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Once again I was reminded this morning that home buyers are having a difficult time receiving accurate information from their real estate agents regarding tagged homes on foreclosures.  Many Macomb County communities now have in place an inspection of foreclosure homes by the building departments before you will be issued a certificate of occupancy.  Without that certificate of occupancy you are not allowed to legally occupy the home, even if you have purchased it.

Please please PLEASE: If you have an exclusive buyers agent insist that the agent contact the city or township building department to ask if a certificate of occupancy and the resulting inspection is needed on the home you wish to purchase.

Do this before you submit your offer to purchase. If the inspection & certificate is necessary you can order this and have it taken care of during your home inspection process and ask for an extension to the inspection deadline that is in your purchase agreement.  If the city inspection turns up items that they insist on being repaired and/or replaced you will have the opportunity to back out of your purchase if you so choose.

~Kris Wales~  A partner for your real estate needs in Macomb County MI
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Normally when people think about buying a home they start out searching for homes on the Internet. They have their wish list and must have list in mind, they have a good idea about what city they want to reside in, and they have a bit of an inkling of how much their new home will cost.

One thing though that many of my home buyers forget to do before starting the purchase process is to think about the paper trail that is needed for their mortgage lender.  This paper trail is the most important thing you can do prior to your home search.

Applying for a mortgage is one of the most challenging things for my Macomb County MI home buyers whether they are first time home buyers or repeat home buyers.  Even if you have purchased a home within the last 5 years applying now is so much different.  The mortgage rules have changed tremendously and the best thing you can do is be prepared.

When you first start to consider buying a home please start saving the following :

• Pay stubs
• Income tax returns
• Bank statements
• 401K statements (or IRA, or other form of retirement savings)
• Documents pertaining to paid off loans or credit cards (proof that you paid them off)

Keep everything in a file so it will be handy for you to photocopy them to give to your mortgage lender when you formally apply for the loan.  All mortgage products (FHA, VA, Conventional, MSHDA, etc) will require a complete papertrail of your financial history and current status.  Having updated paystubs as well as current banking statements will give your mortgage officer a complete package to begin the process.

As always, if you have any questions about what you should do prior to purchasing a home in the Metro Detroit area feel free to give me a call or send me an email. I would be happy to answer your questions, no pressure, just conversation

~Kris Wales~ A partner for your real estate needs in Macomb County MI
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Just when I think the dust is settling a bit with the mortgage changes we receive another whammy.   Currently there are discussions going on about FHA mortgages and changes to the standards that will have a horrible affect here in Metro Detroit, and other areas of the country.

If you’ve thought about buying a home with an FHA mortgage and have talked to family or friends who have used this loan, then you probably know that for years and years FHA has allowed a home buyer to receive up to 6% of the purchase price in sellers concessions.   Most home buyers, whether you are a first time buyer or a repeat buyer, have used that 6% to help pay for your closing costs or pre-paid items (escrows) or tax prorations.  It has helped so many of my Macomb County MI home buyers over the years realize their dream of home ownership.

The whammy I was referring to? FHA wants to cut the sellers help to the buyers in 1/2. They are talking about lowering the allowed sellers concessions to 3% from the current 6%.

One of the FHA mortgage lenders that I have so much respect for has written a couple of articles about these proposed changes and how we can all voice our opinions.  Please go and visit Jeff Belongers blog and click on the links he provided to help support keeping the 6% in sellers concessions for home buyers.  Thank you Jeff for pointing this out to us so clearly and letting us know that we do have a voice about what is going on!

We are all asking for your help. In my opinion the change that FHA is proposing will bring much more harm to our housing industry and real estate market in Macomb County as it will drive even more first time home buyers out of the market entirely.

~Kris Wales~ A partner for your real estate needs in Macomb County MI
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When my hubby and I purchased our home 13 years ago we both wanted a big lot.  (Larger than the norm in subdivisions.  A typical lot in our sub in Macomb County is 50 X 110.)  We didn’t buy acreage, but our home does sit on a double width lot.  It was nice the first year, not too bad the 2nd year, but each and every year after I have this chant in my head “What were we thinking???”

Our double lot now includes double the yard work, double the snow removal and double the maintenance costs for the lot.   When it snows I cringe.  I don’t enjoy it anymore, other than the first snowfall of the year when it’s so darned pretty.   During the spring and summer when it doesn’t rain I moan about the grass turning brown, but secretly I’m a bit excited because it doesn’t grow as quickly! (No, I don’t water.  When our water bills went through the roof after the kids left I rebelled.  No sprinkler system and no higher bills just for a green lawn!)

As I look back at when we first started looking at homes I kick myself.  We were perfect condo people and didn’t realize it.  Now that the real estate market in Macomb County is so soft that we wouldn’t consider selling our home, we are a bit stuck.  Can’t buy a condo unless we sell our home, yet can’t sell our home without bringing a considerable amount of money to the closing table.

Can I empathize with folks around us in the same boat? (Can’t sell and buy what you really want.) You betcha.  I am also extremely grateful that we haven’t lost our home, and that we’re blessed enough that I can still gripe about our lack of foresight in buying a home on a double lot.

I have to tell you though, this is something I bring up to my buyer clients when we are out and about in Macomb County looking at homes.  “Do you think you will enjoy yard maintenance?”  and “Where do you see yourself in 5 years, 10 years, in terms of lifestyle?”.  It’s something to consider when choosing your home (or condo).  Short term purchases aren’t common anymore here in Michigan.  Plan on buying your home with 5, 10, even 20 years in mind.

PS: I just cut the back lawn and am exhausted from the heat.  The front will have to wait until tomorrow morning.  I’m also hoping it will rain

~Kris Wales~ A partner for your real estate needs in Macomb County MI
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During the cold winter months I long for summer. Viewing the foreclosures and vacant homes in the winter isn’t much fun.  In fact, it can be quite challenging and uncomfortable.  My buyers and I cringe each time we trudge our way through snow drifts to enter the home, and no relief is found on the inside if the utilities have been turned on.

Here it is, the summer months, and I’m happier showing the foreclosures and other vacant homes, but they do pose their own challenges and risks.  Yes, risks.

Most bank owned homes do not come with disclosures about the presence of mold or growing mildew in the home. ( HUD is the exception.)  If you’ve been out and about looking at homes these past 2 to 3 weeks and have entered a vacant home then I’m sure you’ve encountered this:  The wonderful strong aroma of a closed up hot house that has had water infiltration. On occasion it can be so bad that the odor greets you the moment you unlock the door and step inside.  Those homes don’t even get a full viewing, most of my buyers wouldn’t even consider them as “on their list”.  We just back away and go on to the next home.

The risky ones in my opinion are those that don’t greet you with the odor at the start but nail you once you get fully inside and in to the basement (or other area that has had water infiltration or mildew growth).   For this reason I caution my buyers that if they have allergies that could be heightened by mold or mildew, or if they have young children with health issues, that I go in the homes first to give them the sniff test before they enter.

Heck, even if your young children don’t have health issues I can’t imagine that the mold & mildew spores are good for them to breathe.  If you can, get a sitter for your children if you are going to be viewing foreclosures.  If you can’t, I make a great sitter and will be happy to wait outside with the little ones while you view the homes.  Or, if there are 2 adult buyers present, one can go inside while the other waits outside, and vice verse.

While I don’t long for winter again, I have to admit that the hot humid days of the past few weeks certainly aren’t fun for my buyer clients, nor for me.  Although, on the upside, it does make us appreciate the owner occupied homes with running air conditioning even more!

~Kris Wales~  A partner for your real estate needs in Macomb County MI
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So many changes in the mortgage industry, so much to keep up with. This is why I ask questions so often of my trusted mortgage lenders in the area.  What may have been true last week might have changed this week.

As anyone who has purchased a condo over the last few months, or has attempted to purchase one has discovered, there are new rules and hoops to jump through.  If you are using an FHA mortgage the “spot approval” is gone, and the whole condo complex must now be HUD approved.  Not fun. Certainly not a quick undertaking.

What happens though to those who want to purchase a specific condo and the complex cannot be HUD approved?   Cash or a conventional mortgage would be the options.  As conventional mortgage rules have also changed greatly over the last year, it was nice to hear from someone yesterday who is in the mortgage industry and works heavily in the Metro Detroit area.

Here is what Drew Sygit of The Lending Edge team at First Michigan Bank had to tell me about purchasing a condo using a conventional mortgage:

• Minimum 680 FICO Score
• 10% down
• No entity can own more than 10% of the units
• No more than 15% of condo owners can be behind on their dues
• No more than 10% can be rented
• If new construction, 70% must be sold and no further phasing

This is terrific news! I’ve heard so many horror stories from other agents about their buyer clients needing 20% or more as a down payment for a conventional mortgage when purchasing a condo.  It’s nice to hear from Drew that he can obtain financing for a condo buyer with only 10% down.

If you want to call Drew Sygit you can reach him at:  248-356-3739

~Kris Wales~  A partner for your real estate needs in Macomb County MI
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If you have been looking for a home over the last year or so you have encountered homes offered for sale with a “short sale” contingency.   There’s no avoiding them, they make up so much of a percentage of the homes for sale now in Macomb County as well as the entire state of Michigan.

As a buyers agent I discuss with my clients the pros and cons of making an offer to purchase on a home that is subject to a short sale.  We go over the time line that is normal, the process the seller has to go through in order to obtain an approval, and the pitfalls that can happen during the purchase process.

One area that keeps cropping up and can be confusing is this: Will the mortgage holder agree to paying for some (if not all) of the buyers closing costs?

The answer: It depends.    It depends on the mortgage holder, the type of mortgage the seller has, and the other various investors who have a say in the process (the PMI company, the end investor - Fannie Mae or Freddie Mac, etc.)

One common scenario is in which the seller has an FHA mortgage and the prospective buyer is also using an FHA mortgage for their financing.  In the short sale scenario FHA does not allow the seller to give more than 1% of the purchase price in sellers concessions to the buyer, even though FHA allows up to 6% of the purchase price to be paid by the sellers in a non-short sale purchase.

Please talk to your lender and your buyers agent before making an offer on a short sale purchase.  The type of financing you are using, as well as the type of mortgage the seller currently has can make a big difference in what is allowed & disallowed as far as the sellers helping you with your closing costs.

~Kris Wales~  A partner for your real estate needs in Macomb County MI
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A few days ago I wrote about the 2 part appraisal that is needed in order to successfully use a 203K FHA mortgage.  Another important part of this mortgage that I want to let home buyers know about is that the qualifying for this mortgage is also a bit different than for a regular FHA mortgage.

If I use the same example purchase that I did the other day ($50,000 home purchase plus $20,000 in estimated repairs) the buyers agent and the mortgage lender would look at the total purchase power of the buyer before proceeding.   Let’s say that you are qualified to obtain a $60,000 mortgage. The home in the example above would need to be purchased for $40,000 in order to add on the $20,000 repair costs so that you didn’t exceed the $60,000 total purchase price.

As always, sit down with your buyers agent and go over everything before writing your offer to purchase.  Having time to numbers crunch will make the process go so much more smoothly.

~Kris Wales~  A partner for your real estate needs in Macomb County MI
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The “rehab” mortgage offered by FHA is a wonderful product, but also wrought with confusion for many potential home buyers. One of the areas that confuse buyers is that there are actually 2 different appraisal amounts that the home must meet in order for the mortgage to be approved.

Below is a basic example of how this rehab mortgage works:

A buyer finds a home listed at $50,000 that needs repairs and/or updates to make it livable for them.   The home is priced under the current market values to reflect the repairs needed.  (IE Home values in the area are $65,000 to $70,000).

The buyer wishes to purchase the home using a FHA 203K mortgage and borrow above the purchase price to pay for the needed repairs and/or updates.   Buyer and their contractor estimate the repairs would come to approximately $20,000.

Buyer makes an offer on the home for $45,000 stating in the purchase agreement that it is contingent upon receiving this FHA 203K loan.   The buyer then submits documentation for their mortgage pre-approval AND documentation from their contractor that specifies the repairs that will be done to the home and the cost of labor and materials.

The mortgage lender then orders an appraisal - a 2 part appraisal. The first part appraises the value of the home before repairs.   This appraisal must be for at least the $45,000 purchase price that the buyer offered.  The 2nd part of the appraisal is then done by the appraiser and it must state the homes value after repairs is $65,000 give/take a 10% variance.

If the home does not meet these 2 appraisal values then the 203K rehab loan will be denied.

The 203K rehab loan is a terrific product, but it is imperative that your buyers agent has a solid knowledge of the market value of the home, both pre-repair and after repair.   If the pre-repair purchase price is too high, then the adjusted after repair price will be too high for the appraiser.   Ask your buyers agent to analyze the true market value of the home you wish to purchase, and sit down and go over the numbers carefully before writing your offer.

~Kris Wales~  A partner for your real estate needs in Macomb County MI
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This home just went on the market today.

It’s a wonderful investment home priced well
at $29,900.  Clean, updated and better yet - it’s
NOT a short sale or a foreclosure!

Please contact me if you have any interest in this
lovely Eastpointe home.

~Kris Wales~ A partner for your real estate needs in
Macomb County MI
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