June is national homeownership month

There is no place like home.

This announcement was made by HUD yesterday is their gift to some homeowners and renters:

“The Federal Housing Administration (FHA) announced a two-month extension of its foreclosure and eviction moratorium through August 31, 2020, for homeowners with FHA-insured Single Family mortgages. This extension provides additional security and peace of mind to homeowners that they will not lose their homes while they are trying to recover financially.

The pandemic and recession are sure to affect homeownership rates in a negative way just like the last recession did.

The homeownership rate in St. Paul, MN is 49.3%, which is lower than the national average of 63.9%.

We have very little affordable housing in the metro area. Affordable new construction is not being built. Housing has not kept up with population growth.

The path to homeownership starts with a good education. Even though St. Paul has but one school district the schools are not funded equally.

After that great education, comes a job with decent pay.

We have a history of housing discrimination which has caused a homeownership gap.

It is wonderful to understand the history but it would be even better if we could do something now so that more people could own homes and so that we could one day get all the way up to the 63.9% US homeownership average by increasing homeownership among people of color. It isn’t going to be easy because there is also the pay gap and the wage gap that has to be overcome.

Homeownership gap

For now all I got it a link to some resources for down payment assistance. I have had the link on this site for years and I have had clients use it and get downpayment assistance and that assistance helped them become homeowners.

Those former clients are still homeowners. Some of them have college degrees and others do not. Most of them were single when they purchased the home and most were women.

If you own a home and are concerned about making mortgage payments, visit the Minnesota Homeownership Center. 

Home buyers need help

I recently talked to a first time home buyer who lost out in a multiple offer situation. Her offer didn’t stand a chance and her agent was too inexperienced to give her good advice. Most new agents don’t know what they don’t know and the same is true with first time home buyers.

Agents don’t always ask for help or even admit that they are new and need help so that we can help them.

Here are a few things home buyers need to know:

  1. In a multiple offer situation there won’t be any negotiating. The seller will accept the best offer.
  2. An offer is not a full-priced offer if the buyer is offering the list price and asking the seller to pay closing costs.
  3. In most cases $1000 dollars earnest money is not enough.
  4. Making earnest money refundable to the buyer if there is a problem with financing makes the offer weaker. There is a better way.
  5. Asking for a closing in three months may weaken an offer. Find out how soon the seller wants to close.
  6. Offers without pre-approval letters are seldom considered.
  7. Offers that are contingent on the sale of the buyer’s home are undesirable to most sellers.
  8. If the house needs a lot of work FHA financing might not work. Please ask your lender about FHA appraisals.
  9. Sometimes you have to walk away. let some other buyer overpay.
  10. Sellers are rarely motivated to take an offer that is less than full price the first day on the market.

When a home seller accepts an offer the home is more or less off the market. Sure people can see it but usually, there is little activity once other buyers know that the home has a contingent offer on it.

I’ll never recommend skipping the home inspection as some buyers do to make their offer more appealing. Inspections protect sellers and buyers and I think it is crazy to buy a house without an inspection.

Working with an agent who hasn’t worked with a buyer before or who has little experience will put the buyer at a disadvantage over other buyers who are working with an experienced agent.

There are so many situations that arise when buying or selling real estate. I wish I could say that it is a simple process but it is not. Getting advice from friends and family is fine but it is important to understand that real estate is local. Laws and business practices are different in each state.

Laws an business practices change and so does the housing market. Parents need to understand that what worked for them 10, 15 or 30 years ago may not work in today’s market.

Timing for homebuyers in a sellers market

blue house
small house

We are in a strong housing market. Demand for homes is high and supply is low.

During the buyers market, a decade ago, people who needed to move could look at houses months ahead of time, make an offer and get the sellers to agree to close a few months later.

In today’s market sellers can set the terms and most are looking to close soon. Starting the search too soon doesn’t work because the houses you look at today will be sold in a few weeks.

However, there are always houses for sale shown on the internet. Homebuyers can browse and get familiar with the market months before they actually start touring houses.

When there is a shortage of homes it is a good idea to start looking 60 to 90 days before you plan to move.

Buyers will need to plan ahead and be pre-approved for a mortgage and be ready to write an offer.

People who are renting should try to enter into a month to month lease with 30 days’ notice to move. Flexibility makes a difference and makes it easier to win in a multiple offer situation without having to go far above the asking price.

Plan on getting pre-approved for a mortgage four months before you need to move. Start working with a real estate agent three months before the move.

Most real estate agents can’t measure

old brick building and new apartment building

When homes are put on the market we are required to put some measurements in the MLS. If you read the fine print it says right in the NorthstarMLS that the information provided is deemed reliable but not guaranteed.

It is recommended that buyers agents verify the measurements. Personally, if I were buying a home and the measurements of it and of each room were important to me I would measure it myself.

Several years ago some clients of mine took measurements of the house they made an offer on during the inspection. It was smaller than advertised by 300 square feet.

They withdrew their offer which is kind of unusual. Apparently, they didn’t like the house enough to negotiate a lower price.

When buyers use financing to buy a house the buyer’s lender sends an appraiser to determine the value of the house. The size of the house does matter when determining the value.

Sometimes when I list a house the owner provides measurements. If they came from blueprints or an appraisal I accept them. If not I measure.

Measuring a house isn’t as easy as you would think. The total square footage can be obtained by measuring the foundation. They are rarely rectangular or square which ads complexity.

On a true two-story the second floor is the same size as the first assuming there are no additions on the first floor. Sometimes total above ground square footage can be obtained by measuring the foundation and multiplying by two.

Finished square footage is where the floor, ceiling, and walls are finished but if a person has to walk through an unfinished space to get to it we don’t count it.

My own house is quite complicated but I have measurements from an appraisal. They differ from what tax records have as the total finished square footage.

It is possible that they are the measurements of the house that was previously on the lot but that burned to the ground.  The house is a story and a half because the second floor is smaller than the first.

However, the second floor is actually more than half as big as the first. It is really a story and three quarters but there isn’t a box I can check for that.

I once measured my own house for practice. I can out with about 20 more finished square feet than what was on the appraisal. We call that REALTOR math.

Call your agent before you look at new construction

New construction

There isn’t a lot of new construction in the area but there is some and I like to remind homebuyers that they can and should buy new construction with the help of their REALTOR.

The nice agent in the model home is representing the seller. Sure they will work with you and they really know the project better than your own agent does but why not work with an agent who has experience and one who represents you and not the seller? Buyers do not get discounts for working without their own agents.

The salesperson at the model should ask if you have an agent and is required by Minnesota law to explain agency and have you sign an agency disclosure at the first substantive contact. It is the agent’s job to help buyers who come into the model, that is what they are there for. Even buyers who have signed contracts with buyer agents.

The easiest way to involve your agent is to include their name when you sign in at the model home.  Better yet go with your agent to the model home. We always have time to tour homes with our clients.

Often buyers report having somehow ended up in a model home and before they realized what happened they made an offer. Buying real estate should be intentional, not accidental.

Recommending a neighborhood

On the river bluff – Cherokee Heights neighborhood

It is a common misconception that a REALTOR can recommend a neighborhood. Recommending a neighborhood is a fair housing violation.

Often home buyers will ask if a house is in a “decent” neighborhood. REALTORS can not answer that question, and “decent” is pretty vague. There are people who tell me that a neighborhood is “bad”.  Like “decent”, “bad” can mean just about anything.

There are homebuyers who choose neighborhoods based on what they can afford or how close it is to where they work or to family or to a place of worship.

There are people who want to live in walkable neighborhoods but I have found that definitions of walkable vary considerably.

REALTORS can not “steer” people into a neighborhood or recommend a neighborhood.

REALTORS can and will answer specific questions about neighborhoods. Some will even recommend restaurants and know a lot about neighborhood amenities.

There are plenty of resources and maps of the internet that provide useful information that can help home buyers choose a neighborhood. Driving, biking or walking through a neighborhood can help buyers narrow the search. Some homebuyers research schools before choosing a neighborhood while others look at crime rates.

The City of St. Paul web site has neighborhood information. Each neighborhood has a district council. Learning more about the neighborhood council is a great way to learn more about the neighborhood.

When choosing a neighborhood is important to consider housing stock in that neighborhood. People looking to buy a rambler should not be looking in the downtown area and people looking for a Victorian-era Queen Anne style might find one in Highland Park but there are so few that the likelihood of finding one on the market is slim.

Some buyers choose a neighborhood only to discover that there aren’t any affordable houses available in the area. People with more money have more choices.