Expert: Dick Dennis - 9/6/2008

Question
QUESTION: We have been trying to sell our home in rural northern michigan for over a year now.  My sister, who lives in Indiana, doesn't quite seem to get it that the market is at an all time low right now.  I am trying to find a web-based article that summarizes why our house isn't selling.  Or perhaps some of your sage advice I can pass along to her.  We have a broker that has a good reputation in the area.  My sister thinks that the broker should be doing more to "push" the house.  I think she is doing a fine job.

Thanks,

John

ANSWER: First of all, John, I get the impression your sister must be up in years. I am, too, as you may be able to tell by my photo. If she is up in years you can tell her that right now is the worse real estate market in U.S. history, certainly since the 1929 crash. Up until 2005, the market was roaring and was the highest in history. That means only one thing: the market has longer to fall when it does. And it did and it is not finished yet.

I have been a broker and Realtor since 1971 and I have been through two previous real estate recessions . . . 1980-1983 and 1991-1996. This has both of those beaten by a mile.

Michigan, Indiana and Ohio are probably the three worse states for real estate depression. The main reason why is that they are located in what they call the "rust belt." Those three states are losing population. That means the businesses that were rip-roaring many years ago are leading the way down the tubes, led by GM, Ford and Chrysler. Those three had many other companies that supplied parts and equipment to them. If people don't buy cars and if they do, they buy Honda and Toyota instead, the workers down in Tennessee and Mississippi are doing well because that is where those cars are made here in the U.S.

Workers who once had a job with the "Big 3" just let their houses go and went elsewhere. Who knows? Maybe they moved to Tennessee and Mississippi. When their houses don't sell, others follow suit. Further, when people try to sell their houses in Michigan they are affected by the foreclosed houses and people losing their jobs.

In the final analysis, there is always a buyer for almost any property. The price of a house is always the culprit why a house doesn't sell. In today's market, most sellers are not willing to accept what buyers (if the Realtor can find one) are offering for the houses. Further, the media keeps painting such a gloomy picture that people are afraid to buy houses for fear that they would buy and then their value continues down.

Things may start turning around soon because the dollar has been rising in value against foreign currencies. That brings the cost of oil down and thus (hopefully) the cost of everything may stop rising. But it has left us with an inflation rate it makes it difficult for employers to want to hire people back to their jobs.

I hope this satisfies your sister, John. I do wish you well.

Dick Dennis

---------- FOLLOW-UP ----------

QUESTION: Thanks, Mr Dennis.  Very good answer.

A quick follow-up.  I live & work 3.5 hours away from the house, while my sister lives 6 hours away.  I have been paying the bills on the house.  In 1994, with the passing of the Headlee Amendment, my mom was granted a homestead exemption which lowered the taxes greately.  For the summer taxes this year, I was astonished to learn the taxes increased by approximately $600 because the homestead exemption was removed. I already spoke to the township assessor and the attorney who will handle the closing and there doesn't seem much that can be done to minimize the tax bill.  Do you have any advice?  The taxes are now based on the taxable value of the house.  Should I ask the Township Assessor to do an audit to check if the taxable value is correct?  It does seem like a steep jump.  Last year the assessed value was $27,000, the SEV was $27,000 & the taxable value as $19,000.  This summer the assessed value is $26,000, the SEV is $26,000 & the taxable value is $25,472.

Sincerely,

John

Answer
There's not too many property owners who are willing to do this to help substatiate a lower value for their property: Make a comparable value of other properties in the area and establishing the cost per square foot. If you can assemble the information on two or three other similar properties that have sold recently, then you may have a chance at lowering the taxable value. I wish you well, John.

Dick Dennis