Mortgage rates over the past month have seen significant levels of volatility. This month’s market update takes a closer look at the actual numbers, focusing on the effect this change in rates has on both borrowers and the housing market as a whole. 

The average rate on a 30YR mortgage is back near a 25 year high. In October 2023 we briefly touched 8.0%, and that was the only time we’ve seen 8.0% since 2000. Today the average 30YR mortgage is 7.55%, rising from 6.0% in February and 6.75% as recently as late August. You can see the sharp and sudden rise throughout the entire month of September on the chart above, with a steading in this first week of October.

What does this actually mean in dollars and cents?

Ex 1. A borrower got pre-approved in August at a 6.9% interest rate. They determined their maximum budget would be a $300,000 mortgage based on its monthly payment. Today, that same monthly payment would set a new maximum budget of a $282,500 mortgage. Same payment, $17,500 change in borrowing ‘power’.

Ex 2. A borrower timed the recent mortgage market perfectly and closed on a home in late February of this year. Their $300,000 mortgage has a 6.0% interest rate and a $1,799 monthly payment. If they were to get a $300,000 mortgage today at 7.5%, their monthly payment would be $2,108.

In the previously rapid rising rate environments (2022-2023), the situation was bleak for borrowers. Rates were rising, yet the market was still dramatically favoring sellers. Buyers during this timeframe, essentially got only bad news. Home prices, property taxes, and homeowners insurance barely skipped a beat and continued to rise. Today, things are a bit different. 

We’re still no where near a true buyer’s market here in metro Detroit (the same cannot be said for many metros in the country). Homes that are move-in ready, are in desirable areas, and are priced competitively still receive plenty of attention from buyers, but we’re now firmly in a balanced market. The best indicator for a buyer vs balanced vs seller market is months supply. In September, Macomb, Oakland, and Wayne county were each at 3.0 months supply or higher for the first time since pre-Covid. Months supply simply compares the number of listings to the number of closings. It’s the best indicator of supply/demand in real estate, and 3.0 is the threshold that many experts characterize as the line between a seller market and a balanced market. What does this mean for buyers today?

If a home is brand new to the market, the chance of you getting your offer accepted is far higher than it was earlier this year. You also may not have to go over the asking price or include as many ‘extras’ in your offer (appraisal coverage, escalation clause, limited inspection, etc..). Remember every situation is unique, and that’s what a great realtor is for. Your dream home may still be a competitive situation and require some of those items. 

If a home has been on the market for more than a couple weeks, the chance of you getting a below asking price offer, one with seller required repairs, or seller concessions (cash to you at closing to cover closing costs) has now increased substantially. Buyers today have much more power than they did the last time rates increased to the levels we are at today.

The question many have right now, ‘are we going to see a crash?’ 

Today’s months supply reading of 3.0 is the threshold from a seller market to a balanced market. Metro Detroit’s months supply in August 2007 was 20.5. Months supply isn’t the only indicator, but it is the best one, and we’ll continue to follow it. Although I see no signs of an incoming crash today, I do think the possibility of prices softening some as somewhat likely as buyers gain more power in this market.

Lastly, it’s important to always keep all of this in perspective. The finances of buying and/or selling a home are only one part of the decision. If you’re thinking about moving, you already know all the personal/family reasons why. I’m here to give you clarity on the financial piece today.

-Jeff 10.9.26

Imagine you’re going on a first date with someone you’ve only met briefly once or twice. They’re a friend of a friend, and you’ve heard nothing but great things about this person you’re meeting for dinner this weekend. You’re excited, and you want to make a great first impression. What would you do? You’d likely spend the time to do your hair, wear that favorite outfit, and put on a great scent. You wouldn’t go on a new diet or start working out harder. You wouldn’t get plastic surgery (ha!). You likely wouldn’t buy a new pair of expensive shoes. 

In many ways, selling your home is similar. You’re excited, and you want to make a great first impression. You’re ready to put in effort to have your house shine, but you’re not going to completely change what it is. 

When speaking with sellers, I break ‘what should we do prior to selling’ into three tiers:

Tier 1 - Minimal Effort and Minimal Cost

Deep clean

Declutter and depersonalize

Tidy landscaping

Remedy smells

Replace dull/dead light bulbs

Remove political or religious items

Tier 2 - Moderate Effort and Moderate Cost

Complete all items in Tier 1

Complete small repairs (leaks, loose hardware/railings, chipping paint, etc)

Paint the walls of rooms that have ‘bold’ colors with a neutral color

Remove damaged/dated window treatments

Tier 3 - Moderate to Significant Effort and Moderate to Significant Cost

Complete all items in Tiers 1 and 2

Complete medium sized repairs (items that will cost more than a couple hundred dollars)

Paint the walls of the entire house a neutral color

Paint the baseboards, casings, and doors white (only if they’re already painted)

Replace damaged/worn flooring

Upgrade dated hardware in kitchen/baths

Upgrade dated light fixtures

Last month we spoke about home upgrades and how you should likely put more emphasis on the improvement to your quality of life, rather than the upgrade’s financial ROI. That perspective is still important when getting your house ready to sell, BUT during this time frame, the financial ROI should carry a bit more weight. 

In the industry, we commonly use the phrases ‘the home shows well’ or ‘the home doesn’t show well’. What we’re characterizing is the home’s first impression. Did you spend time doing your hair, did you wear that favorite outfit, and did you put on that great scent? Homes that show well, get more showings, get better offers, and oftentimes attract more serious buyers. Wear that favorite outfit.

To end, let’s go over decluttering and depersonalizing in more detail. That is almost always something sellers have questions about while getting ready to list their home. If the home is vacant, this obviously doesn’t apply, but if you’re living in the home when it initially hits the market, decluttering and depersonalizing is potentially the most important thing you can do.

Make it look like a hotel. When in doubt, think about the last hotel you were in. The furniture is strategically placed to make the room most functional and feel bigger than it is. The walls aren’t bare, there’s well placed artwork on the walls. The tables’/shelves’ surfaces aren’t empty, they have a few neatly grouped items that make sense. The space looks inviting and sophisticated without looking cluttered or intimidating. 

When decluttering and depersonalizing, take this opportunity to start packing for your move. Any items that you won’t need over the next few weeks and won’t be part of the hotel aesthetic go into a box, ready for your new home. The boxes can be neatly stacked up in a corner of your basement or garage. The items that are left out should be intentional and organized.

Remember, homes that show well, get more showings, get better offers, and oftentimes attract more serious buyers. Seriously, wear that favorite outfit.

-Jeff 9.9.26

Every homeowner asks themselves the same question at some point, ‘how does the money I’ve spent, or am planning to spend, on my home affect its value?’. It’s a great question. To set the stage, here are three things to consider and ask yourself.

1. What is meant by value?

The term ‘value’ can mean a number of different things. Market Value: is it the value that a prospective buyer would put on my home when writing an offer? Appraised Value: is it the value that an appraiser would settle on when approving financing? Assessed Value: is it the value deemed by the city that taxes are based on? Replacement Cost Value: is it the cost to rebuild on your homeowner’s insurance? It’s likely the ‘value’ for the same home would be four different numbers based on who is determining it and for what purpose.

2. Is this a repair, a replacement, or an ‘addition’?

Repairing a broken dishwasher is different than replacing a broken dishwasher. Replacing a broken dishwasher is different than adding a dishwasher to a home that was previously without one. In all three cases, the end result is a functioning dishwasher, but the change in the home’s value is different for all three scenarios. Am I repairing, replacing, or adding? A repair doesn’t increase the value of your home. You’re bringing the value back to where it was prior to the issue. A replacement likely adds to the value, and an addition always adds to the value.

3. How long do I plan on living in this house?

The return of money spent on your house is only realized if you sell or refinance your home. For those with no plan to move or refi any time soon, the ROI is fairly meaningless. What matters is how that money spent affects the quality of your life now. Over the long term, property values are affected much more by market conditions and less by money put into them.

The homeowner asking ‘how does the money spent on my house affect its value’ is likely referring to replacements or upgrades they’ve recently done or are planning to do. Here is a link to data from The Journal of Light Construction. This is the source most commonly sited when answering this question.

Link:

https://www.jlconline.com/cost-vs-value/2025/

As you can see, the ROI on upgrades varies significantly. Some upgrades have a positive ROI, while the majority are less than 100% (the increase in value is less than the cost of the project). Remember, this is purely the financial ROI and ignores the benefit to your quality of life. For those contemplating a new project, this is a great resource to refer to while making a decision, but shouldn’t be the main thing considered.

It goes without saying, this conversation isn’t black and white. Every situation is different. Below are a few general rules of thumb:

1. If the laborer is you (and you can do a good job!) you’ll likely get a positive ROI from the replacement or addition. Labor is oftentimes the biggest cost of any project. If the labor is free, your ROI increases drastically.

2. Small/light kitchen and bath remodels have a better ROI than custom/high-end remodels. The highest ROI is typically a very light refresh including painting, refacing cabinets, replacing countertops, replacing hardware, etc… 

3. Curb appeal is more important than you may think. The data shows replacing worn/damaged garage doors and front entry doors are the two highest ROI replacements.

4. Improvements that bring a home up to the standard for the neighborhood have a higher ROI than improvements that go above and beyond what is typical in an area.

5. Unless you plan on selling soon, place more emphasis on the impact to your quality of life, and less on the financial return, of any home projects.

If you’d like to speak about your unique situation, let me know. I’m here to discuss.

Next month, I’ll dive into the specific situation of someone planning to sell their home and the improvements they may want to consider prior to listing it for sale.

-Jeff 8.11.26

Aren’t adjustable rate mortgages scary?

Your payment can increase substantially, right?

Weren’t adjustable rate mortgages the cause of the housing collapse in 2008?

Adjustable rate mortgages aren’t right for everyone, but I’d argue ARMs are the better loan products for a number of borrowers today. 

On the surface most borrowers understand the key difference between a fixed rate mortgage and an adjustable rate mortgage. A fixed rate mortgage provides consistency and certainty. Your principal and interest paid each month is the same for the length of your loan. An adjustable rate mortgage is flexible. The principal and interest will change over time, but how does an ARM actually work?

An ARM has a fixed introductory period where the rate and payment will not change. It’s typically 5 or 7 years. The interest rate during this period is lower than a fixed rate mortgage, saving borrowers a significant amount of money over this time frame.

After the introductory period ends, the rate will adjust at specific time intervals. Typically every six months or one year. The new interest rate is based on an index. In most cases this index is the Secured Overnight Financing Rate (SOFR). Your lender will charge a specified premium over the SOFR and the combination of the SOFR + premium = your rate for the next six months or one year. If my mortgage rate adjusted today, my new rate would be 6.44%.

When locking my loan four weeks ago, the rate on a 30 year fixed mortgage was 6.75%, while the rate on a 30 year adjustable rate mortgage was 5.75%. During the seven year introductory period for a $250,000 loan and a $500,000 loan that would be a savings of $13,608 and $27,300 respectively.

Who should consider an ARM?

• Do you believe there’s a good chance you’ll sell your home during the introductory period?

• Do you accept the long-term risk in exchange for the guaranteed savings during the introductory period?

• Are you buying a fixer upper at a discount and planning on refinancing into a fixed rate mortgage in the future?

• Do you believe interest rates will be lower in the future?

Who shouldn’t consider an ARM?

• Do you strongly value certainty and you’re willing to pay more today for peace of mind?

• Do you believe it's unlikely you will sell your house in the next decade?

• Do you believe interest rates will be higher in the future?

The ARM conversation isn’t complete without covering refinancing. Many borrowers of both fixed and adjustable rate mortgages refinance over time. Whether it’s to fund home improvements, to lower the rate, shorten the term, or to lengthen the term, many borrowers choose to refinance. Life evolves and your best financing decision today may be different than your needs years in the future. Many borrowers that start with an ARM end up refinancing into a fixed rate mortgage when that better meets their needs in the future.

If you think an ARM may be better for you, reach out to me to discuss your specific situation.

- Jeff 6.16.26

What really are the cost of selling a home in Michigan?

Sellers know there will be fees that need to be paid, commission to the broker(s) involved, and a mortgage that needs to be paid off. Few sellers know exactly what they’re paying for, to whom, why they’re paying it, and what’s negotiable with the parties involved. Here’s a quick breakdown and an example.

Flat Fees:

Title Closing Fee ($300-$700)

Title Misc Fees ($0-300)

These fees are paid to a title company for handling the closing, preparing the closing documents, and a formal review of the transaction from an attorney for your protection.

Fees Based Off Sales Price:

State Transfer Tax (0.75% of sales price)

County Transfer Tax (0.11% of sales price)

Title Insurance (more complex formula, see example)

These fees are paid to the state, county, and insurance company respectively. The transfer taxes are simply sales taxes that generate revenue for the state and county. The title insurance, paid for by the seller, is to guarantee the new buyer that they’ll have full ownership of the home. This insurance comes into play if a legitimate claim to ownership of the property arises after closing. 

Commissions:

Listing Brokerage (fully negotiable, but typically close to 3%)

Buyer Brokerage (fully negotiable, but typically close to 3%)

These commissions are paid to the respective brokerages for the services agreed to between client and broker. 

Lien Payoff(s):

First Mortgage (variable)

Second Mortgage (variable)

Unless you own your home free & clear, you’ll need to pay off the debt you used to purchase the home or later took out through a home equity loan.

BONUS

Property Tax Prorations (variable)

As long as you’re up to date on your property taxes, you’ll receive a refund at closing for a portion of the taxes you’ve paid. In Michigan, we pay property taxes upfront, so the buyer will pay you for the portion of the tax year that they’ll own the home.

Property Tax & Insurance Escrow (variable)

If you currently escrow for your taxes and insurance, you’re forced to have reserves, or buffer, at the mortgage company. This is a savings account you pay into each month, to pay the two tax bills and one insurance bill you encounter throughout the year. Whatever money is in this savings account will be refunded to you typically a few weeks after the mortgage is paid off. It comes as a check directly from the mortgage company. 

- Jeff 5.15.26

How to NOT get stuck with a mortgage payment you never expected. Earlier this year you may have heard the story of Christa and Steven, a young couple, who bought their new home in midtown Detroit. It seemed like every local news outlet covered their story. After falling in love with Detroit, buying their new home together, and moving across the country, the couple was met with an unexpected and disastrous surprise.

Recall this portion of last month’s market update:

‘The year after a property is purchased these two numbers (State Equalized Value & Taxable Value) will be the same, but over time they may grow distant from each other. The reason for the divergence is a state law that caps how quickly the TV can increase from year to year. While the SEV can change to any value the city’s assessor believes is accurate, the TV can only increase with the current rate of inflation, or 5%, whichever is less. Over the course of many years, this can lead to a taxable value, and subsequent tax bill, that is significantly less than the true SEV.’

They purchased the home from a longtime owner and the divergence between the SEV and TV had grown immense. This is something we commonly see in metro Detroit. The current owner’s tax bill was $3909 at the time Christa and Steven bought the home. The following year the taxes uncapped, the SEV and the TV became the same value, and the new property tax bill was $19,648. They should have been advised to plan for, but they were left in the dark.

It’s not sexy, but one of the most important steps while shopping for your next home is to understand what the new estimate of property taxes will be, NOT what the property taxes currently are. As an agent, I don’t even look at what the property taxes currently are. It’s not important. The current owner may/may not have a homestead exemption, may/may not have another less common exemption, and may/may not have a taxable value far less than the state equalized value. Their current property tax liability simply doesn’t matter. Here’s how to calculate what does matter.

New Property Tax Estimate

1. Obtain the property's SEV

Go to the website below, enter the city, enter the address, select the property, and find the property’s SEV.

Take that SEV and multiple it by 105% to account for a reasonable increase in value (there’s some nuance here, but the 5% increase should be good most homebuyers).

https://bsaonline.com/MunicipalDirectory

2. Calculate the new tax bill

Go to the website below, select the county, select the city, select the school district, and enter the new SEV you calculated. This will give you two different annual tax estimates, one with the homestead exemption (you live in the home) and one without.

https://treas-secure.state.mi.us/ptestimator

Armed with this new annual tax estimate, you now know what to expect next year, and won’t be left in the dark like Christa and Steven.

- Jeff 4.17.26

In the United States, there are three different categories of taxes (income, sales, and property). Each of these three different taxes funds a different level of government and its respective programs. With some exceptions, income taxes fund the federal government, sales taxes fund the state government, and property taxes fund the local government(s). Our focus is on the later, property taxes.

Properties in Michigan receive two separate tax bills each year. One bill comes from the county and is mailed in December with a due date in January. The second bill comes from the city and is mailed in July with a due date in August. These two bills together make up the total annual taxes on a property. On these bills you’ll find the amount currently owed, alongside valuations of the property, millages (tax rates) it’s subject to, and exemptions (discounts) it qualifies for.

ANNUAL TAX = TAXABLE VALUE x MILLAGE RATE x 0.001

Valuations: A property tax bill will show two different values for the property: the State Equalized Value (SEV) and the Taxable Value (TV). It’s important to realize that neither of these values is intended to be the actual market value of a property. The SEV is the government’s assessed value of a property and is intended to represent approximately half of the home’s estimated market value. The TV is the value that the actual tax bill is calculated from. The year after a property is purchased these two numbers (SEV & TV) will be the same, but over time they may grow distant from each other. The reason for the divergence is a state law that caps how quickly the TV can increase from year to year. While the SEV can change to any value the city’s assessor believes is accurate, the TV can only increase with the current rate of inflation, or 5%, whichever is less. Over the course of many years, this can lead to a taxable value, and subsequent tax bill, that is significantly less than the true SEV.

Millage: The second piece of the formula is a property’s millage rate, or tax rate. This rate varies greatly from municipality to municipality, varies with school districts within a municipality, and varies with certain exemptions a property or its owner qualifies for. Below you’ll see a link to the millage rates for every municipality in metro Detroit. The highest millage rate in the tri-county area is River Rouge (River Rouge Schools) and the lowest millage rate is Commerce Township (Walled Lake Schools).

Exemptions: The homestead exemption is the discount most are familiar with. This is the exemption a property qualifies for if an occupant of the home claims it as their primary residence (not a vacation home, not a rental property, etc…). All other exemptions in the state of Michigan are much less common. Examples are Disabled Veteran Exemption, Religious/Non-Profit Exemption, Industrial Exemption, and other city specific programs for individuals in need. Note: the homestead exemption is also referred to as the Principal Residence Exemption (PRE) and a value of 100% on a tax bill shows it’s claimed, while a value of 0% shows it’s NOT claimed.

Over the last three months, you should have received both your winter tax bill and your yearly assessment in the mail. Is your PRE reporting correctly if the property is your primary residence? Is the TV change from last year 5% or less? Is the SEV less than half the current market value of your home? It’s a good idea to verify these items for accuracy.

If anything on your tax bill appears confusing or unexpected, let me know. We can review the bill together. If your property’s assessed value is too high, you do have the option to appeal. The appeal process begins with an assessor review in mid-February. If the issue is not resolved there, homeowners may submit a formal appeal to the Board of Review in early March. If necessary, a further appeal can be filed with the Michigan Tax Tribunal in late July.

- Jeff 3.12.26

Question:

What does it really cost to purchase a home?

 Answer:

First, it’s imperative to have an understanding of the required services and what they can cost when buying a home. Second, see a common example with real numbers. Third, I’ll share some differences to expect with specific types of transactions that may apply to your unique situation. Finally, I’ll detail some great options for buyers looking to keep their initial investment low on a home purchase. To keep timely, I won’t explain what these services are, what they’re for, or why they’re required. Want to know more? Let me know.

1. SERVICES ON A HOME PURCHASE:

DURING TRANSACTION

Inspection - $400-800

Appraisal - $450-550

LENDER

Origination/Lender Compensation - 0.0-2.0% of loan amount

Discount Points - 0.0-3.0% of loan amount

Underwriting Fee - $0-1200

Processing Fee - $0-1000

Lender Misc Fees - $150-300

ATTORNEY

Settlement Fee - $300-700

Title Policy - $500-2500

Attorney’s Misc Fees - $100-200

REAL ESTATE BROKERAGE

Broker Compensation - 0.0-3.0% of sales price

Broker Transaction Fee - $0-1250

OWNERSHIP COSTS AT CLOSING

PROPERTY SPECIFIC

Property Tax Prorations - 0.0-100.0% of the year’s property taxes

Homeowners Insurance Premium - $1000-2500

Homeowner Association Transfer Fee - $50-150

DOWN PAYMENT

Down Payment - 0.0-100.0%

2. EXAMPLE:

$400,000 single family home without a homeowners association

$320,000 conventional loan (20% down)

Inspection - $550

Appraisal - $495

Origination/Lender Compensation - $3200

Discount Points - $0

Underwriting Fee - $895

Processing Fee - $0

Lender Misc Fees - $150

Settlement Fee - $595

Title Policy - $1222

Attorney’s Misc Fees - $195

Broker Compensation - $0

Broker Transaction Fee - $0

Property Tax Prorations - $4500

Homeowners Insurance Premium - $1700

Homeowner Association Transfer Fee - $0

Down Payment - $80,000

TOTAL

$13,502 before the $80,000 down payment.

3. DIFFERENCES TO EXPECT:

When purchasing a home and NOT getting a loan, many of these fees to do not apply. You won’t have an appraisal, won’t have any lender fees, will have a settlement fee of 1/2 the price, and won’t have a title policy fee. That’s a savings of over $6000.

When putting less than 20% down on a home, almost all lenders will require you to ‘escrow’ for property taxes and homeowners insurance. This simply means they’ll require a portion of next year’s bills to be paid upfront, and an additional portion paid each month as part of your mortgage payment. 

When getting a FHA, VA, or USDA loan, you’ll be required to pay an upfront lending fee (Up Front Mortgage Insurance Premium (FHA), Funding Fee (VA), or Guarantee Fee (USDA)) to use their loan program. Note: if you’re a veteran and receiving VA Benefits, there’s no Funding Fee.

4. GREAT OPTIONS FOR BUYERS LOOKING TO KEEP THEIR INITIAL INVESTMENT LOW:

There’s still a common misconception that you’re required to put 20% down when purchasing a home. That’s certainly not true and very rare for first time home buyers, let alone repeat buyers. A conventional loan only requires a down payment of 5%, and many lenders have programs offering as low as 1% for eligible buyers, giving more people the opportunity to achieve homeownership.

An amazing program sponsored by the state of Michigan is MSHDA’s MI Home Loan Program. This is a conventional loan program that requires only 3% down, and comes with a $10,000 grant to be used at closing to cover a portion of your costs. This program does have eligibility requirements, but many first-time home buyers qualify for it, and even some repeat buyers can, too.

Have a Merry Christmas!

- Jeff 12.16.25

Question:

What are the pros/cons of placing your home in a revocable living trust?

Pros:

- Your property will avoid probate court when it's eventually transferred to your designated heirs.

- Your heirs will receive the IRS's 'Step Up in Cost Basis' income tax benefit.

- Your asset remains protected from many liabilities during your lifetime.

- Your property and estate will have a higher level of privacy.

Cons:

- You'll need to hire an attorney to prepare/file the proper documentation.

- Selling or refinancing the property in the future will require additional paperwork.

Correcting Two Common Misconceptions:

- If done correctly, placing your home in a trust does NOT limit your control of the house during your lifetime.

- If done correctly, placing your home in a trust does NOT uncap your property taxes or lose your homestead exemption.

In summary, if you're young, healthy, and without a significant amount of equity in your home, you likely don't need to consider this option right now. As you get older, build wealth, and start estate planning, a revocable living trust is something to look into further. At a minimum, your heirs will thank you. Have a great Thanksgiving!

- Jeff 11.18.25

Question:

What happens to my house when I die and what should I do now to prepare?

Answer:

After starting to write this I quickly realized it’s impossible to cover the topic thoroughly within this newsletter’s quick/digestible format. Instead of bypassing the question altogether, let’s focus on a common mistake that can cost your heirs huge amounts of money and reveal a better solution you should consider.

WHY YOU SHOULD NEVER PUT YOUR HEIR ON TITLE BEFORE YOU DIE.

The county that you live in has a number of different courts, one of which is the probate court. A responsibility of the probate court is to direct the transfer of assets from your estate after your death. Ask someone that’s gone through this process. It can be costly, time consuming, stressful, and is always public. Rightfully so, savvy people will take steps while they’re alive, for their heirs to avoid probate court as much as possible. Putting your heir on title to your house, prior to your death, accomplishes the goal of avoiding probate court, but it comes with two large pitfalls that are often overlooked.

1.Loss of the ‘Step Up In Cost Basis’ Tax Benefit

When your property is inherited (with/without a will OR with/without a trust), your heir receives an income tax benefit known as the ‘step up in cost basis’. This benefit isn’t realized until after you die AND until after the asset is sold by your heir. Because it’s seemly so far in the future, many people completely overlook it. Here’s an example to demonstrate how mom cost her daughter over $22,000 with one subtle mistake.

Scenario 1

In 1980, mom and dad buy a house for $100k.

In 2020, mom is now widowed and puts her only daughter on title to avoid probate.

In 2022, mom passes away and the property is seamlessly transferred to the daughter avoiding probate court. The house is worth $400k at the time.

In 2024, daughter decides to sell the house and gets $420k for it. The daughter’s profit from the sale is subject to capital gains.

Capital gains calculation for Scenario 1:

(15%*(420,000*50%-100,000*50%)) + (15%*(420,000*50%-400,000*50%)) = $25,500 in federal income tax due (add another 4.25% in MI income tax)

Scenario 2

In 1980, mom and dad buy a house for $100k.

In 2020, mom is now widowed and puts her home in a revocable living trust for benefit of her daughter to avoid probate.

In 2022, mom passes away and the property is seamlessly transferred to the daughter avoiding probate court. The house is worth $400k at the time.

In 2024, daughter decides to sell the house and gets $420k for it. The daughter’s profit from the sale is subject to capital gains.

Capital gains calculation for Scenario 2:

(15%*(420,000-400,000)) = $3,000 in federal income tax due (add another 4.25% in MI income tax)

The difference here is the Step Up in Cost Basis benefit. In the eyes of the IRS, only half of the property was inherited and received the Step Up. The other half was already owned by the daughter prior to mom’s death, so there’s no Step Up for that portion. I'll avoid getting in the weeds of the tax law further, but know this subtle mistake cost the daughter over $22,000.

2. Open Yourself Up to Unnecessary Liabilities

When you put someone else on title to your home, the asset is now there’s. If they undergo financial hardship, your asset may become vulnerable to creditors. If they get divorced, their ex-spouse may be entitled to a portion of the home’s equity. If they get sued for any reason, the plaintiff’s attorney and judge may come after your house. Those are just a few examples. They may be unlikely, but they are entirely unnecessary.

So what’s a better solution you should consider?

A revocable living trust.

Next month, I’ll go over the pros/cons of holding title in this kind of trust. Hint, for most people there’s almost no cons.

- Jeff 10.9.25

Question:

I'm looking to make a move. How do I navigate buying a new home and selling my current home?

Answer:

There's three different options to the question above. The right answer for you is very dependent on your goals, your preferences, and your financial situation. Anyone in this situation should have an in depth conversation with both their realtor and mortgage broker before making any decisions. Below is a brief summary of each option with their pros and cons as a general starting point.

1. BUY FIRST, THEN SELL LATER

This is a low-stress option that keeps you completely in control throughout the entire process. You'll have time to do improvements to your new home, and move in at a time and pace that is on your own timeline. You'll also be entirely moved out of your old home prior to putting it on the market, so you won't have to accommodate prospective buyers touring your home while you still live in it. Lastly, you could potentially 'time' the market and buy in the winter, sell in the spring. The downside to this option is you'll have two mortgage payments simultaneously for a period of time. You also will not be able to use any of the equity in your current home as a down payment for your new home unless you pull a HELOC on it prior to starting this process. NOTE: many clients cannot qualify for their new home without first selling their current home, so this is not an option for them. 

2. SELL FIRST, RENT, THEN BUY LATER

This is another low-stress option that keeps you in control. You'll sell first, cash out all of your current home's equity, and have it ready to be deployed as you see fit. Many sellers choose this time to rent in a new area of town that they're not sure they'd like to buy in as a low-risk exploration. You get all the normal benefits of renting (flexibility, no unexpected expenses, limited responsibilities, etc). Additionally, in almost all desirable areas of Metro Detroit, your monthly payment is less to rent vs buy in today's market conditions. The downside to this option is obvious. You're now a renter with all the cons to leasing. You won't buy you new longterm home for an extended period of time. You'll need to decide whether to do a traditional 12 month lease and bring your own furniture or do a short/medium term lease and keep your furniture in a storage facility. You'll move twice over a relatively short period of time. Lastly, you'll likely have prospective buyer tours of your current home while still living in it, unless you move into your leased property early.

 3. BUY & SELL AT THE SAME TIME

This is a high-stress option, but in most cases the option clients choose. In today's market, it's difficult for clients to qualify for their new mortgage without first selling their current home, and they don't want to move two times is under 12 months. Clients know what they want in their new home and want it now (that's typically the entire reason for selling their current home in the first place). Going this route you'll never have two housing payments at the same time, you can use the equity in your current home for the down payment on your new home, and you'll still potentially have a small amount of time to do improvements to your new home prior to moving in. The downside to this option is the lack of control over the situation. You're dependent on the seller of your new home closing on time, you're dependent on the buyer of your current home not defaulting or backing out under one of their contingencies to purchase, and you're dependent on your realtor and mortgage broker being outstanding throughout the entire process. If anyone of these people drop the ball, you can be the one that carries the burden through no fault of your own. Another downside is sellers will look down on your offer to purchase their home when they see it is contingent on the sale of your current home. You may have to overbid to win in a competitive situation (all things being equal a seller will always choose a non-contingent offer over a contingent one). On the flip side, if you find the house of your dreams and get your offer accepted, you may have to lower the price on your current home to make sure you get a buyer that can close quickly. Good news, in almost all cases, a great realtor and mortgage broker can mitigate the majority of these concerns, but the risks are still non-zero.

- Jeff 9.16.25

Question:

My wife and I have been thinking of doing some renovations to our home we purchased 8 years ago. We know that a home equity line of credit is a great option, but don't know where to start or how it works.

Answer:

First off, what is equity? Equity is the current value of your home less the total mortgage balance(s) remaining. This can be a large amount of capital that contributes to your net worth, but it's not straightforward on how to access it. In short, you have three main choices to access the equity in your home.

1. Sell the home and take your proceeds

2. Pay off your current mortgage(s) via a 'cash out' refinance with a new larger loan and take the difference in cash

3. Get a Home Equity Line of Credit (HELOC)

- Option 1 is not applicable to the question asked.

- Option 2 is not a great option for most, because a refinance would mean trading a historically low interest rate for one in the 6.0s.

- Option 3 is the best option for most. Banks/credit unions have great options for HELOCs. This would be a second mortgage, separate from your current mortgage. You'd apply, qualify, and pay for this new line of credit just like you did for your initial mortgage, but the process is significantly more streamlined and less expensive. Below is an example.

2017 - Home purchased for $200,000 with mortgage of $190,000

2025 - Home worth $300,000 with mortgage balance of $160,000.

Equity in this example is $140,000 ($300,000-$160,000)

You can apply for a HELOC from a bank/credit union for a portion of that $140,000. Typically banks cap your total mortgages at 90% of the current value, so in this example you could get a line of credit for $110,000 ($300,000 x 90% - $160,000). The great thing about a line of credit is you only pay interest to the bank/credit union on the money you actually draw. You're not required to take all $110,000 and pay interest on it from day 1. It's flexible.

Let's assume you took out a total of $50,000 from the HELOC to do what you wish. You don't have to use this money on your house. You can use it to pay off credit card balances, children's tuition, wedding, or anything else that's most important to you.

$300,000 current value of your home + any potential new value created from renovations/improvements completed on your home

$160,000 first mortgage with a payment of $800/mo (remember, this loan is completely unchanged)

$50,000 second mortgage (HELOC) with a payment of $300/mo

Two last items to note.

- HELOCs are almost always variable interest rates NOT fixed.

- After a period of time (10 years in many cases), banks/credit unions will close the HELOC and require you make a new regular payment on the money you borrowed. This new payment will now include both interest AND principal, so you start paying down the balance on the money you borrowed.

- Jeff 8.12.25