The golden rule in a sellers market

The golden rule at least the way my parents taught it to me is about treating others the way I want to be treated.

Once a upon a time I had some buyer clients who made an offer on a home. Their offer was ignored, and the sellers would not negotiate.

After at least two weeks of hard work the sellers slowly started to negotiate with the buyers and eventually they both signed a purchase agreement.

Several weeks later the sellers found themselves in a position of needing a favor from the buyers. The buyers quickly and graciously said yes to the sellers request.

Even in a sellers market on a home with multiple offers the seller may need something from the buyers at some point in the transaction. Maybe a closing date has to be changed. Treating everyone with respect and kindness and promptly responding during negotiations is free and it never hurts.

When buyers and sellers don’t get along small problems can turn into huge misunderstandings and even lawsuits.

Copper or lead?

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Saint Paul water

St. Paul home owners can find out if their home has a lead water line leading from the property line to the water main. Just go to online water bill pay You will need to login to your account or create an account. I write this today because I just got my water bill. There is also information about lead in water and testing for lead.

I know for sure that line from the street the house is copper. These are all questions to ask when buying a home. . . the more you know . .

Urban legends, mythology and the FHA loan

FHA loans have been an alternative loan for first time home buyers since the 1930’s. FHA stands for “Federal Housing Administration” Simply put an An FHA loan is a mortgage insured by the Federal Housing Administration.

The loans have advantages. Buyers only need a 3.5% down payment and there are other advantages. First time home buyers in particular should ask their lenders. The FHA loan might just be the best or only way to get the money to buy a house.

Buyers and sellers should not believe everything their real estate agent tells them about these loans. FHA appraisals are different than appraisals for other types of loans.

When a home buyer is getting a loan to buy a property the lender they are getting the loan from has to send out an appraiser to make sure the property is worth as much as the buyer is borrowing. The home becomes collateral for the loan.

The FHA appraiser determines the value of the property and also inspects it to make sure the it meets ” HUD’s minimum standards for health and safety” That kind of appraisal isn’t done for conventional loans. VA (veterans administration) loans also require a safety inspection as part of the appraisal process.

The FHA inspection is where much of the mythology comes from that surrounds these loans. I have had real estate agents tell me that all sorts of things will not pass an FHA inspection . . yet they do. If something does not pass an FHA inspection often a repair can be made so that it will pass. As a result home buyers sometimes do not make offers on houses they really want to buy, and sellers say no to FHA financing miss out on having the largest possible pool of qualified buyers.

FHA is not particularly picky about windows or the age of a boiler. They are picky about peeling paint that may contain lead and they will ask that a handrail be places along stairways. Leaky roofs won’t pass and neither will heating plants that don’t safely heat the house. Bedrooms must have egress windows and windows must open and close. While it is expensive to add egress windows it isn’t that big of a deal to repair a window so that it opens and closes.

HUD’s primary concern is the health and safety of the home buyer who will actually live in the house. Thus, most of their appraisal / inspection checkpoints have to do with health and safety aspects of the property. Above all, the home must be habitable and comfortable, without any potential hazards to the occupant.

HUD standards have changed over time but many real estate agents have not kept up. It doesn’t hurt to ask your lender or  read the guidelines. As a home owners myself I want my home to meet minimum safety requirements and would be inclined to make repairs for a new owner. After all we bought the house using an low downpayment FHA loan ad a forgivable silent second mortgage that helped with the closing costs.

The widening net wealth gap

Right now average monthly rents are higher in St. Paul than the average house payment, making owning attractive to many. It never ceases to amaze me the way a person can pay rent each month but not be qualified to buy a home and pay less each month but it happens.

Owning real estate is a strategy for building wealth. Homeownership takes planning. There are downpayment assistance programs and loans that require less than 5% down.

 

Net worth - NAR
Net worth – NAR

I don’t need help I can find the perfect house

Forbes Ave
Houses on Forbes Ave

Times have changed. It is rare that I encounter someone who wants to buy a home who can not find a home for sale. Most buyers search the internet and find homes they are interested in buying. I have buyers tell me that my job is easier and that buyers themselves are doing all the work.

The internet has made my job easier because people who use the internet to do research and learn about homes for sale and the local real estate market are educated and informed. They will have an easier time choosing a home and making decisions about how much they want to pay for it.

The internet has not made the home buying process any easier. I recently had a client find a house all on her own that she wanted to buy. She contacted me and gave me the address. I contacted the listing agent and found out that there were already four offers on the home and that offers were due in less than an hour.

My client wanted to make an offer. I explained that it would be a long shot. She was able to offer a little more than the asking price.

I abandoned my Saturday night plans and wrote that offer even though I knew it was a long shot. I believe that my clients deserve a shot and that is part of the service I provide and the value I add.  I triple checked it to make sure that it was perfect. I got the offer in right on time. Early the next morning I was informed that there were six offers and the sellers did not choose the one that I wrote. I suspect the winning offer was at least 5k higher than the one I wrote.

Even when my clients can find a house to buy without my help that isn’t the same as buying the house and having the sale close. The finding part if easy, it is the buying part that can be challenging. Even though most people are amazing negotiators they don’t always know how to negotiate with sellers who are also amazing negotiators.

When I work with buyers I have to be fast and flexible. I need to be able to quickly gather the information needed to make an offer and then I need to council and advise the buyer on strategies making a winning offer.  I can count on having to go through this process at least twice with each buyer.  I have heard tales of buyers making seven of more offers. Those buyers want to consider a new strategy.

Financing, contracts and even inspections have gotten more complex. The internet compounds issues as home buyers crowd source solutions from friends on social media rather than asking an experts.  Houses haven’t gotten more complex but there are fewer to choose from and for some reason that is translating into showing each buyer more homes as they want to look at any possibility as they look for the perfect home.

I spend less time searching for homes for sale because I can use the internet and so can my clients.  I spend more time with each buyer and show them more houses over a longer period of time.  I write more offers for each buyer and spend more time negotiating and advocating for each buyer before they close on their home.

It is more stressful to have to write offers very quickly and compete with half a dozen other offers.

Types of air conditioning found in homes

infographic
Types of air conditioning

The chart is from the NorthstarMLS.  79% of homes listed have central air, 3% have wall air conditioners, 5% have window air conditioners, less than 1% have geothermal and 1% have ductless Mini-split and 12% of homes have no air conditioning.

For houses without the duct work the ductless mini-split is an attractive option . . at least is is more attractive than a wall or window unit with a small air handler/evaporator inside the house mounted on the wall and a condenser outside.

Real estate agents can search for homes based on the type of AC. The most common request is to search for homes with central air.

In Minnesota heating is also important. Most homes have central heating. either forced air or hot water. Homes without central heating may have baseboard electric type heat.