed engaging them about their careers. They caused me to grow as an agent.  I like this!!  

Another out-of-town couple desiring a lakefront cottage, worked with me to find a place for their family.  He is a senior manager with a national firm which works closely with automotive manufactures moving product and installing after market accessories.  How interesting to listen to him explain what his company does and how he fits into the picture.

 I sold a home for a 90 year old WW2 veteran who was assigned to the submarine fleet.  90 years old and as my mother used to say, “sharp as a tack!”.  What stories he had! And then my most recent listing owned by a couple in their mid 80’s (looking like 70).  He was a career Air Force Officer, obtaining the rank of full Colonel.  And if the fact he flew the SR-71 Blackbird wasn’t thrilling enough, I witnessed mounted on the wall in his den the Silver Star, Distinguished Flying Cross (with 3 Oak Leaf Clusters), Legion of Merit and the Distinguished Air Force Cross. 

And then there was the young couple who I helped with their first home.  They were so cool, creative and appreciative of everything I did.  They helped me stay relevant.  What a delight they are!!!

Yes, the people.  That is why I hope I don’t ever have to retire.  I love my work.

Ansel Adams is often described as America’s Master Photographer (1902-1984).  He was also an environmentalist and best known for his black-and-white photographs of the American West.

Masterworks is a traveling exhibition of 47 of his works which he made late in his life as a representation of his life’s work.  The exhibition makes just one stop in Michigan and that is at our own Ella Sharp Museum.  The gala preview is on Thursday, June 23 from 5:30-8:30 p.m.,featuring an open bar, heavy hors d’oeuvre and the Ron Brooks Jazz Trio.  The event is $85 per person. Friday, June 24 will be a special preview day for Ella Sharp members only.  Finally, it will be open to the general public on Saturday, June 25.  Cost for admission will be $8 for non-members.

Jackson County is very fortunate to have the Ella Sharp Museum and the museum is fortunate to have Charles Aymond as its Director.  If you are not a member of the museum or not on their mailing list, I would strongly recommend you do.  Just as a bit of useless trivia, I remember when I was 14, my Grass Lake neighbor, Ruth Foster, who may have been the director of the burgeoning local effort to restore the original farmhouse, hired me out of her own pocket to help her clean and paint.  Needless to say, I have had a long love affair with Ella Sharp.

Stan Humphries, chief economist at zillow.com recently was quoted as saying, “there has been an over correction in terms of psychology and home buyers are overly suspicious” Well I say that concern, given our residential real estate market over the last 5 years is well founded.  He goes on to say, “they need to get into a place of pragmatic decision making. Break out a pencil and run the numbers, use calculators, look at the price of the houe, value and estimate for rent.  That can help people think through the decision more.”

So, what would be the general “rule of thumb?” First, there was a long standing opinion among real estate professionals that a buyer should plan to own a home for 5 to 7 years to make it worthwhile. Less time than that and the transaction fees and payments typically don’t make sense.  There is a “tipping point” and that depends on local price-to-rent ratios. For example, in a market where a 3 bedroom house costs $500,000 and the monthly rent for a similar home is $24,000 per year, the price-to-rent ratio is about 21. Generally, if the ratio is above 20, the scales tip toward renting, especially if there are other factors that could cause you to move sooner. If the ratio is below 15,then home ownership starts to be more attractive. Let’s do a Jackson County Michigan example. Rent for a suburban 3 BR ranch with a basement, which would sell for $105,000,  is $850 per month, or $10,200 per year.  The price-to-rent ratio is 10, indicating a strong advantage to buying, given other variables, not all which have been discussed here. Other variables would be do you like doing outside maintenance and do you have the discipline to set aside money for major repairs. 

Buying a home is a big decision.  It is always best to consult with professionals including your tax person and an attorney.

Jackson County, Michigan is very fortunate to be the home of Cascades Humane Society. They are staffed by a group of dedicated professionals. Additionally, many local residents sacrificially donate their time and money to our areas lost, homeless and unwanted “critters”.

Cascades Humane Society has a pressing need.  They need a new van and we can help.  Toyota has a program called, “100 Cars For Good”.  Toyota took in over 5,000 requests from non-profit organizations to vie for a new vehicle.  Toyota came up with a list of 500 of the most worthy.  Beginning in May of this year and continuing for 100 continuous days Toyota will post 5 of the organizations on facebook each of the days and the organization which wins the daily vote, receives a new Toyota vehicle. The day you can vote for Cascades is Thursday, June 16, 2011, from 6:00 a.m.- 11:59 p.m.  You will need to be a registered facebook user in order to vote. Here is the link to vote: www.facebook.com/toyota. 

Of course, you can vote other days for other organizations.

Here is a video you can watch about the program.

http://www.youtube.com/watch?v=xMyeEgRRSHA

For the quarter ending March 31,2011, there were a total of 360 residential closings in Jackson County.  Average sales price was $66,087 and average time on market from date of listing to date of closing was 113 days.  Of the 360, 11 were condominium sales.  They average $71,230, with an average time on market of 188 days.  60% of the closings were foreclosures.

To put this in perspective, for the quarter ending March 31, 2010, there were 425 closings.  Average sales price of $76,887 and 112 average days on market. Of these, 10 were condominiums with an average sales price of $77,106 and average market time of 112 days.  Again, about 60% of the closings were foreclosures.

Year over year we have experienced about a 15% decrease in units sold and about a 15% decrease in average sales price.  Not a good statistic for those who argue our local market is getting better.  This can be attributed to no decrease in the number of foreclosures coming on the market and the elimination of governmental incentives to stimulate the housing market.  The residential market remains a price and beauty contest and I suspect will for several more years.

I put forth the argument in Part #1 of this series, that I believed it was inevitable that the Federal Reserve would increase interest rates.  That being the case, this may be a very good time to consider refinancing your home.  Here are some tips to position yourself to do same:

1.  Know Your Credit Score: Many people make a guess rather than doing some simple investigation.

2.  Know Your Home’s Value-to-Equity: With the boom of the early 2000’s and then the steep declines commencing in 2007, this is another area not to venture a guess.

3.  Know Your Mortgage Terms: Did you know that making an extra mortgage payment a year is said to knock off almost a years worth of interest.

4.  Reduce Credit Card Debt: However, don’t close any open accounts; it knocks points off your credit score.  Doesn’t make any sense to me.

5.  Bring Money to the Table: This is also called a cash-in refinance.  Bringing some of your own money to the table can make the lender take a less restrictive view of your request.

Then my final piece of advise would be to shop for a mortgage broker locally.

In August of last year,Ben Bernankeannounced QE2, or quantitative easing; round #2. This was done  in conjunction with a zero interest rate policy.  The thinking was this would be a wealth creating move, which in turn would energize the stock market, make housing more affordable, allow more homeowners to refinance and encourage investment.  Since then the stock market is up about 19%. Unfortunately what we have also seen is skyrocketing commodity prices which has shown up in higher prices at the “pump” and at the grocery store.  In fact, just about everything is rising except house prices. What we have enjoyed in “wealth” has been taken away in the overall cost of living. 

Now the dilemma for our leaders is whether to continue this policy, or to raise interest rates.  The downside of continuing is further debasing of the dollar, and more pain when we buy gas or food.  If rates rise, then the stock market will fall and it will cost more to finance a home.   

I don’t have the answer and I am not saying if what Bernanke did was right or wrong. However, I suspect at some point there will be so much clamor against rising commodity prices that rates will go up.

NEXT: Is this the time to refinace and what you should do to get your financial house in order.