I used smooth vertex and sculpting in order to achieve the result. According to the help file:
To create a custom target, the artist has to alter the base mesh, which is done in the usual way within Blender. First start edit mode, and then select one or more vertices, moving them to reshape the mesh. You may use the full power of Blender to create your morphing target design. The only rule, in order to create a valid morphing target, is to never add or delete a vertex, face or edge. The topology must be absolutely preserved. After the modelling process is completed, the MakeHuman™ morphing target can be saved by pressing the "Save Target As" button on the MakeTarget™ panel. By default this will save all of the offset deviations of every vertice from the base mesh into the target file.
The "full power of blender" statement suggests that I can sculpt, without adding anything to the mesh, so I did that. I simply sculpted the model without messing with any type of modifiers. Is that what I did wrong? I thought that perhaps all the modeling was done by sculpting on the mesh. Am I missing a step? please tell me what I did wrong so I can really help you guys make non standard characters by sharing my ideas as I complete them.