COVID19 and the Real Estate Market, July 2020 Update

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When stay-at-home orders became widespread in March, many assumed that the economic shutdown and ensuing uncertainty would cause prospective home buyers to put their plans on hold. And they did, for a while. But just a few months later, it looks like staying in has caused buyers to be even more ready for a move.

In fact, according to a recent article from Housingwire, 53 percent of home buyers say they are more likely to buy a home in the next year because of the pandemic – compared to 27 percent who said they hadn’t changed their plans and 20 percent who said they’d be less likely to buy. Why would the coronavirus make home buyers more enthusiastic to buy? The vast majority said mortgage rates. Rates were already favorable to start the year but are now at record lows. That makes buying more affordable and presents movers with an opportunity to lock in a historically low rate.

Another reason is Americans have been able to save money during lockdown because they’ve been spending less. That means more money set aside for a down payment. Perhaps the most relatable reason survey respondents gave, though, belongs to the 28 percent who said they were ready to make a move because they’d been stuck in their small space for so long.

While the housing market has been hit hard by the coronavirus – with home sales predicted to suffer the biggest year-over-year decline in 12 years – expectations for its recovery are far more optimistic. In fact, according to one recent analysis from Nationwide, home sales could be back to 2019 levels as soon as next year.

Are you ready to look for a new home? Start your search by visiting https://nexthomevictors.realgeeks.com/dani-hallsell/

To your health, Dani

Source: Luxury Mortgage

What is Title Insurance?

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Title insurance is a type of insurance that protects mortgage lenders and homeowners against claims questioning the legal ownership of a home or property. If disputes over title ownership arise after the purchase, the insurance policy pays for any legal fees to resolve them.

Unlike other types of insurance that help cover future mishaps, title insurance is designed to protect the policyholder from any past title discrepancies. For instance, when you buy car insurance, you are protected in case your car is in an accident. When you buy health insurance, you are protected against the cost of future medical care. Title insurance, on the other hand, protects an investment in real estate that might be at risk due to a past event, such as an undiscovered lien against the property.

Title insurance does not just protect you, as a purchaser of the property. Your mortgage lender will likely require you to have title insurance in order to protect their security interest in the property you are buying.

In any real estate transaction requiring a mortgage, the title company runs a public record search to ensure that the home being purchased is free and clear of any liens or ownership disputes. This process confirms the seller’s legal right to sell the home. If any defects in title, also known as “clouds”, are found during the title search, they are the responsibility of the seller. He or she may be able to cure the defects, or you can walk away during the sale. If defects in title are missed, however, you could be on the hook.

For example, a lien travels with the property, not the debtor. For example, let’s say a previous owner of your house had the kitchen remodeled. He failed to pay the contractor the $30,000 owed, and the contractor had a lien against the house for that amount.

If the title search failed to discover the lien, and you purchased the property, the lien would become your problem. Now that it is known, you will have to satisfy it, most likely out of the proceeds of the house if and when you sell it.

While this process usually goes smoothly, title insurance comes into play when disputes arise. Here are some of the more common title issues:

  • Title forgeries
  • Back taxes
  • Filing errors
  • Unknown heirs to the estate who claim ownership
  • Inconsistent or conflicting wills
  • Liens, commonly from unpaid home equity lines of credit (HELOCs) or contractor bills
  • Undocumented easements

There are two types of title policy; a Lender’s policy and an Owner’s policy.

A lender’s title policy is designed to protect the financial institution providing your mortgage from title claims that would put their stake in your home at risk. Lenders almost always require borrowers to purchase title insurance on the lender’s behalf as part of the loan-approval process. It’s considered a closing cost.

The owner’s title policy is designed to protect the homeowner in case of any claims against their ownership of the home. In most cases, owner’s title insurance is not required in a home purchase, but it is recommended. It can be paid for by the seller at closing, so you may want to negotiate for it when you are purchasing a home. Generally, in Michigan, the seller’s real estate agent will choose the Title Company that will provide the buyer’s owner’s policy and that Title Company will conduct the closing. The buyer may use the same Title Company for the Lenders policy, or the buyer can use a different Title Company.

If you are buying a home in cash or your lender doesn’t require title insurance, you can request that the seller provide a warranty of title, which states that they are the sole party with a right to sell the home.

How much does title insurance cost?

Title insurance policy costs often range between $500 and $3,500 for each policy but vary based on the purchase price, mortgage amount, the sales price of the home, and the extent of the coverage.

Your title insurance premium is a one-time charge that’s paid at closing. In addition to the insurance itself, you may be responsible for other related fees, like wire transfer fees, closing fees, and recording with the county (register of deeds).

You should watch out for unnecessary fees from title companies.  Anything outside of the title premium, title closing, recording, and wire transfer are unnecessary fees that you should NOT be paying.

In many states, you can compare the prices of different title insurance companies. But in Michigan all title companies are required to provide the same level of coverage at the same price, so shopping around isn’t required in terms of title premiums.

I hope you found this information informative and helpful. If you have any real estate related questions, I am always happy to talk with you, and I’m available via phone, text, email and social media.

To your health and happiness, Dani

Housing Market Update, June 2020

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We are halfway through 2020, and what should be the peak home-selling season. However, in these unprecedented times, the real estate industry as a whole is still recovering slowly. Here is a June 2020 Housing Market Update.

Home Sellers Are Starting to Come Back

The number of homes for sale has been lagging for years. It’s been among the housing market’s main challenges. That’s because a lack of available homes combined with rising buyer demand leads to steady price increases and declining affordability. While that can be good for homeowner equity, it’s bad for buyers – especially first-time buyers who don’t have the benefit of cashing in their equity to help fund a home purchase.

This continuing imbalance only got worse when the coronavirus led to stay-at-home orders across the country. That caused some buyers to delay their plans, but also has led to homeowners to think twice before putting their home up for sale. This caused new listings to plummet. In fact, according to realtor.com, the national inventory of homes for sale is down nearly 20 percent from last year.

The good news, though, is things are starting to get better. By the end of May, the number of new listings had improved in 45 of the 50 largest U.S. markets compared to the month before. While they’re still down, the fact that the rate of decline has gotten smaller is an indication that home sellers are starting to return to the market. If the trend continues, it’ll lead to a healthier and more balanced housing market.

Home Prices Increase 5.4% in April

The housing market, like any market, is a balance of supply and demand. Conditions are a reflection of how many buyers and sellers there are, rather than the strength or weakness of the overall economy. For example, when coronavirus mitigation efforts shut down much of the country’s economy, there was a lot of speculation about what would happen to prices. Though the economy suffered, home prices didn’t.

In fact, they rose. According to the most recent CoreLogic Home Price Index Report, home prices increased 5.4 percent in April over last year at the same time. Not only did they improve, but they also did so at a stronger pace than last April when they were up just 3.6 percent. So, why did home price gains accelerate while the economy was suffering a severe downturn?

When stay-at-home orders went into place, many home sellers pulled their listings and decided to wait a while before selling. The corresponding drop in for-sale inventory meant there were more home buyers than homes for sale, which led to more competition for available homes, bidding wars, and higher prices.

Mortgage Rates Hit Another Low

According to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey, average mortgage rates hit another low last week. Rates were down week-over-week for most loan categories. The declines helped push demand for home purchase loans higher. In fact, requests for loan applications to buy homes rose another 5 percent from last week and are now 18 percent higher than they were at the same time last year.

Joel Kan, MBA’s associate vice president of economic and industry forecasting, says the numbers are encouraging, but challenges remain. “Purchase applications continued their recent ascent, increasing 5 percent last week and 18 percent compared to a year ago. The pent-up demand from home buyers returning to the market continues to support a recovery from the weekly declines observed earlier this spring.”

“However, there are still many households affected by widespread job losses and the current economic downturn. High unemployment and low housing supply may restrain a more meaningful rebound in purchase applications in the coming months,” Kan said. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications.

If you have any real estate related questions, I’m always happy to talk with you. You can find my contact information on the right side of this page.

To your health and safety, Dani

Source: Luxury Mortgage

Michigan Principal Residence Exemptions (PRE)

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Michigan Senate Moves Bill to Allow for Principal Residence Exemptions (PRE) Until June 30th

Over the past several weeks Michigan Realtors® has worked with the Legislature and the Department of Treasury to allow additional time for buyers to file their Principal Residence Exemption (PRE) for 2020. With the traditional deadline expiring this past Monday, June 1st, Michigan Realtors® is urging expedited movement on this important legislation to provide buyers with property tax relief and the greatest amount of certainty during the month of June.

Today, the Michigan Senate passed Senate Bill 940, sponsored by Senator Roger Victory (R- Hudsonville) extending the time frame to file a 2020 PRE until June 30th. With the overwhelming support of the Senate and work with the Department of Treasury, it is anticipated that the bill will see continued movement in the Michigan House next week.

While there are no certainties, Realtors® should advise their buyer closing in the month of June to file their PRE before June 30th in order to receive the PRE rate for their July property tax bill.

What is a Principal Residence Exemption (PRE)?

A PRE exempts a principal residence from the tax levied by a local school district for school operating purposes up to 18 mills. To qualify for a PRE on a parcel of land, a person must be a Michigan resident who owns and occupies the property as a principal residence. The PRE is a separate program from the Homestead Property Tax Credit, which is filed annually with your Michigan Individual Income Tax Return.

What this means to a homebuyer: If you close on a property in the month of June and file for the Michigan Principal Residence Exemption by June 30th, your summer tax bill will be lower due to the PRE.

Have questions about this subject, or any other real estate related topics, I’m always available to talk with you!

Dani

Buying Incentives to Discuss with Your Mortgage Professional

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Federal homebuying incentives make taking out a mortgage easy and affordable. If you’re a first-time buyer worried about having to make a large down payment and upping your credit score before beginning the process, consider taking out a Federal Housing Administration (FHA) loan, which is meant for first-timers. FHA down payments could be as low as 3.5% and you don’t have to worry about having impeccable credit to get prequalified. Plus, part of your closing costs could be covered or supported by another federal incentive.

The Department of Housing and Urban Development (HUD) Homeownership voucher is an option available for first-time buyers who have at least one member of the household working full-time and are willing to participate in a homeownership counseling program. The voucher is offered to those who meet a low-income requirement.

Other opportunities include those available to rural residents, service members or veterans, and state-level incentives. The U.S. Coronavirus Aid, Relief, and Economic Security (CARES) Act currently offers mortgage assistance as part of the pandemic economic stimulus package.

Source: Level One Bank

For more information on these programs, give me a call today! Dani

The Truth About Skipping Mortgage Payments (And The Consequences)

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Every professional in the housing/mortgage market understands the crushing economic changes for many households as a result of coronavirus.  It makes all the sense in the world for those households to pursue the forbearance option (skipping mortgage payments for 180-360 days) if needed.  But it may make considerably less sense for those who aren’t truly in need.  Either way, the decision should not be taken lightly and its consequences are already being felt.

The CARES Act requires that mortgage servicers grant forbearance without verifying need.  In other words, if you say you have a financial need, your mortgage company can’t ask you to document it.  This has resulted in a much bigger surge in mortgage non-payment than the industry expected.

When people don’t pay their mortgage, the fallout is a bit different than most other things in life.  For instance, if I loan you $100 and you don’t pay me back, I’m out $100!  If you gave me some collateral, I could sell that and try to recoup some of that $100 of course, but I’d still come up short–especially when factoring in time and energy.

The investors fronting money for mortgages don’t have to worry about getting repaid.  There are guarantees in place for that from housing agencies (Fannie Mae and Freddie Mac, primarily).  But those guarantees only mean the investor will get the principal and interest they otherwise would have received for the time the mortgage existed.  They DO NOT protect the investor from other expenses that can arise when a homeowner isn’t making payments.

That’s typically not too big of a concern because the risk of non-payment is low and stable enough that it can be easily managed.  With the risk now higher than ever and without knowing how long the situation will last, uncertainty reigns supreme among mortgage investors.  Uncertainty has a cost.

For instance, the housing agencies that guarantee a majority of mortgages are now charging 7% of the loan balance to lenders when new loans enter forbearance status too soon after closing.  The time window can be as long as 6-8 weeks in some cases.  In other words, the lender loses $21,000 on a $300,000 loan.  Such costs quickly add up to insolvency for some lenders.

The investors who buy mortgages are accounting for these new risks by charging higher rates and fees, or by simply ceasing to offer certain loan programs altogether.  The greater the number of forbearance risk factors, the higher you can expect the rate to be, EVEN IF you personally don’t agree that the risk factor applies in your case.

Moreover, the industry’s definition of “risk factors” might surprise you.  Case in point, housing agencies won’t buy/guarantee cash-out loans at all if there’s been early forbearance, even with the 7% penalty).  Rather than run the risk of getting stuck with a mortgage that can’t be sold to or guaranteed by the housing agencies, many investors simply aren’t doing cash-out mortgages right now.  Most of those who remain in the game are charging extra fees and/or higher rates.  That means that a borrower with an 800 credit score who wants a cash out loan for half of their home’s value (a stellar credit risk historically) would still pay a much higher rate.

To a large extent, this would be happening regardless of the people opting for forbearances who don’t really need them.  But those people are certainly making things worse for everyone else.  They’re also making it worse for themselves.

If we look beyond the impact on rates and program availability, there are other reasons a homeowner should think twice before requesting a forbearance they don’t need.  As the guidelines currently stand, there is no guarantee that they’d be able to refinance or get a new mortgage with forbearance on their credit report–especially if the forbearance is ongoing.

This is a head-scratcher for those who’ve followed the forbearance and CARES Act news reasonably closely, because the law states that there is to be no adverse credit reporting as a result of forbearance.  While it is true that forborne payments will not be reported as late, the forbearance itself is still reported, and that’s obviously a red flag for the mortgage industry as long as the CARES Act’s guidelines remain intact.

In terms of credit scores, it is true that forbearance will not DIRECTLY impact someone’s FICO, but there’s no way to prevent it from having an indirect impact in some cases.  For instance, certain creditors are lowering available revolving credit limits in the event forbearance shows up on a credit report.  This increases the ratio of debt to available credit, which is a key ingredient in determining FICO score.

In other words, even though the forbearance itself is not affecting FICO scores, it can lead other lenders to make changes that cause scores to drop, and it can absolutely hurt your ability to buy/refi in the future.  Could that be clarified to your advantage in the future?  Certainly, but it’s important to know that’s not the way it is right now.

Source: Level One Bank

Be sure to contact your lender to find out how forbearance will affect your future payments. If you have any real estate related questions or concerns, please contact me via phone, text, email, or social media.

Dani 

Forecast Calls for Housing Market Rebound Later This Year

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Typically, economic forecasts rely on a mix of current and historical data. If you understand where things are today and what’s happened in the past, you can make an educated guess about what the future might look like. This becomes harder, though, when there aren’t obvious historical precedents to use for comparison.

Despite this, Freddie Mac’s most recent quarterly forecast attempts to predict how well the housing market will endure the economic impact of the coronavirus. So, what do they see? According to Sam Khater, Freddie Mac’s chief economist, we may begin to see a rebound during the second half of the year.

Specifically, Freddie Mac sees home sales and price increases slowing this year before rebounding in 2021.

Source: National Association of REALTORS

Start your Ann Arbor Area home search today by visiting https://nexthomevictors.realgeeks.com/dani-hallsell/

To your health, Dani

6 Bad Household Habits to Break

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Bad habits are so easy to fall into. But in the end, we know they only make us miserable. They’re the opposite of what makes you happy. They’re what make you miserable. Here are 6 bad household habits to break now for a happier you (and a fatter bank account):

#1 Taking Long, Steamy Showers (I’m guilty!)

Spending 20 minutes in the steam may be good for your pores, but it’s also great for mold and mildew. Run the exhaust fan while you’re singing in the shower, squeegee the walls afterward, and scrub that grout every few months.

#2 Keeping Out the Sun

Shutting your shades on winter days might seem smart. More insulation from the chilly weather, right? Your energy bill disagrees. A sunny window can warm your home and lower your heating costs. And as a bonus, you could see a decrease in seasonal depression.

#3 Compulsively Buying Bargains

Finding a deal feels so good, but cheaper isn’t always better. In fact, budget buys might cost you more in the long run. For instance, dollar paintbrushes will leave annoying streaks, requiring a costly re-do. And when it comes to appliances, permit a little splurge — especially if selling your home is on the horizon.

#4 Running a Half-Full Dishwasher

You get a gold star for always remembering to start your dishwasher before bed, right? Clean dishes every morning! Go you! Yeah, about that: Your dishwasher wastes water unless it’s completely full.

#5 Mega-Mulching

Your precious trees really are precious. Each one can add $2,000 or more to your home’s value while saving on energy costs. A “tree volcano” is actually damaging your foliage. Too much mulch suffocates your tree, causing root rot and welcoming invasive insects.  Protect your precious trees by packing mulch loosely, letting water filter properly toward the trunk.

#6 Going on a Remodeling Rampage

Don’t break out the sledgehammer for a demo three weeks after moving in unless your home needs serious, obvious work. Give yourself time to understand the home’s quirks before renovating. For instance, you could dump $15,000 into a kitchen remodel — only to realize the original layout would have worked better for holiday parties. Or you paint a room your favorite color, Wild Plum, only to realize the natural light in the room makes it look more like Rotten Plum. Whoops.

Breaking habits takes time, so it’s important to be kind to ourselves when we slip up. When we create new habits, we’re building new wiring, but it’s not like the old wiring disappears. Don’t turn slip-ups into give-ups.

Have any real estate related question? Send me message using the box to the right of this page.

Dani

Ann Arbor Area Board of REALTORS® Reports Washtenaw County March Real Estate Statistics

Total residential home & condominium sales dropped 6.6% along with single-family home sales decreasing by 1.5% compared to this time last year. New single-family home listings decreased in March, with a 13% fall compared to this time last year. However, the average single-family home listing price rose by 11%. During this past March 202 single family homes were reported sold.

In March, new condominium listings went down with a 12% decrease. However, condominium sales saw an increase of 35% compared to last year. The average condominium list price also rose by 0.2% and the sales price increased by 0.4% compared to that of 2019. During this past March, 69 condominiums were reported sold.

Year to date 724 residential home & condominium listings sold between January 1st and March 31st. Single-family home sales saw 556 listings reported sold during this time frame.

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NAR Survey; COVID-19 Effect on Real Estate

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The National Association of Realtors recently conducted an Economic Pulse Flash Survey on April 5-6th. The survey showed that 59% of its members feel buyers are delaying home purchases for a few months, while 57%, said sellers are doing the same with listings.

NAR Chief Economist Lawrence Yun commented, “Home sales will decline this spring season because of unique economic and social consequences resulting from the coronavirus outbreak, but much of the activity looks to reappear later in the year. Home prices will remain stable because of a pandemic-induced reduction in inventory coupled with less immediate concerns over foreclosures.”

The survey also asked members questions about how the pandemic has impacted the residential and commercial real estate markets. A large majority of respondents, 90%, said buyer interest has diminished during the crisis, while 80% said there had been a decline in homes out on the market.

Finally, respondents also mentioned the importance that technology is playing in the current environment. The most common ‘tools’ mentioned in the survey were that of e-signatures, social media, messaging apps, and virtual tours.

Source: National Association of REALTORS

If you have any real estate related questions, I’m available by phone, text, email and social media. 

To your health, Dani