By Greta Guest
RISMEDIA, May 19, 2008-(MCT)-Newlyweds Tracie and Jeremy Moy were outgrowing their West Bloomfield, Mich., condominium and dreaming of buying a new house last year.
Seven months after putting it on the market with scant interest from buyers, the Moys knew they needed another option.
They found out about the Forte Group in Birmingham, Mich. The company works with builders in the area to move inventory by purchasing the buyer’s existing home for 90% of the appraised value.
The Forte Group organized in 2006 to capitalize on the huge oversupply of homes on the market. At the end of 2007, there were 40,298 houses on the market in nearby counties. That represents a 17.4-month supply at the current sales pace, nearly double the 9.6-month national supply.
The Moys bought a new four-bedroom, 2,300-square-foot home in Novi, Mich. Their condo sold in two weeks, and Forte Group put them up at no cost in another condo until their house was built.
“If it wasn’t for Forte Group, absolutely we would still be in the condo,” Tracie Moy said. “We didn’t make any money on our condo, but we didn’t lose any either.”
The purchase prices Forte Group make may surprise potential homeowners, but they are made after a thorough review similar to what a bank looks at, said President Chris Forte.
Forte looks at foreclosures, what similar homes nearby have sold for, what is on the market that isn’t selling and does its own appraisal of the home.
“We are trying to give fair value of what the market will pay,” said Joshua Britton, Forte’s partner. “There are a lot of people in this market who are stuck. But there are a lot who aren’t.”
Forte works primarily with people moving up from a starter home and empty nesters looking to buy in the $250,000-$400,000 price range.
They accept just one out of eight applications because the owner isn’t ready to accept a price lower than anticipated, or he or she owes too much on the house.
Forte has completed 30 deals and has just secured private financing to do more. The firm is working with several builders.
Phil Upland, owner of Upland Development in Rochester, Mich., started working with Forte Group last year to sell some homes.
As of last month, one had sold, and he still had six speculation houses-homes built with no committed buyer-to go with about 60 more home sites to develop there.
“It’s a means of getting someone into a new home where they might not have an opportunity otherwise,” Upland said.
If they cannot quickly sell a home they buy, Forte would fashion a lease-to-own deal.
But the money isn’t in selling the houses, and they sell many at a loss to control inventory. Builders pay their fees ranging from 12.5% to 15% on the purchase price of the new home.
“We usually sell the house at a loss,” Britton said. “You can either sell a house for a gain or you can sell a house fast, but you can’t do both.”
Trade & Trade Up in Washington Township, Mich., works with Lombardo Homes and Centex Homes to get buyers to move up from manufactured homes to their subdivisions.
The houses range in price from $120,000 to $300,000, said Sal Pianello, sales and marketing manager for the company that formed a year ago.
“We hope to generate 250 to 275 sales this year,” Pianello said. “With a manufactured home, it is an untapped market, and people don’t owe $200,000 on their home.”
The company was formed by Lombardo Homes about six months before it became a separate company, he said.
Lombardo, like some builders, has its own program to buy a customer’s existing home.
Marketplace Homes LLC, also in Birmingham, Mich., started in 2002 and began operations with a rent-to-own program and that changed when the real estate bubble burst.
“Now the market has shifted, and people can’t get rid of their homes. They are competing against banks that are dropping the prices,” said Skip Chelton, the company’s vice president. “It is a terrible time to sell in Michigan. Conversely, it is a terrific time to buy.”
Marketplace’s buyout program includes a guaranteed three-year lease so the customer can purchase a new home, knowing that the old home will generate income to pay the mortgage and expenses until it sells.
The company purchased or leased more than 40 homes and generated more than $10 million in new construction sales for builders last year. It works with more than 100 communities in southeast Michigan, including those developed by Winnick Homes and Pinnacle Homes.
Chelton said the company also has an exclusive agreement with Keller Williams Realty. The homes are generally leased for corporate relocations, he said.
The National Association of Realtors forecast last month that home sales would begin recovering in the summer and inventories will start dropping.
“We’re looking for essentially stable sales in the near term before higher loan limits translate into more sales in high-cost markets,” said Lawrence Yun, the association’s chief economist. “The wider access to affordable credit should increase sales activity notably this summer as pent-up demand begins to be met.”
At the end of February, there were 4.03 million existing homes for sale nationwide, or a 9.6-month supply at the current sales pace. And there were 471,000 new homes on the market at the end of February, or about a 9.8-month supply.
Yun predicts that new-home sales will fall 25.7% to 576,000 in 2008 and then rise 4.6% to 602,000 next year. Existing home sales are forecast to hit 5.39 million for 2008 and then rise by 6.6% to 5.74 million in 2009.
© 2008, Detroit Free Press.
Distributed by McClatchy-Tribune Information Services.