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How Has Covid-19 Affected the Market?

We get this question a lot.  People are concerned about the real estate market because:

  • We went through a time where we couldn’t show homes in person unless it was already under contract.

  • Unemployment has been up and people need jobs to buy houses.

Sellers are nervous that this means their value may have gone down, and buyers are eagerly expecting an easing in the market – maybe they don’t have to go in with full priced and quick offers like they did last year.

Fortunately for sellers and the health of our real estate market, we have not seen a negative impact from COVID so far.

Here is what the numbers show:

In Kent county the number of houses sold is down 14.7%.  May specifically was down 56.2%, reflecting the shelter in place order that was strictest in April as it takes about 30 days to close.  But, if you notice, even when we weren’t physically able to show houses it wasn’t down 100% so that alone shows you that there is pent up demand.  The only reason that transactions are down is because the number of people listing their home is down.  Inventory is 1.5 months (meaning that everything on the market would be completely sold off in 1.5 months at the current rate of sales) and anything less than 3 months is considered a seller’s market. Even though the number of homes sold is down, the average sales price is UP by 4.1% through May this year, to $253,149.

Ottawa County shows similar trends.  The number of homes sold was down 10.9%, much of that due to May being down by 53.2%.  Inventory is at 2.3 months, the same as it was last year.  Ever so slightly higher than Kent County but still a strong seller’s market.   Average sales price went up 4.4% to $268,097.

As we listen to economists discuss the housing market at a national level, they think demand will stay strong for at least a little while.  The low levels of inventory off set the effects of the rise in unemployment.  Also, mortgage interest rates are extremely low right now, helping to keep homes affordable.  What they see being an effect in the future is the inflationary pressure that the government bail out may have on the dollar.  This may cause both interest rates and housing prices to rise.  If you are at all able to buy right now and lock in low interest rates, this is the time to do so.

As always, if you have any questions on the value of YOUR home or on the impact of YOUR buying power just let us know.  At Clarity, all of our agents are trained in properly pricing homes and we would love to help!

Posted in: Agent, Home owner

Tax Benefits: Why Owning is Better than Renting

Title graphic: Why Owning is Better than Renting

When evaluating tax benefits and deciding whether to rent or buy or whether to invest in real estate or mutual funds – choose real estate! The most significant tax benefit of home ownership is avoiding the capital gains taxes. (A capital gains tax is a tax on the profit from a sale of an asset).

First of all, there have been some changes regarding tax deductions, so let’s clear things up. When you are preparing your taxes, first you have your income. Then, you can either take off your standard deduction or you itemize your deductions – whichever is higher.

Last year a major change came through that raised the standard deduction quite a bit, so if you used to itemize, you probably don’t anymore. Overall, that is better – it’s a higher number! This means that all the things you used to itemize aren’t as important to you anymore – things like real estate taxes, mortgage interests, and charitable contributions.

The tax benefits of those three things aren’t the same as they used to be for a lot of taxpayers. If you’re following, you may be thinking, “I don’t itemize anymore so home ownership isn’t as beneficial.”

You may be right about this from year to year, but don’t overlook the major tax benefit of home ownership that we discussed earlier: avoiding the capital gains taxes.

Let me simplify: whatever money you make on your house, you don’t pay taxes on. (This is huge!)

You have to live somewhere, right? You have to make a monthly payment regardless. So, let’s look at the difference between renting and owning when it comes to taxes.

Let’s say you rent because your rent amount is a little bit less than what your mortgage payment would be. Every month you put a certain amount of money into a mutual fund, and suddenly you do really great and make a decent amount of money.

What’s going to happen is that Uncle Sam is going to take a bit of what you made depending on how long you hold it, etc. This is going to be somewhere between 10-35% of your profit – not a small amount.

Now imagine you own a house and you’re paying a mortgage. Let’s say the value of your home goes up. If your house goes up in value, it goes up even from the money you borrowed from the bank. So, if your home value goes up 5%, it doesn’t just go up on the 10% you put down; it goes up 5% on the $100,000 that the house is.

The money you make on the bank’s money, you don’t pay taxes on! As long as you live there for two tears, you don’t pay capital gains taxes. The only exception is if you make more than $500,000 in gain.

There are a million benefits of home ownership, but this is a major one. When deciding whether to rent or buy, remember to consider how it affects your taxes. And if you rent and are deciding between mutual funds or real estate – choose real estate!

Posted in: Home owner

Building wealth through rental property

My husband and I thought that we began investing in real estate in 2003 when we purchased our first duplex.  The truth is, we first invested in real estate when we purchased our first home in 1999.  At that very moment we began building our net worth by owning an asset that increases in value, and every month paying down a little bit of principal.  The key concept there is that a little bit done consistently turns into quite a bit!

The average net worth of someone who rents their home is about $5,000.  The average net worth of a homeowner is about $230,000.  So that little bit every month really adds up!  The reason for this is because you have two things working in your favor: appreciation and debt reduction.  If you put 10% down on a house, the magic is that a 1% appreciation on a $200,000 is $2,000.  However, if you calculate your return from the down payment of $20,000 a 1% appreciation rate is a 10% return on your money!  That’s what we call leverage.

Why I am talking about homeownership when this is supposed to be about rental property?  I wanted to first sell you on the idea that owning real estate is a very smart thing to do.  Leverage and appreciation make sure of that.  But with rental property you get something that makes this even better: monthly cash flow.  Even if your cash flow is minimal, your tenant is paying your mortgage so that you enjoy the reduced mortgage amount and the appreciation on the property.

Build wealth by buying rental property, start today!

Posted in: Agent, Home owner

Are we in a bubble?

by Julie Grevengoed, broker of Clarity Realty

In 2004, I was just getting into real estate. Those were days where prices were rising and things were moving quickly. And then, they weren’t. The real estate bubble burst. In 2006 we started to see inventory climb, and then in 2007 through 2012 we saw prices come down and down and down. In hindsight, everyone looks around at the warning signs and asks the question…. could we have seen this coming? If we had, would we do things differently?

Now, in 2018, we are experiencing an even tighter inventory level than we did in 2004. While everyone is excited to see the value of their home going up, we are also experiencing some housing market PTSD. Is this just like before where it was all a set up for losing thousands of dollars? Is this another real estate bubble, waiting to burst?

I recently went to a conference where I met the NAR Chief Economist and I was able to ask him this very question. He believes that the answer to this question is no, because what is causing our prices to go up is caused by very different things than what caused it the last time. Last time prices were artificially inflated by low lending standards. This time prices are going up because of the classic situation of supply and demand. During the downturn the construction industry slowed down the rate of building, causing some people to leave the industry. Now the construction rates are not keeping up with population growth. One of the major things holding our economy back is the lack of construction workers. This is especially true in the lower price points, and this is why we are seeing the most competitive markets in the first time home buyer price points.

Although economies go through cycles and the boom we are experiencing will not last forever, every economist that I’ve heard has said that they expect us to experience housing gains for years to come.

Posted in: Home owner

How would the new tax bill affect real estate?

Taxes are on my mind for a couple of reasons, that I would bet are reasons that put them on your mind as well:

  • It’s year end, so tax filing season is right around the corner.
  • The proposed changes going through congress right now.

I thought with my background as a CPA (although I have not been practicing in many years so I don’t claim to have a thorough knowledge of present tax law) and currently working in real estate, where there were some proposed changes, that I would take a minute to discuss.

Changes to the mortgage interest deduction – I don’t think this will affect many of us in West Michigan who don’t have the price points that the East and West Coasts have, but they have reduced the amount of mortgage interest that is deductible to only on loans up to $750,000 (if you had a larger note than this before then you are grandfathered in, this is for all new loans). Home equity lines of credit interest is only deductible if used to make substantial renovations to your home. If you use it to purchase a boat there is no deduction for this.

There was a proposal to change the amount of gain that is excluded on the sale of your personal residence to require that you have lived there longer. Currently the requirement is that it was your primary residence for two of the last five years. This time frame was proposed to be increased, but it was not.  

One deduction that went completely away (except for members of the Armed Forces) is the deduction of moving expenses. I wonder if this will have more employers reimbursing for moving expenses as part of their recruitment package. This is already a common practice so I’m not sure how it will impact someone’s desire and willingness to make longer moves.

So, all in all, I don’t think that these law changes will have a very big impact on our corner of the world. Time will tell!

As always, if you do have questions about how this impacts you personally or the value of your home I am happy to help in any way that I can.

Posted in: Home owner

Fall Home Maintenance Checklist

It’s officially fall and the weather is starting to reflect the season! With fall comes all of our home preparations for winter. Take a look at our fall home maintenance checklist for tasks you don’t want to forget in the coming weeks.


Posted in: Home owner

Why a listing agent is more important than ever

Sure, you’ve heard about the hot, sellers market in the greater Grand Rapids area and maybe that has you thinking about selling your own home. Many feel that now is the time to sell their home and that it would be best to not pay a commission by listing for sale by owner (FSBO). But before you start making your plans, it’s important to know why it is more important than ever to have a strong listing agent on your side.

 

Picking the best offer

We’ve encountered properties where there are already fifteen other offers on the table by the time our buyer makes an offer. We’ve even heard that some properties have had up to fifty offers. Can you imagine having to sort through fifteen to fifty offers and decide which is the best and most reliable? According to the National Association of Realtors (NAR), 18% of FSBO sellers felt that getting the right price was one of the most difficult tasks while 12% felt that understanding and performing paperwork was also very challenging.

Purchase agreements can be tricky to weed through because the highest priced offer isn’t always the best. Do you know the difference between contingent and non-contingent offers? How about all of the different loan types? Do you know what each loan requires and how that could affect you as the seller? Or even which banks have a reputation of closing on time or lengthy closings? Chances are you’re probably not an expert in those areas, which is why it is important to have an expert on your side. A listing agent will be able to assist you in picking out the pros and cons of each offer and help you decide on the most solid opportunity while also walking you through the execution of documents.

 

Marketing

Sure, you may be saving some commission if you choose to go the for sale by owner route. But what about the money that will need to be spent on the marketing that needs to go into selling your home?

Unless you’re a pro photographer or have the necessary equipment, you might have to spend money on professional photos because you want your home to attract as many buyers as possible. Professional fliers and advertising your home will be necessities as well. On top of that, do you know what repairs and updates are necessary and will actually get you a return on your investment? According to NAR, 13% of FSBO sellers felt that preparing and fixing up their home was a difficult task without the help of a professional.

If you have a listing agent, they’re going to take care of your marketing and help you decide what repairs and upgrades are necessary. Better advertising will solicit more offers which will mean a higher sales price.

 

You’ll still probably pay a commission

In today’s competitive environment, many buyers are seeking professional advice and very few go in alone, therefore the chances are the majority of buyers who are interested in your home will have an agent with whom they are working. In that situation, you’re now negotiating versus a skilled and experienced real estate negotiator. There’s a good chance that you’ll lose out on even more money because you may not know the best practices.

 

In summary, a listing agent is truly worth every penny in this fast-paced market. On the surface it seems like you could save yourself some expenses by selling your house yourself, but in reality, you’ll not only get a better price but also a better experience if you have a rock star agent on your side. You’ll have someone to negotiate, someone to market your home, and someone to help you weed through offers and complete paperwork.

Posted in: Home owner

Why should you get a recommendation for a contractor?

Why should you get a recommendation for a contractor?

We’ve all worked with plenty of contractors – from plumbers to landscapers to painters to electricians. But how do you typically find those contractors? We bet your good friend Google has helped you out in many occasions. But is that always the best decision?

Searching online and sorting through all of the reviews can lead to a good experience with a helpful contractor. But spending all of that time takes just that, your valuable time. Plus, there are many companies that don’t have any reviews at all.

It’s best to ask family, friends, and trusted professionals for their recommendations. It can save you time, money, and many headaches. Choosing a vendor at random can lead to poor work, undependability, and in the worst case, someone who disappears after taking your money.

Clarity Realty is always here to provide referrals for any home service that you may have. We’ve worked with many contractors over the years who have done great work for us and our clients and we’d be happy to pass along their contact information.

Another resource to consider is the Better Business Bureau (BBB). Companies that are accredited by the BBB must go through a vetting process before becoming accredited. Accreditation requires businesses to uphold the BBB Code of Business Practices so you’re more likely to have a good experience with contractors who have gone through the process.

Posted in: Home owner

Rebuild Cost vs. Market Value

With the inflated home market values recently in West Michigan we are seeing two things happen: Home sale prices are much higher than rebuild cost in areas with high land values (such as waterfront), and sometimes home sale prices are much lower than rebuild costs in certain emerging markets.

When you insure your home, make sure that you pay attention to the rebuild cost, not market value. Insurance coverage that matches the sale price could mean that you are paying more than you need to for insurance. Remember, the goal of insurance is to rebuild your home back to the way it was originally built. If your home could rebuild for $200,000 and you were insured for $300,000 you would not get a check for the difference, thus overspending on premium by $100,000.

To Sum Up: Take a minute and have your insurance reviewed; it may surprise you what you find out.

About the Author: Alistair Lynch is the owner of the Lynch Agency at Farm Bureau. Feel free to give Alistair a call at (616) 940-7043 or send him an email to alynch@fbinsmi.com if you have any questions or would like more information.

Posted in: Home owner

Tips for Selling a Home During a Divorce

As if it isn’t hard enough to sell a house, it is even harder when you are doing so while going through a divorce.  Julie Grevengoed of Clarity Realty and attorney Ivan Shaw of ADAM teamed up to come up with this list of tips for navigating the sale of a home during a divorce aimed at making sure the home sells fast and for the best price.

  1. Use the whole closet.  Some home buyers try to take advantage of the seller’s misfortune.  If a buyer suspects a divorce is a reason for the sale, the buyer may try to lowball the seller.
  2. Be picky about your realtor.  Divorce is not just hard on the husband and wife; it can also be hard on the people that come into contact with them.  That is particularly true if that person is the Realtor that must work with both of them.  Find a realtor both parties can trust and a realtor that has experience working with divorcing couples.   You will be most successful if your realtor is impartial, compassionate, and patient.
  3. Make sure that the person who is occupying the home has the motivation sell it.  If the spouse who moved out is the one making the payments, which may continue until it sells, this can lead to an unmotivated person living in the home.  Selling a home requires a lot of logistics such as making time for showings, cleaning up before open houses, and fixing little cosmetic flaws.  An unmotivated person is not likely to follow through with these details and may get fewer and smaller offers.  Consider some type of incentive for the occupying spouse or a time frame on how long payments will be made.

You deserve the special attention of an experienced professional when facing a divorce or home sale.  The Realtors at Clarity Realty and attorneys at ADAMGR.com are here to help you.  Please call us with any of your real estate or divorce needs.

Posted in: Home owner

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310 S. Lafayette St, Greenville, MI 48838

622 E Savidge Street, Spring Lake, MI 49456

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