• First Time Home Buyers
  • homeownership can help build wealth

    After the crash of the housing market homeownership kind of got a bad rap which makes sense because there were so many people who had negative equity. Things are better today. More people have equity and home values are rising. There are risks to homeownership and it isn’t for everyone but for many it is a good investment.

    Home ownership is down nationwide from what it was at the peak in 2005 but looks to be as strong as it was in the 1990’s. In the long run owning a home is still a great way to accumulate wealth. People who have their home paid off when they retire spend less on housing and have more money for food and health care. I guess some even have money for fun and travel. 🙂

    Here is a looks at net worth and home ownership from a presentation given  by Lawrence Yun, Ph.D., NAR Chief Economist Ph.D., NAR Chief Economist, to the Residential Real Estate Forum at the 2014 REALTORS® Conference & Expo in New Orleans, LA on November 7, 2014.

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  • First Time Home Buyers
  • One home sale does not an expert make

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    Turret

    It is common for my clients to tell me that they have this friend who had this particular situation when they purchased of sold a home and based on that piece of information they want to take some kind of action on their own purchase or sale that doesn’t work and in some cases isn’t even possible.

    Often the people who know the most about real estate transactions and who give the most advice are the folks who have gained expertise through one or two real estate transactions in the last decade. Some of the comments they make can add unnecessary stress and worry to the home buying or selling process.

    If you are planning on buying or selling real estate plan on getting a lot of advice from friends and family and understand that even though the advisor has the best of intentions they may not have the experience or expertise needed to give the best advice but they want to help anyway.

    It is also useful to understand that real estate is local and that laws and business practices can be very different in other states and that laws change so that someone who bought or sold real estate a decade or more ago may not be up on current laws and business practices.

    The advantage in working with an experienced real estate agent is that after being involved in a few hundred real estate transactions we learn to anticipate problems and head them off and can give advice based on all of that experience.

     

  • First Time Home Buyers
  • Getting a home inspection

    Buyers are strongly encouraged to make inspection contingent offers and get a complete home inspection. Right now the best home inspectors are very busy. There are several inspectors I can recommend. I have worked with them and I know that they will do a good job finding any problems and explaining the house to the buyers.

    It is important for buyers to choose their own inspector but often real estate agents choose inspectors for buyers. In Minnesota there isn’t any special licensing required for home inspectors. Some inspectors have minimal qualifications but they are part of a franchise that provides them some of the business tools they need to be inspectors and guidelines on how to do it.

    Most of the homes I sell are older homes. In fact they are downright old making a home inspection very important. The inspector needs to really understand older homes and know what to look for.

    Some home buyers will choose an inspector based on reviews and ratings. That may not be the best way to go about it. The ratings are most often coming from first time home buyers who do not have any experience with homes or home inspections and they don’t have anyone to compare the inspector with. I have witnessed some really poor home inspections where the buyers really liked the job the inspector did because they did not know any better.

    There are a couple of questions I would ask if I were interviewing inspectors. I would want to know how long they have been doing inspections and what their qualifications are. I would also want to know if they are full time and how well they know the area or neighborhood where the home to be inspected is located. I would want to know if they typically inspect older homes or newer homes or some of each.

    Inspectors should also be members of American Society of Home Inspectors. (ASHI). Personally I would like to see some licensing requirements where the inspector would have to pass a test to be licensed and also be required to take continuing education classes.

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    leak under sink – a picture is worth a 1000 words

    I have seen inspectors overstep their area of expertise. For example they will recommend a furnace or boiler replacement because they got a high c02 reading when they should be recommending that a HVAC contractor tune and certify the unit. If it needs replacement the HVAC specialist will say so. I have yet to meet an inspector with an accurate c02 meter.

    In other cases the inspector has missed something important like the rust inside the breaker box or the fact that the clean out plug on the main water drain is new of there is an old tank buried in the back yard. After one inspector left the house I showed the buyers where the main water and electrical shut offs were located. Most inspectors go over that. On one inspection I watched as the inspector had the buyer take notes. A good inspector provides a written report and does not ask the home buyer to take notes.

    Once the inspection is complete the buyers must decide if they are going to ask for repairs. last year I had some buyers who wanted every issue on the inspection addressed. I later learned that they had changed their mind about buying the place and were just trying to get out of the contract which they could have done very easily during a ten day recision period but they were sneaky and dishonest.

    Also see: Asking for repairs?

    Home buying inspection 101

  • First Time Home Buyers
  • Closings don’t always happen on time

    coin_wBy a closing I mean the closing of a sale of a home. If the buyer is using any kind of financing there will be a closing and a lot of things need to happen before the purchase can close. Sometimes we get the go ahead days or even a week before the closing and other times we get the news a day of two before the closing that it isn’t going to happen on time.

    The best way to handle a delayed closing is to reschedule it with a contract amendment signed by the buyers and sellers. Chances are the underwriting department needs more or another approval is needed or the buyer did not send in everything that was requested. There is no penalty for the bank when the closing is late and they tend to be extra cautious. Delayed closings cause an enormous amount of stress for buyers and sellers and their agents too especially when one home is being sold and the proceeds are needed to buy another.

    What happens at a closing in Minnesota is really pretty simple. The buyer signs a pile of loan documents, the seller signs a deed and some other documents. A check is cut for the sellers from funds that have been wired to the title companies trust account by the lender. The seller give the buyer the keys. The title company files and records the deed with the county.

    Real estate is local. In Minnesota we close at the table, literally. In other states an escrow is opened and once everything is signed, and approved and recorded the escrow is closed and the buyer gets the keys.

    Yesterday I had some home sellers ask if a buyer could give back a home after the closing if they changed their minds. The answer to that one is no. I am not sure how these rumors get started but they do. It is possible to back out of a non-purchase mortgage 3 days after the closing. Home sellers do not need to worry about returns.

  • Boardman Realty
  • Agent, Broker, Realtor?

    Last week a couple of home buyers asked me to explain what a real estate broker is. I have been asked that question before so I decided to write an article that I can use over and over again.

    A real estate agent is a real estate professional who has a license to be a real state sales person. Getting such a license requires taking some classes, passing a test and paying some fees. Real estate licensees must work under a licensed broker. A person can not get a real estate license and go out on their own and sell real estate. The license is actually held by a broker. The agents license can be transferred from broker to broker with the greatest of ease and of course a small fee to the stat on Minnesota.

    Technically it is the broker who owns all of the listings and buyer clients and agents are acting on the brokers behalf.  Most real estate agents are independent contractors who work on a 100% commission basis. The broker gets a percentage of each commission the agent earns. A real estate agent can only be paid by a broker.

    A REALTOR® is a real estate agent who is a member of the National Association of Realtors. Generally all a person has to do to become a member is pay the dues.  Members of the national association are also members of the local and state associations. For example I belong to The Minnesota Association of Realtors, and the St. Paul Areas Association of Realtors and the National Association of Realtors. In addition to paying dues Realtors agree to adhere to a code of ethics.

    A real estate broker has continued his or her education past the real estate agent level and passed the real estate broker license. Real estate brokers can work as independent real estate agents or have other agents working for them. In my case I have my own company and have one agent under my license. I am planning on bringing on a few more this year. Being a broker with my own company gives me a great deal of flexibility and a little too much paper work some days.

    A broker can work on his or her own, while an agent or associate has to work under a licensed broker. There is also such a thing as an associate broker which is a broker who works under another brokers license. I was an associate broker for 8 years. In Minnesota a person has to have had a real estate license for three years before they can take the broker classes and apply for a license. You may think that means that a broker has to have at least three years of experience selling real estate. Sadly the law doesn’t say anything about actual experience.

    Even though brokers are supposed to provide oversight there are several large companies where one broker is responsible for hundreds of agents and when it comes down to it if an agent does something wrong generally brokers will defend the agents actions.

    Also see How to get a real estate license in Minnesota.

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