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.

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.

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.

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.

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.

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.

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.

We want to help you have the best experience if you are buying a home in Grand Rapids or any area of the country.  If you or a friend or family member are purchasing a home in another area we would love to connect you with an amazing agent anywhere in the country or even Canada!

Did you know that it is possible to purchase real estate with your IRA?

Recently, there has been many articles posted about Grand Rapids being an amazing place to own rental property. This is due to the increasing rents and affordable real estate. These articles are convincing and you may have been considering getting into the game yourself! I am a huge fan of investment real estate as a vehicle to reach many goals such as long term appreciation and short term cash flow.

You may not have been aware that you can use the funds in your retirement account by using what they call a “self-directed IRA” to buy investment properties. The basic concept is that instead of using retirement funds to buy stocks, bonds and mutual funds and have those investments grow to provide for your retirement, you use the money from your retirement account to invest in real estate. This is very possible to do, but must be done very carefully and with a provider that is set up to handle it correctly so that you don’t endanger your tax protected status.

The Rules:
1) The IRA owns the real estate and must benefit from it – not you. You can’t use it for your primary residence or a vacation home.
2) You can never personally touch the money. The money to purchase the property must come from your IRA and any proceeds must go into the IRA.
3) Although there are ways to manage the property yourself, it is must simpler to use a property management if you are holding the real estate for rental purposes. All monies must be made out the the IRA, never to your name personally.

The Benefits:
1) The benefits differ depending on if you use a traditional IRA or a Roth IRA, but with either there are all the benefits of tax deferral that you enjoy with the more common mutual fund investments.
2) Control. Often the returns that real estate experiences exceeds that of other investments if managed properly. Managed properly being what I want to emphasize here. You can choose the home, the tenants, the improvements, and many other decisions to make sure that your asset is performing to your expectations in a way that you aren’t able to do with stocks and bonds.

To Sum Up:

To find out more, please give our office a call. We would love to talk to you about if this would be the right avenue for you to become a real estate investor!