What does it mean to buy a HUD home?  How is it different from purchasing a “regular” house?  Is it different from buying a different kind of foreclosure? These are questions that I get quite frequently. The answer is: yes, it is different.

HUD stands for The Department of Housing and Urban Development, a department of the U.S. Federal government. This department does many things, one of which is provide insurance on certain mortgages. These mortgages are called FHA (Federal Housing Administration) loans when they have this insurance. When a home is FHA insured and it forecloses it will go back to the lending back like other foreclosures, but then the bank turns it over to HUD to collect on their insurance. HUD then takes ownership of the home and is responsible for selling it. This is what we refer to as a HUD home. It is a foreclosed home where the previous homeowner had FHA insurance on their loan.

Purchasing a HUD home is different than purchasing other types of foreclosures. Typically banks work with asset managers that assign foreclosed homes to REALTORS® to market and then any offers received are presented to the listing agent who sends them on to the asset manager to make a decision on. With a HUD home there is an asset manager and there is a listing REALTOR® but offers go to HUD through their a bid made through the buyer’s agent onto the HUD website which is www.hudhomestore.com. Although you need to be a registered agent to submit an offer, the public may look at this sight to search for available homes, get a property condition report (PCR), and look at other pieces of information.

HUD homes are different, but if you’re working with an experienced agent who can guide you through the differences this can be a great opportunity for buyers to get a great value!

As a real estate agent, I often get questions from people who are relocating to the Grand Rapids area and have questions about what community would be the best for their needs. How do you choose when you’re not familiar with the neighborhoods and different suburban areas?

Of course the first thing is the same as what it would be with someone who grew up here: what’s important to you in a home? How much can you spend? How many bedrooms do you need? Do you want land or lots of neighbors? Determining these basics helps us to start the process of what area helps you fill those needs.

School district is often a very important issue as well. There are many websites that allow you to see how different districts do for test scoring. You can read a blog post on school districts that I did previously by clicking here.

And the most important thing that you can do is just come to the area and drive around. Is it important to you to be close to a grocery store? Or a lake? Once you are able to get a feel for a few communities by driving you may want to take a walk at different times of the day to see who are the people and houses and schools and parks around you. There are many wonderful communities here in West Michigan to fit all kinds of different needs for you and your family.

Of course, I would always work with an experienced REALTOR® to find out if I am in an area that is going up or down. The cost of living here is relatively low compared to other metropolitan areas so the most common mistake that I see out of town buyers make is overpaying for the home because it feels inexpensive compared to what they’re used to. You can’t replace good professional advice!

Here we are, just over halfway done with the year.  I like to take an in-depth look at the condition of the housing market at the mid-way point to keep my finger on the pulse of what’s going on and saw some good and some bad things.  Good news first.

One thing that helps us to keep track of how fast homes are moving is the amount of inventory there is on the market.  We answer the question: at the current rate of sales, how long would it take for all of the current homes on the market to sell?  Generally below 3 months is a hot sellers’ market, 3-6 months is even, more than 6 months is considered a buyers’ market.  Single family homes has been steadily improving.  June of 2008 inventory was 12 months, dropping to just under 9 in 2009, to just over 8 in 2010 and now is 6.4 months.  Half of what it was in 2008!  In June of 2008 there were 9,373 single family homes on the market, now there are just 5,733.  If you’re out looking for homes and it just feels like there’s not as much to choose from anymore, you’re right!

Condos have seen an even more dramatic improvement.  In 2009 there was 27 months of inventory (over two years!!!) and today we are down to 9.5.  This is a combination increased sales (from 300 to almost 550 year to date) and a significantly decreased number on the market (from almost 1,400 down to under 900).  The reason for this I’m not sure.  Lending for condos continues to be more challenging than for single family homes which has had an impact.

The other piece of good news is the number of homes sold.  I’ve included a graph because I’m a visual person.  The red line is 2010 and you can clearly see the effects of the tax credit as April saw a dramatic spike in sales followed by several months of lowered sales in the summertime months which are normally the higher sales months.  2011 has had a more usual sales cycle with the winter months being slightly lower than the summer months.  The number of units has increased over what it was in 2009 and is on pace to exceed both 2009 and 2010.

The bad news is that although the number of homes sold has increased, the average price range that those sales are in has not.  Until 2007 the most common price range for sales was $100,000-$150,000.  2008 had the most frequent price range be $50,000 to $100,000 and 2009 is fell below $50,000.  In 2010 the number of first time home owners increased in response to the credit so the most frequent price range came back into the  $50,000 to $100,000 range.  It appears that investors have increased in 2011 homes under $50,000 has again become the typical sale.  This obviously has an impact on the average sales price for the area.

Foreclosures and distress properties such as short sales continue to have an impact on our marketplace.  This is a blog post unto itself, stay tuned!

So, although prices have not seen much recovery, there are some positive indicators indicating that the market is trying to recover.  I don’t anticipate prices to come back until distress properties have become a lesser percentage of the market.

If you own property in Grand Rapids, you’ve probably received a notice that looks like this in the mail recently:

You may be tempted to read “This is not a tax bill” and then throw it away, thinking that it is not important. However, this could be very important. It is not a tax bill, but it tells you what your tax bill is based on. Property taxes are based upon two things: the millage rate and the taxable value. Multiply the millage rate times the taxable value, divide by 1,000 and this gives you what you owe in taxes for the year.

The millage rate is based on what voters have approved by county, township or city, and school district. Each area has two different rates, the homestead and the non-homestead. This means that if you live there as your primary residence or you don’t. You can only have one primary residence, so your cottage or rental property would not get this exemption. Is this important? Very much so. Having the homestead exemption saves you 18 mills or about $900 per year for a home worth $100,000.

Look at this assessment form, especially if you’ve purchased the property this past year. If this is your principal residence then the percentage should be 100%. The example attached is for my rental property, which is 0%. This is located toward the bottom of the page.

The other thing that your taxes are based upon is the taxable value of the property. The assessor determines, based on your square footage and other factors, what he thinks your home is worth. Half of the fair market value is what your assessed value is (a $100,000 house has an assessed value of $50,000). Your taxable value can increase no more than the rate as inflation, but will never exceed your assessed value. So in a market where property values are increasing, you’ll see the taxable value gradually be less and less than the assessed value. As you can see, in my case, these numbers are the same:

This is when appealing your assessed value really makes sense. In my case the assessor is saying to me “I think your property is worth $91,400″ (double $45,700). Based on what I have seen of the neighborhood sales, I only think that the property is worth $70,000 which would be an assessed value of $35,000. The non-homestead rate for the city of Grand Rapids is 47.7817 so my property being over-assessed by $10,000 is going to cost me about $475 a year, or around $40 per month. If I am successful in my appeal then not only am I going to save $475 for 2011, I will also save it every year after that because even when property values do start going up, they can only go up by the rate of inflation so the lower value will become my new baseline.

So, when you get this notice in the mail, make sure that you have the correct percentage of homestead exemption and see if you agree with the assessed value. This could save you thousands of dollars!! Pay attention – the city of Grand Rapids assessment appeals form is due by February 18. If you miss the deadline you’re stuck with this value until next year.

There is a relatively new federally funded program that is good for neighborhoods and buyers. This program is called the Neighborhood Stabilization Program. The intention of the program is to make neighborhoods stronger by rehabilitating foreclosed homes and then selling them to a qualified owner occupied buyer. I think this is a terrific idea as it raises sales prices in neighborhoods, keeps them from being rental properties and therefore a longer term resident who will invest in the neighborhood, and repairs the home to a level that most homeowners would not be able to do alone.

And, by the way, the buyer gets their 20% down payment gifted to them. Here’s how it works:

1) Areas are selected based on their foreclosure rate. In the Grand Rapids area it is: Grand Rapids, Gaines Township, Grandville, Kentwood, Plainfield Township and Wyoming.
2) Approved developers rehab foreclosed homes in those communities.
3) Qualifying buyers purchase these rehabbed homes and are given 20% of the purchase price towards their closing costs and down payment.

20% gift towards a newly remodeled house? What’s the catch?

Your income cannot exceed 120% of the adjusted median income for the area. Here’s a chart for you to see if you can qualify:

Secondly, the 20% down payment is a “silent second” meaning that it is still a lien on the property bearing no interest and has no payments, but if you sell the home or rent it within 10 years it becomes payable (unless it’s for less than $15,000 – then just 5 years). The amount owed when you sell it is prorated based on how long you’ve lived there.

Sounds good, right? So, now you just have to find these homes. There are several sources. Homes in Grand Rapids are managed by the city of Grand Rapids and outside of that it goes through Kent County. For Grand Rapids homes click here and for Kent county homes click here.

And, of course, call me to walk you through it. I’m here to help!

As you may already know, my background before real estate was a career as a CPA. So, this means that I am more into the numbers than others may be. Don’t worry, you don’t need to look through everything and do the analysis, I’m here for that!

In 2009 the government was paying people to purchase homes by offering a tax credit. This was originally set to expire in October of 2009 but ultimately got extended until April of 2010. As you can imagine, when you used to get paid $8,000 to buy a house and now you don’t, it may have affected our market a bit. It certainly made for a weird year! Usually the first and last two months of the year slow down slightly with about 800 homes selling in those months compared to about 1,100 in the others months (give or take, of course) so not coming to a halt, but slower.

As you can see from the chart below, 2010 was not like this. We experienced a bit spike through April and since then have been about 800 per month (+/- 50), basically making every month since the credit ended like a slow winter month in other years.

One thing that we have seen improvement in is the distribution of price range for the sales. I think this is because the credit encouraged non-investor buyers in higher numbers than before the credit. As you can see from the chart below in 2007 (and before) the sales curve looked like a bell curve which peaked at $150,000. Especially in 2009 this changed so that the price bracket with the largest number of sales was $0-$50,000 and then the number of units going down from there. This obviously had a negative affect on our average sales price, since our sales mix had changed so much. In 2010 this began to look more like a bell curve again, resulting in an increase in average sales price. Hopefully this trend continues!

So, what do I predict for 2011? Let the guessing begin! I am guessing that we won’t see the declines that we have seen in 2008 and 2009 but that we won’t see large increases either. The number of sales that are foreclosures or short sales continues to be significant and until this turns around I don’t see where we’ll really see large increases. I’m predicting an uneventful year as far as pricing: not significantly up or down. So, if you’re thinking about buying now is the time as interest rates are expected to rise (they are sooooo low right now, they have no other direction to go!) so your buying power will decrease if rates increase. Now’s the time!

Homebuyer Tax Relief Bill signed on last day of 2010 Session! (via Julie Rietberg, CEO of the Grand Rapids Association of REALTORS®)
12/3/2010

MAR-supported legislation to allow foreclosed properties to retain their principal residence exemption for a period of up to 3 years has passed both the House and Senate, and is expected to be signed by the Governor in the coming days.

Senate Bill 77 provides for much needed Principal Residence status and tax relief to purchasers of bank-owned properties after the May 1st filing deadline. This legislation has become particularly important since foreclosures, which are non-principal residences, have flooded Michigan’s real estate market in recent years. The current situation prices buyers out of homes by forcing them to qualify for a mortgage at the higher tax rate. Those buyers looking to purchase foreclosed properties are consequently stuck with a significant tax burden for the remainder of the year despite making that new purchase their principal residence. This bill would alleviate that burden by allowing a buyer to immediately make a foreclosed property their principal residence.

The MAR Public Policy staff met with legislators on this bill until the very last hours of the 2010 session to express the importance of making this tax-friendly legislation a priority. We are pleased that legislators on both sides of the aisle supported the passage of this bill, which gives homebuyers significant tax relief when purchasing a foreclosed property.

The foreclosure crisis began in 2007 and was in full effect by October 2008. The foreclosures were due to job loss, credit mismanagement and predatory lending. Those that had a foreclosure three years ago can now buy through FHA financing with 3.5% down. This presents an interesting situation.

Rates are very low, which allows for a lower payment compared to what the same borrower would have been offered just three years ago in the same price range. Housing prices have plummeted, which also allows for that borrower to be ultra-conservative this time around. Many of my current clients are buying homes in which the payment is equal to or less than their rent.

The predatory loans are now a distant memory, and guidelines are such that hopefully we have curtailed the credit mismanagement foreclosures. The obstacles that many borrowers with a prior foreclosure/bankruptcy will come up against are lenders who don’t have the knowledge or the determination to help them. Although I would suggest contacting a good lender to assess your situation, there are a couple of pitfalls to watch out for. Lenders will determine the three year requirement by searching for the final deed of foreclosure. The credit report is not a trustworthy source to determine the timeline. A borrower who included their property in the bankruptcy will also subject to the final deed in determining the three-year requirement. The bankruptcy discharge is not the determining factor! A borrower who filed bankruptcy and kept their home will qualify after two years with re-established credit.

Note from Julie: This is a guest blog from a terrific lender that I work with often – Jon Izenbart from Evolve Bank. Hope it is helpful! If you have more questions you can reach him at 616-745-0645.

I have spoken with many people who have the unfortunate circumstance of having negative equity in their home. Then people start looking around at the kind of house they could be living in for the same payment if they could get out from under the house that they’re in. The thought creeps in to their mind (and maybe it’s floated through yours): would I be better off to just turn in the keys to the bank? Why do I keep making a payment when it’s going to be many years until I’ve got positive equity? Am I just throwing good money after bad?

When you are looking at selling your home and you’re in a negative equity situation you have 3 options:
1) Sell the home and pay the difference out of your savings.
2) Sell the home and ask the bank to forgive the balance that the sales proceeds don’t cover (a short sale).
3) Just stop paying and live there until the bank tells you that you can’t anymore (foreclosure).

Each of these is a blog post of it’s own, but today I wanted to talk about why you probably wouldn’t want to go with choice 3.

There’s a few different bad things that happen when this route is pursued:
1) This has a negative impact on all of those around you. It is estimated that a foreclosure in a neighborhood reduces everyone’s value 5-15%.
2) This trashes your credit score. If your plan is to go buy another home you can forget about that for about 7 years.
3) There is a good chance that the bank will pursue you for a deficiency. The difference between what the bank sells the home for and what you owe is something that they can pursue you for. I have seen banks being more aggressive on this lately so this isn’t something to scoff at. If you sell the home via short sale because you have an actual hardship they’ll often waive their right to pursue for deficiency and if they don’t the amount that you get for the house is most likely going to be much higher than the bank gets so the deficiency amount is lessened.

Just simply walking away is never a good idea. There are always options that should be exhausted before a foreclosure is something in your life. If you’re thinking about this, please call me first. There’s a better way!

When you are considering a purchase of a new home usually people have an idea of what they want to spend per month and then back that into a dollar amount they can spend. The thing that can make this a little tricky is that property tax rates can vary quite significantly from area to area. The property tax rate is determined by your taxing authority (the township, city, village, etc.) in combination with which school district you are in. As a general rule, townships are less expensive than anything starting with “City of”. For example, if you were trying to be in Forest Hills school district the millage rate for Grand Rapids township is 28.4003 while for the city of Kentwood it is 35.6272. For a $150,000 house this would mean a difference per month of approximately $45. Maybe not the end of the world, but certainly something to be aware of.

Property taxes are calculated by taking the assessed value of the home, which in theory is half of the fair market value, divide by 1,000 and multiply by the millage rate.

So, after giving you a little background, here is the top ten least and most expensive tax areas in Kent county:

Feel free to put in the comments if you have questions about your area and how it compares to others.