What is earnest money?

Earnest money is money paid to confirm a contract. People who make an offer on a house draw up a purchase agreement and offer earnest money. Earnest money isn’t required but it is often expected and is considered a kind of standard business practice.

The funds are usually in the form of an electronic deposit from a bank account or an old-school paper check. The funds need to be immediately available. They are deposited into a brokers trust account where they are held until the closing.

Usually, the money ends up being used to pay for the house.  If the buyer backs he/she/they may end up forfeiting the earnest money and it will go to the sellers.

There are no hard and fast rules about the amount of money a buyer should offer. Generally, $1000 dollars is a starting point for homes in St. Paul and there is no limit to how much money can be offered. I have had buyers offer $25,000 or more.

The amount of earnest money offered is usually part of the negotiating strategy. It shows the sellers that the buyer is serious. Sometimes sellers will counter an offer and ask for more earnest money. The money forces the buyers to have some skin in the game.

Once a seller accepts an offer the house is tied up for a time. Even though it is usually left on the market until inspections are completed it may be largely ignored by other buyers. Sellers want to know that the buyer will not back out.

Purchase agreements are usually structured in such a way that the buyer gets the earnest money back if he/she/they if they decide not to buy the home because of issues on the inspection or in the case of a condo if they are not comfortable with what is in the association documents and financials.

Buyers may also be able to get their earnest money back if the financing falls through. Again it depends upon how the purchase agreement is written.

Sometimes in multiple offer situations, buyers will offer more earnest money and the contract will allow the sellers to keep it if the financing falls through.

In the end earnest money usually isn’t enough to compensate sellers if the purchase falls through and they have lost time on the market.

Buyers earnest money is safe. There are numerous laws that dictate how the money is kept and accounted for. Real estate is regulated by the state. People who are buying property outside of Minnesota should consult a professional in their state.

True but Misleading Advertising

apples
The best apples in the world

As the spring real estate season heats up there are many real estate agents competing over few listings. Some of the agent/team/real estate company advertising is a bit misleading.

Like my graphic most everything about the advertising is true but the same claims can be made about any fresh apple. Have you ever gotten an apple with gluten in it?

Advertising that there is no obligation if we don’t sell your home makes for a nice sounding advertisement. The truth is under a standard Minnesota listing contract we don’t get paid unless the house sells and only after a successful closing.

There are agents/teams/companies that offer a free market analysis, equity position analysis or CMA. I have never heard of an agent charging a private homeowner for pricing a property.

Some are advertising that they can sell your home fast. Right now, especially in St. Paul, homes are selling very quickly and often with multiple offers.

You may read that a particular agent can get you ‘top dollar” for your home. That is a safe bet as prices continue to rise, but keep in mind that it is the buyer decides what to offer and if there is financing involved the bank will have a say too.

An agent may claim to sell more houses than anyone else. I say prove it and if I were to hire the agent I would want to know how many homes they listed that they did not sell and how many sold for less than the market value.

My claim that the apples in the picture are the best in the world is hard to prove, but also hard to disprove.

I like apples.

Most Elders do not want to move

queen anne house
Queen Anne

It is a common experience. We gradually realize that our mom or dad or both are having trouble maintaining their home.

There may be maintenance issues or maybe they are having trouble remembering to pay the bills or maybe they no longer drive and have trouble keeping the refrigerator and pantry stocked.

Sometimes they really do fall down and can not get up. We worry about them being there alone. We check on them or maybe we get them an emergency call button.

No matter how hard they struggle do not expect your elderly loved one to say that they want to move. Most do not want to move and by elderly, I mean people who are well into their 80’s.

There isn’t anyone in a memory care facility who asked to go there. Most if not all of the people who have moved to long-term care (nursing homes) did not ask to go there.

Seniors who move to assisted living often get nudges from others and sometimes it is their own idea. Almost all of the people I know who have moved to senior apartments have decided to rent instead of own and it was mostly their choice to move.

People who live in senior apartments tend to be younger and healthier than those who are in assisted living and nursing homes.

If your elder needs to move but does not want to move keep in mind that they are adults and they have the same rights that all of us have. We even have the right to make bad decisions.

We can make suggestions to our parents and we can take them on tours and show them some of the places they could be living.

We can help them get more help at home. They can have meals or groceries delivered or both. There are housekeeping services too.

We can help them keep organized with bills and paperwork and there are services that can come into the home and help sort and organize pills.

Don’t be too surprised if they are resistant to having people come into their home.

Disabilities become more common as we age and loss of mobility is one of the most common issues facing the oldest of the old.  Sometimes grab bars and a walker will work for a time.

Unfortunately, it is often hospitalization or an accident that triggers an emergency and results in a move for the elderly. I recently listened to an expert suggest that we all need to plan ahead.

That sounds good but it is almost impossible to do if we don’t know ahead of time how long we are going to live, what we are going to die of and what kind of medical care we will need during various decades of our lives.

We don’t know what medical advances will be made from one decade to the next and unfortunately, people who suffer from dementia don’t always realize it and dementia impairs their ability to make good decisions.

Do you want to move out of your home when you are old or would you rather stay there and age in place?

Don’t be surprised if you are met with resistance when trying to help an elderly parent or friend who needs to move.

Senior Real Estate Specialist

See What is a NORC

Also, see Retiring with a mortgage

See Getting mom’s house ready to sell

bad advice on the internet

Like most people, I like to use Google to do a little research when I want to buy something or get a quick answer to a question.

I use it for recipes and for technical support and occasionally for medical type information. There are articles on most topics.

There are many articles on the internet about how to choose a real estate agent. Most of them are fluff pieces written by people who do not have any expertise in the area.

They do some research . . probably on the internet and use ideas from someone else’s fluff piece or maybe from several fluff pieces.

I disagree with most of the questions people are advised to ask agents.

Why would anyone want to know how many listings an agent has? The better question is to ask them what percentage of their listings get sold.

The real estate market is ever changing. If I am asked how long houses I list are on the market it wouldn’t be the same for one year to the next.

If I am asked what percentage of the asking price I get on average for homes that I list, that really isn’t a fair question unless I get to set the price.

If I did set the price in this market I would go low and consistently get more than the asking price for the home.

Real estate agents are salespeople and finding clients is most of what the job is all about.

Hiring the right real estate agent boils down to three simple questions:

  1. Does the agent have experience? 
  2. Is the agent someone I feel that I can trust and work with?
  3. Am I just a “deal” or will the agent give me the time and attention I deserve?

By experience, I mean at least 5 years and it should include working in your neighborhood or the neighborhood you wish to move to. Personally knowing what I know I wouldn’t work with anyone who has less than ten years of experience. Agents with no experience generally charge as much as agents who have decades of experience.

I have a bias toward full-time agents but I can honestly say I have known some part-time agents who do a better job than most full-time agents.

Trust is a big deal. If you don’t trust an agent do not work with him or her. Choosing someone who is easy to work with is also important. You will have to work closely with the agent that you choose.

Ask the agent if they have time to work with you. Are they going to hand you over to a junior team member? Do they sell zillions of houses? Will they care about your sale or purchase?

One of the best ways to find an amazing real estate agent is to ask friends, family, neighbors, and co-workers who they worked with and if they would recommend that person.

The only downside to that approach is people who have had only one experience buying or selling a home might not even realize their agent wasn’t up to par because he or she was so “nice”.

If you think choosing an agent is tough you should try choosing clients. When I mess up it can make my life miserable for weeks or months. I can end up spending money to market a home before I figure out that the owners are not committed to selling.

Also see: REALTOR is not an occupation

Builder beige now Builder gray

There has been a color shift in recent years. In the past when REALTORs and others recommended painting a home to get it ready to sell the preferred neutrals were shades of beige. It was called builder beige and REALTOR beige. Before that white was the preferred neutral.

In fact, one of the best ways to see the latest trends in home design and color is to tour some new construction . . . if you can find it.

For the last several years the most popular neutrals have been shades of gray. I’ll admit that at first, I did not like it. Maybe it is an acquired taste and I have acquired it.

Just like colors from the beige family or the white family, there are many other colors that work with gray. There are so many shades of gray that choosing one is almost overwhelming.

Here are a couple of homes with gray siding, white trim, and yellow on the front door. Primary colors work well as accents.

gray siding yellow doors
Yellow doors on dark gray siding and light gray siding.

Getting ready to sell a house?

Here in St. Paul people who want to sell their house will need to get a truth in housing inspection. TISH for short. The program is run by the City of St. Paul. The inspection is pretty basic and no repairs are required with one exception. Homes are required to have one hardwired smoke alarm with battery back-up.

The city has specific requirements as to where and how this smoke alarm/detector is to be mounted. In most cases, an electrician will need to do it and a permit will be required.

The city has a list of qualified inspectors who can perform the inspection and prepare the report.  The inspection will not be free and is required. The city has a list of common deficiencies.  It is a good idea to make repairs before the inspection if possible.

Even though repairs are not required when a buyer sees a report with a lot of items on it that are hazardous or below minimum standards they may not want to make a full priced offer or any offer at all.

The houses in St. Paul are old. Most truth in housing reports have several items on them that are below minimum standards but it is a myth that houses have to be brought up to code or that repairs have to be made.

Building code is local and it changes over time. St. Paul building code was very different in the late 1850’s when my home was built than it is today.

Also see:

How to find Truth in housing reports

Efflorescence