How much did the current owner pay?

There is no relationship between the value of a house today and what the current owners paid for it. Home buyers like to find out how much the sellers paid for the home. Some want to use that information as the basis for an offer.

craftsman style dining room
Dining room with built-ins

It is interesting information but there is no relationship between what the current owner paid for a house and the current value of that house. Sometimes it is good to know that the seller paid more than you want to offer. Some sellers can not afford to accept an offer that won’t pay off their mortgage.

When someone purchases a home and uses financing the lender who is providing the financing has the property appraised. The appraiser looks at how much similar properties in the area have sold for in the last year or so. The subject property is compared with comparable properties and adjustments are made.

If the home buyer offers more money than the appraised value the buyer may have to bring more cash to the closing. Sometimes the buyer and seller renegotiate the sale price. Sometimes the buyer decides not to proceed. What happens when a property does not appraise for the amount offered depends upon how the purchase agreement is written and on what kind of financing is being used.

Minnesota appraisers have training and licenses.

Low appraisals happen. Pricing a property correctly is important. Even in today’s market, we are seeing houses that do not appraise for as much as they are listed for or as much as the buyer offers. It is possible to get multiple offers for more than the appraised value of a home for sale.

Don’t buy or sell real estate right after a breakup

Bleeding heart

People do not make the best decisions right after s divorce or a death. Rebound real estate can end up being the most expensive real estate of all.

Right after the holidays, I start getting calls from people who want to move. For some of them, the move will be because of a divorce or a break up with a partner. They wait until after the holidays and then begin making plans.

Some will want to buy another house. I call it a rebound house. Please think before you buy the rebound house because it is the home purchased shortly after a divorce or the break-up of a long term relationship. The rebound homes that are purchased don’t always work out in the long run. Go out and rent an apartment and give yourself a year or so before buying real estate.

During breakups, people often look at their move as moving away from something or someone. It might be best to think in terms of moving toward something like a new life. Where do you want to be? Where do you see yourself in five years? If there is no mental picture then making a long term commitment like buying a home is not the best choice.

I have listed homes for a few people who bought the home shortly after a break-up. In each case, they felt they owned it for a short time and felt they had made a mistake. They did not look at enough homes, they got themselves in over their heads financially, or they just paid too much for what they bought because they wanted to get on with their lives and in their haste failed to do their homework.

Buying a home is a big step, please wait until you are ready to make a good decision.

Tax rules are complicated

It is Friday and Fridays are for fun. There isn’t anything fun about taxes but I can write about it anyway because it is my blog.

Very few people really understand the Federal tax code. I think it is created to be as confusing as possible. If people are confused then politicians can say they lowered taxes or that taxes were increased and no one can prove it.

There are people who honestly believe that if their tax refund is lower than expected they paid more taxes.

Getting a bigger refund usually means that too much money was withheld from each paycheck. In my case, because I am self-employed if I have a refund it means I overpaid my tax payments.

If I underpay my estimated taxes I end up having to make a payment to the IRS on April the 15th and I pay a fine for my underpayment. If I overpay I apply what would be a refund to my next tax payment.

It works the same way for people with W2 type jobs. If the amount of money that is withheld from each paycheck is barely enough to cover the year’s taxes there won’t be much of a refund. If too much is withheld the refund check is higher.

If too little is withheld then the taxpayer has to write a check.

To determine if you are paying more in taxes or less calculate income taxes as a percentage of your income.

If you are not sure how to calculate a percentage use this calculator. .

If your refund is too small have more money withheld from your paychecks so that next year your refund will be higher.

Remember your 2018 income taxes are due on April the 15th and that is just 59 days from today.

Your home doesn’t have to be new to be smart

queen anne house
Queen anne

My house is old. Part of it was built in 1858 and the newer part may have been built as recently as 1860. In fact, it was built without central heating, electricity, central air conditioning or plumbing. The house has all of that today and more.

It was built before many of the modern appliances we have today existed. They were added later. The electrical system and the plumbing and heating have all been updated even more recently.

I have one of those smart thermostats that I can control with an app or by voice the Amazon Echo. I don’t have to be at home to know what the temperature is in my house or to change the temperature.

There is a camera in my house that can be activated by motion and it can send me an email alerting me that someone has entered my house. I can watch someone take my stuff using an app on my phone as I dial 911 and yell at them through a speaker.

I have some lights and electrical outlets that can be controlled with an app on my phone or by voice. I am interested in upgrading some of the locks to smart locks.

As we add smart devices to our homes those devices will become obsolete and will need to be replaced with newer devices or some other kind of technology altogether.

When we bought our last refrigerator there was no such thing as a smart refrigerator that could help us keep track of what is inside the fridge and what we are out of.

This holiday season I gave my brother’s family an Instant Pot that is accessible by wifi. Doesn’t everyone need a smart Instant Pot?

You don’t have to buy a new house to have smart home technology, which is a good thing because not many new houses are being built.


Internet of things

Those darn ice dams!


I couldn’t help but notice all the ice dams on houses as I drove to a meeting yesterday. With all of the snow we have had and more on the way there will be a lot of ice dams and water damage from them this year.

The dams are caused by melting snow on the roof and heat leaking out from the house.  The snow at the edge of the roof turns to ice as it thaws and refreezes.

The water pools on the roof because the ice dam prevents it from rolling off the roof . . hence the term ‘dam’.  It does not matter how new your roof is you can still take on water.

The best way to handle ice dams is to prevent them. There are companies that will remove ice dams and damage the roof at the same time . . . or not. Removing the snow from the roof will stop new dams from forming.

It isn’t just snow on the roof that causes ice dams.  The University of Minnesota Extension web site has some great information about what causes ice dams and how to prevent them.

Get it in writing


When buying or selling a home in St. Paul it is important to get everything in writing. The contract to purchase should include:

  1. Purchase price.
  2. Earnest money amount.
  3. Downpayment % if financing.
  4. Type of financing.
  5. Closing date.
  6. Specific contingencies.

An offer might be inspection contingent, contingent on financing or contingent on the sale of a home that a buyer currently owns or the seller may want to add a contingency.  Contingencies always have start and end dates and usually require that some specific thing happen before they can be removed. For example, an inspection contingent offer will have an inspection period with a beginning and an end.

With some types of real estate, there are automatic contingencies and laws dictate when the period starts and how long it has to be.

Sometimes everything is in writing and both parties agree but the agreement is written in such a way that there are misunderstandings. For example, a buyer may ask for a specific repair without specifying that the repair needs to be made by someone who is qualified to make the repair. If the buyer is asking to have a window repaired on a house with more than one window the contract needs to reference the specific window.

Using too many or too few words on a contract can lead to misunderstandings later on. Using the wrong words or not being specific enough can lead to misunderstandings or even lawsuits.

When I receive or review a contract from another agent sometimes I can tell if the agent is new or if he or she is experienced. Experience does matter when writing real estate contracts.

Before making an offer or accepting an offer on real estate read the contract and make sure you understand it. Often I spend more time explaining a contract than I spent writing it and I am fine with that.

If everything isn’t in writing . . . good luck!