First Time Home Buyers

Words matter in purchase agreements

Posted on by Teresa Boardman
kitchen
Stainless steel appliances – granite countertop

Remembering way back to one of my first clients. I sold their house and when we got to the closing the buyers were most upset that the sellers took the microwave with them when they moved out.

Microwave ovens that are not built-in are considered personal property. Unless the buyers ask for them specifically and unless the sellers agree to include them in the sale they can be packed up and moved away.

The buyers refused to close unless the sellers paid for a new microwave and the sellers refused to do so. At the time a new portable microwave oven cost around $100.

Anything built-in is included in the purchase of real estate in Minnesota. That included the kitchen sink, light fixtures, built-in appliances, cabinets and shelving.  If a microwave is built-in then it is included when the house is sold. Light fixtures are included as are curtain rods.

Perennial plants, bushes, and trees also run with the property and are included in the purchase.

If it is a portable model that sits on a table it is considered personal property. It can be included in the sale if specified in writing. Sellers can specify in writing items they do not want to include in the sale.

When asking for personal property the buyer should be specific.  Ask for the ______(model) microwave oven, as seen in the kitchen on this day______.

Sellers who do not wish to sell a light fixture with the house should remove it and put in a new light fixture before putting the house on the market.

Over the years I have seen more misunderstandings and disagreements over property that is worth less than $100 than over anything else. There are gray areas as to what is personal property and what isn’t. When in doubt spell it out and get signatures from both parties.

Experienced real estate agents know the difference between personal property and part of the property.

2008 all over again?

Posted on by Teresa Boardman

Coins, moneyLet’s not forget what happened during the housing crash. Many homeowners ended up in a negative equity position. In other words, they owed more on their houses than the houses were worth. I well remember sellers bringing money to the closing so the mortgage could be paid off.

Here we go again with loans that guarantee the borrower will have no equity from the start via zero-down mortgages.

United Wholesale Mortgage (UWM), one of America’s largest mortgage lenders, is offering zero-down mortgages, opening up home ownership to more people but revitalizing a controversial practice that carries as many risks as advantages for cash-strapped home buyers.

Here’s how it works: For first-time homebuyers making 80% of their area’s median income or less…

  • Buyers take out a mortgage for 97% of the value of the house they buy.
  • The remaining 3%, up to $15,000, is a second interest-free mortgage.

The second mortgage has to be paid back in one payment when the first mortgage is paid off or the house is sold or refinanced.

Under the program homebuyers start without any equity, so if the value of their home decreases, they would instantly owe more than the house is worth.

If a buyer has to sell quickly, they’ll still have to pay back the entire second mortgage or risk default/foreclosure.

Buyers may get stuck with a higher mortgage rate, even if the Federal Reserve starts to cut interest rates because to refinance, borrowers need to have enough cash to pay back the second mortgage.

Please think before you borrow and borrow responsibly.

Finding a house Vs. Buying a house

Posted on by Teresa Boardman
drawing of a house
I drew this myself

People are often confused by the fact that it is fairly easy to find a house for sale without any kind of professional help. Anyone with internet access can find houses that are on the market complete with pictures, floor plans, and room dimensions.

Once a home buyer finds a house that they are interested in what do they do next?

Make an offer?

Tour the home?

Pay to have it inspected?

Hire a title company to close the sale?

There is a process for buying real estate that is somewhat unique in each state. In Minnesota, offers have to be in writing. Most homes that are on the market are offered by a Realtor®. They know what to do and how to make an offer but they also represent the seller. They can work as a facilitator and work with both parties but one agent or one broker can not represent both buyer and seller in a transaction.

Finding a house to buy is just the first step in a process that often takes months. Most buyers will need money to buy a house so it starts with finding money for a downpayment and getting pre-approved for a mortgage by a lender.

The next step is usually looking at some houses and seeing them in person. Occasionally someone will buy a house they saw on the internet without touring it first but that is surprisingly rate.

Then the buyer will need to make an offer. The offer is on a legal contract. The buyer will need to decide how much to offer and whether or not to have an inspection and any other contingencies.

If there is an inspection the buyer has to negotiate any repairs with the seller. None of this is rocket science. It just takes patience, negotiating skills, and experience.

Finding a house for sale and buying it are two completely separate processes. Finding the house can be done on the internet. Buying the house can be done with a combination of email, text messages, phone calls, trips to the house, and in-person meetings. Do not confuse the two processes.

Plants and trees are included

Posted on by Teresa Boardman

it is hard for some folks to believe but some of us have sentimental attachments to plants. I have some peony bushes that came from the family farm. From there they went to a home in St. Paul and then they went to a home in Maplewood. Now they are in my yard. When we decide to sell we will ask out children if they want the plants and if they do we will remove them before the house goes on the market.

Perennial plants and trees are considered part of the property and are included when it is sold.  Most anything can be put in a purchase agreement to buy a house. If the buyer and seller agree in writing the seller can take the plants.

Things go much more smoothly when anything that the sellers do not want to included in the sale are removed from the property before the buyer sees the property.

Sometimes homeowners want to keep light fixtures and other items that are attached to the property.  Again the best way to avoid misunderstanding is to remove those times before the home goes on the market.

Technically under Minnesota law, if the homeowner plants tomatoes or other crops before they sell they are entitled to come back and harvest them.

Pink Peonie
Peonies

Over the years I have had clients who got most upset over missing hostas and in one case missing rhubarb when they went to take possession of the property.

A reminder that commissions are and have always been negotiable

Posted on by Teresa Boardman

coinsYes, it is true real estate commissions are negotiable. They always have been.

Agents are independent contractors who set their own rates. Some agents will not negotiate. Agents are not required to negotiate.

There is no “going rate” but I’ll admit I have benefited from the myth. For many years I have charged less than what people believe to be the “going” rate.

Real estate agents are selling experience yet new agents often charge the same rate an experienced agent charges. Personally I wouldn’t pay it but people do.

There are many real estate agents to choose from. In fact, there are more agents than there are houses to sell. If one agent charges too much and won’t come down in price find an agent who will.

Real estate agents are salespeople taught how to sell themselves and negotiate fees and commissions. Real estate agents do not get paid until after a sale closes and most work on a 100% commission basis. There are no paid vacations and there is no group health insurance.

Some agents show this chart that shows how much of the commission they get to keep after fees and splits with their broker. To that I say who cares. That is the agents problem.

The good news is that people can buy and sell houses without the help of a real estate agent. It can work out very well especially considering that home buyers and sellers often do not know what it is they do not know and won’t know if they ended up spending more or getting less because they did all on their own.

Real estate commissions and fees are spelled out in the contracts home buyers and sellers sign.  It is a good idea to read the contract before signing it. We can not list a house or work with a buyer without having a signed contract.

It is true that real estate agents can make a lot of money but most do not but don’t feel sorry for those who don’t make a lot of money.

Down Payment Assistance 2024

Posted on by Teresa Boardman
Coins, money
Money

There are funds available for downpayment assistance for home buyers. Especially first-time homebuyers and first-generation home buyers. By the way, often people who have not purchased a home in the last three years qualify as first-time home buyers.

There are programs for specific areas like the whole city of St. Paul or Minneapolis. My husband and I bought our first home using a program through the City of St. Paul. Through the program, we got a forgivable downpayment grant and a lower interest rate. I can still remember how thrilled we were to be homeowners.

Just click on the link to learn more about downpayment assistance.

Ask your lender about down payment assistance programs and other programs you might be eligible for. Some of these programs will run out of money long before the year is over so hurry.

I have helped several home buyers successfully use downpayment assistance. I believe in these programs because they made a huge difference in my own life.