There are closing costs too

calculatorFirst time home buyers are often surprised when they find out about closing costs. Those pesky fees are in addition to the down payment. Lenders will provide detailed information about what those costs are but here are a few examples:

1. Loan origination fee

2. Appraisal fee

3. Pre-paid homeowners insurance.

4. Property taxes prorated from the day of closing and for the rest of the year.

5. Mortgage registration tax

6. Pre-paid interest and taxes (prorated from the day of closing)

Typical closing costs in Minnesota are about 3% of the purchase price which is usually not the same as the loan amount. In addition to closing costs, most home buyers will make a down payment. The down payment can be as little as 3%. There isn’t any truth to the rumor that home buyers need to put 10 to 20% down to buy a home. There are some down payment assistance programs too.

Home buyers often ask sellers to pay their closing costs. Typically that means that the buyer borrows 3% more and those funds are applied to closing costs. I encourage buyers to do the math and understand that the closing costs come off of the seller’s bottom line. I encourage sellers to pay attention to the bottom line and I let them know that paying the buyer’s closing costs is common and often necessary.

To estimate closing costs the lender needs to know what day the closing will be held on and will have an exact figure available to the borrower 3 days before the closing. The lender will provide a good faith estimate shortly after the loan amount is known.  Closing costs should never be a surprise.

Closing costs are generally lower in Minnesota than they are in other parts of the country.

don’t skip the inspection

The shortage of homes for sale continues to shrink. We have set many records for all-time lows. It isn’t just St. Paul it is the metro area and much of the country.

Home buyers need to be ready to pounce when that perfect or almost perfect home comes on the market. As I mentioned yesterday being pre-approved for a mortgage is important and so is having some money for a down payment and for closing costs.

Sure you can ask the seller to pay your closing costs but that makes your offer weaker than the buyer who can pay his own.

There is one thing home buyers should never compromise on and that is having a complete home inspection. Houses are a big financial investment and buyers need to understand what they are buying.

Buyers inspections are good for home sellers too. It is always best if the buyer finds out about any problems with a home before they buy.

Is it worth skipping the home inspection to make the offer stronger? Personally, I don’t think so. Please have a complete home inspection. Have it done by a qualified professional home inspector and make your offer contingent on that inspection. Please have a radon inspection too.

Recipe for home ownership this spring

Cooking – photo curtesy of Flicker commons

Home buyers who plan to move this spring or summer should be looking for a home right now. There isn’t much on the market. When a house comes on the market that might be good fit home buyers need to see it right away. There is no wait until next week or wait until tomorrow. The best houses sell quickly and often with multiple offers.

Lunch hours and after work are great times to see houses for sale. Don’t wait for the open house on Sunday. Buyers who are not working with a real estate agent are at a disadvantage as they end up competing with buyers who have agents.

The first step in the home buying process is getting a pre-approval letter from a lender. Offers on houses that do not include pre-approval letters or proof of funds are usually rejected.

Your lender can tell you how much money you will need for a down payment. It is a myth that buyers need to put 20% down. Most buyers make a downpayment of less than 10% and there are programs for downpayment assistance for those who qualify.

Even though it is only January and it is cold outside the spring real estate market it is in full swing.

Changes in real estate by market segment


These numbers are for 2017 and they came from a press release from the Saint Paul Area Association of Realtors®:

  • Changes in sales activity varied dramatically by market segment
    • Single-family sales decreased 1.1 percent; condo sales rose 2.0 percent; townhome sales rose 5.7 percent
    • Traditional sales rose 3.7 percent; foreclosure sales fell 42.8 percent; short sales fell 49.9 percent
    • Previously-owned sales declined 0.7 percent; new construction sales rose 13.9 percent

It isn’t at all hard to see why new construction sales rose. There has been very little new construction in the last few years but a little more in 2016 and 2017 than we saw in the previous 8 years. I haven’t done the math yet but the increase in condo and townhome sales could be because of new construction of condo projects.

Existing home sales are being hampered because there are not as many sellers as there were in prior years. The only reason for the decrease in single-family home sales is because fewer homeowners decided to sell in 2017.

In the last year or so I have met several people who want to buy foreclosures and fix them up. Unfortunately, the foreclosure market has been contracting for the past several years from the peak during the great recession.

I’ll predict that in 2018 single family home sales will be lower than they were in 2017.

For local real estate market numbers please see Local market conditions and home prices.

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.

Cats kill 500 million birds a year

House cat – in the house

Cats roam free in my neighborhood and they make little cats too. There are people who believe that it is alright to let their cat roam free and that it is a cat’s right to roam free.

The house cat has long been listed among the 100 most dangerous invasive species. They kill millions of birds and other small animals each year to the point of extinction. A cat is a pet when kept inside but once when outside it is a heartless killer.

“If we extrapolate the results of this study across the country and include feral cats, we find that cats are killing more than 4 billion animals per year, including at least 500 million birds. Cat predation is one of the reasons why one in three American bird species are in decline,” said Dr. George Fenwick, President of American Bird Conservancy [wildlife management institute]

There was a study that shows that they only bring home about 25% of what they kill. They eat some of what they kill but they leave a lot of it where they killed it.

Being a free-range cat in St. Paul is not good for the cat either. Here are some statistics:

200 cats are killed annually in traffic

Life expectancy of a cat allowed to roam is only three to four years

Confined cats can live beyond 14 years

Over 1,200 cats are picked up each year by animal control

Roaming cats may be a nuisance by urinating and defecating in sandboxes and gardens

Outdoor cats are susceptible to injury or death from other predatory animals

Outdoor cats are predators to wildlife such as birds

Be a good neighbor and keep your cat inside.