previous sale price, good to know

blue house
small house

It is wonderful that there is so much information out there for home buyers. it is easy to find out who owns a home when they bought it and how much they paid for it.

Knowing how much someone paid for a home is interesting but what someone paid for a house in the past does not impact the current value. The owners may have gotten the house at a bargain basement price or they may have paid too much for it. Maybe they bought it for a song and then made a bund of improvements.

If the house is in St. Paul it is easy to look it up on the city of St.Paul website property look-up and see if there were permits for work on the house. Maybe there is a permit to put on a roof and a few for plumbing and for a new heating plant. Each permit will list an approximate dollar value.

Determining the current value of a house is not an exact science. The best way to come up with a number is to compare the home to three houses in the immediate area that were sold in the last year. Location, condition, and size determine the value of a house.

Buyers who are working with a REALTOR® should ask for a comparative market analysis before making an offer. Home sellers should do the same before setting the asking price.

Apparently we are not getting any younger

The population of the twin cities isn’t getting any younger. We are getting older.

FACT: 60,000 Minnesotans turn 65 this year, next year and every year through 2030. Soon 25% of our adult population will be 65+ [Facing aging MN]

The counties with the lowest average age in Minnesota are the counties that make up the metro area.

the number 25 is important to remember because, by 2025, 25% of the population of Ramsey County will be 65 or older.  That is exactly like one in 4. In just two years 22% of the population of Ramsey County will be 65+ years of age.

It is easy to blame baby boomers for this but I would be more inclined to blame the parents of baby boomers if someone needs to be blamed. What were they thinking?

It is also important to understand that people who are over 50 move far less often than those who are under 50. I believe that part of the reason for the shortage of homes for sale has to do with a population that has aged past the prime moving years.

My own parents will both turn 90 this year. The 90 to 94-year-old age group is the fastest growing age group.

Aging in Ramsey county
Ramsey County & aging – source “Face aging MN


Choose your house style

There are a variety of housing styles in St. Paul. The city was built over a period of time. The oldest houses are near downtown St. Paul and the newest are around the edges of the city.

If you are looking for a rambler or a split level home with a two car attached garage I would not bother looking in the downtown area but you might find some in the western part of Highland Park and near 3M and Battle Creek.

If you like Tudor style homes look along Summit Avenue or in Merriam Park or in the Cherokee Heights neighborhoods because those are the areas with the biggest concentrations of them.

When choosing a neighborhood consider the housing style and when choosing a housing style consider the neighborhood.   When you find the right combination you may find that you can not afford the style of home that you want in your favorite neighborhood.

Home buyers end up compromising on one or the other.   With today’s smaller inventory of homes on the market, buyers should allow extra time for finding a good fit and should be prepared to move on it when they find it.

In recent years people have been buying houses in their favorite neighborhood, tearing them down and building the kind of home that they want which is of a completely different size and style than what is usually found in the neighborhood. Thankfully that isn’t an option for everyone.

6a00d83451d6cf69e20115713d580f970c 500wi
Tudor style house – Merriam Park

Entertaining TV far from reality

empty room
empty room

Last Saturday when I went to visit my parents there was this show on TV featuring a young couple who were selling their house and buying another. There was a lot of drama and the couple was doing it all wrong.

They were renovating their house so that it would sell for more and at the same time they were looking at homes that they would need to renovate to live in.

I have a couple of problems with that scenario. Homeowners need to know that renovations cost money and for major remodels the return on the dollar is less than 100%, in fact, 60% is a more realistic expectation.

The couple in the story on TV “had to have” a certain amount for the home they were selling so that they could buy another home. They planned on getting that amount by renovating their home. That would work if the renovations were free. Maybe they are free on TV but in real life they cost money.

As for buying a home and renovating it that usually only makes sense if the home needs work and can be purchased for an amount that is below the value of the home plus the cost of rehabbing it.

The buyers on the TV show were looking at expensive homes that did not need any work but that the couple would need to add onto and re-arrange so that they could have the perfect floor plan.

That means that by the time they paid for the house and the renovations they would have more money in the house than they could get out of it. The best way to get more money for a house is by making smaller improvements and repairs.

The smarter thing to find a house that is close to perfect and doesn’t need renovations and to get used to the idea that there is no such thing as the perfect house. It is more cost effective to buy the home with enough space rather than adding to a smaller home.

Being able to sell a home for as much or more than was paid for it gives homeowners more flexibility and more choices.

The real estate agent in the show is a wealthy man. I can understand why.

Reality isn’t like reality TV. Real home buyers and sellers will need to adjust their expectations if their ideas are coming from TV shows where actors pretend to buy and sell real estate.

Proposed tax bills and real estate

I am going to limit my commentary to the part of the Federal tax bill that directly impacts real estate. For St. Paul homeowners the sky is probably not falling. Yes, the mortgage tax deduction is being limited to interest on the first 750K

The majority of mortgages are less than 750K and here in St. Paul where the median home value is around 200K most will not be affected by the changes in the MID.

The first 10,000 paid property and state taxes will also be deductible for those who qualify. Property taxes in St. Paul are 1.33% of the assessed value of the property. State income tax rates range from 5 to 10%. Most middle-income households are going to be in the 7 to 8%  range. [see the best run states]

With the standard deductions being raised fewer will qualify. Currently, there are many homeowners who do not get any tax benefit from owning a home because they do not itemize and the reason they do not itemize is that the standard deduction is higher than the total of all possible deductions added together.

The incentives for incurring more mortgage debt will be gone for some. It is even possible that owning lake homes in Minnesota will become less popular and the values will decline.

There are some advantages in having less mortgage debt. Money can be invested in other things. Maybe some will start a business rather than owning a lake home and take advantage of business tax cuts.

Most homeowners I know love owning a home but I think new tax laws will impact the housing market. Taxation has intended and unintended consequences. I think it is important to keep it all in perspective.

When is the house yours?

Moving Day

When will you get possession of the house you bought?

It isn’t unusual for someone to buy a house and sell on the same day. Sometimes the movers are moving everything out of one house during a closing and moving into another home after a closing.

Possession immediately after the closing is a popular option. That means if the closing is at 11:00 AM and lasts until 11:45 AM the buyers can move in at 11:45. It also means that the sellers have until 11:45 AM to get the house ready.

The important thing to remember is that possession immediately after the closing is not automatic it is spelled out in the purchase agreement.

Buyers and sellers have other options. Occasionally buyers negotiate for an early move-in and pay rent to the seller up until the closing. There is usually a damage deposit. A contract is drawn up to protect both parties.

Sometimes homeowners need an extra day or two of possession to move out. In that case, the sellers rent their former home after the closing. We call that a “rent back”.  The rent back is also put on a special separate contract.

Sellers sometimes just need an extra hour or two after the closing.

There are a few other options. Movers have all sorts of services they can offer to store items in pods or trucks with the movers or at the new home.

It is important to remember that whatever your moving situation is chances are your real estate agent and movers have seen it all before and will help you make it work and may even have an idea that you have not thought of.

Also see Final walkthrough

How clean is clean?