Buying “as-is” is sometimes misunderstood

Maybe you are looking to buy a house or you want to sell one. You have heard of buying or selling “as is”. It just means that what you see is what you get and that the seller will not make nay repairs or changes.

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It doesn’t mean that the buyer can not have an inspection. A complete home inspection is necessary and part of the home buying process. In the case of “as-is”, it is even more important.

Buyers have the right to know what they are purchasing as-is. Sellers will not make repairs but if the purchase is inspection contingent the buyer can cancel the purchase.

If buyer inspections are not allowed my advice is to pass on the house because it may need expensive repairs. Government entities and corporations sometimes sell houses and will not turn the utilities on so that the house can be inspected.

Selling “as-is” does not give the owner permission to deliberately hide property defects, nor does it protect them from lawsuits.

Corporations and government entities that sell real property do not always fully understand what “as-is” means and may prohibit inspections or hide material facts.

Several municipalities including St. Paul require truth in housing or tie of sale inspections. Selling as is does not mean that the house is exempt from such inspections.

In a general way, all houses are sold as-is. If the buyer has an inspection and the homeowner makes a repair the house is then sold “as-is”.

Record low unemployment in Minnesota

I almost missed this news but it does matter. Minnesota’s unemployment rate is usually lower than the average for the country. Even so we hit a new record low last month.

The unemployment rate or 2% in May 2022 – a new record low since the metric has been tracked in 1976, according to numbers released today by the Minnesota Department of Employment and Economic Development (DEED). The decline in the unemployment rate over the month was entirely due to people moving from unemployment to employment. The labor force participation rate rose from 68.3% to 68.4%.

  • Gains were in Construction (up 4,100), Manufacturing (up 1,100), Professional & Business Services (up 2,500), and Educational & Health Services (up 3,200).
  • Losses were in Leisure & Hospitality (down 4,300 jobs), Government (down 900 jobs), and Retail Trade (down 800 jobs).

Nationally, the unemployment rate stayed the same at 3.6%, and the labor force participation rate ticked up a tenth of a point to 62.3%.

Now might be a good time to find a new job.

Factory worker

Just smell that basement

Sometimes when I am looking at houses that are for sale and I see a picture of the basement I can almost smell it. Damp basements are very common in old houses. With the recent rains, I can usually smell the damp basement as soon as I enter the house.

Some of the basements will have puddles of water, and others will appear dry but smell wet. Some will have dehumidifiers running. I have an old house with a new basement. I have one of those dehumidifiers that only runs when it is needed. It has been running most of the time for the last week.

Damp or wet basements are not necessarily a deal killer when buying an old house. It is important to understand where the water is coming from. In some parts of St. Paul are built in a boggy area that was drained. In those old houses, the water tends to seep up through the basement floor.

In other cases, water is leaking in through. basement walls. Maybe the grading around the house needs improvement or the house needs gutters with extensions that will keep water away from the foundation. Sometimes there is water damage in a basement because of a plumbing leak at some point.

Drain tiled basements with sump pumps are common in some neighborhoods and very rare in others.

Homebuyers should get a complete home inspection and find out as much as they can about that wet basement.

I’ll never tell a home buyer that mold is harmless but most of it is. I send them to the Minnesota Health Department website where they can learn all about mold.  Once the moisture source is removed mold can usually be cleaned up with a solution of bleach and water. I have used soap and water but I am kind of a rebel.

The seller’s disclosure and the truth in housing report may have additional information on them about water in the basement.

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Basement

Sale prices higher than asking prices

One of the most common questions home buyers ask is how much should they offer when they find a house they want to buy.  Sometimes they ask if on average

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spare change

local home sellers are getting more or less than the asking price.

Right now on average home sellers are getting about 4% more than the asking price of their St. Paul home. However, I strongly advise against using averages. If a house is already overpriced it doesn’t make sense to offer that much more than the asking price.

So far home buyers are willing to pay over the asking price and over the value of the house. Some are putting in extra cash when the appraisal is low and the loan amount isn’t enough to cover the price.

However, knowing that on average home sellers in St. Paul are getting more than the asking price does give buyer’s a feel for the housing marketing.

Highest mortgage interest rates in a decade

Mortgage rates went up to levels that we haven’t seen since 2009. It should be noted that 2009 was during a recession and housing market crash. Housing prices have more than doubled since then here in the Twin Cities and in other parts of the country. In the early 2000’s rates were at 6 and 7% but houses did not cost as much as they do today.

It is likely that the higher rates will cause homeowners to reconsider selling. It is too soon to tell if it will dampen buyer enthusiasm. Homebuyers are making offers and competing with one another to make the highest offer so that they can buy a house. . . at least as of this week.

 

Mortgage rate chart
Mortgage interest rates hit 5.11%

 

Appointment Whack-a-mole

Sometimes home buyers want to see several houses. Making the appointments can be challenging for Realtors. There isn’t any point in making appointments several days ahead of time because more often than not the sellers will accept an offer before the showing and cancel that appointment.

The best way to do it is to make appointments one or two days ahead of time. A few of those appointments will be canceled. Sometimes it helps to make twice as many appointments and cancel them as houses sell. Sometimes houses come on the market to fill the appointment holes.

Most homebuyers do not understand how fierce the competition is among homebuyers. Once they lose out on a few houses or have some offers rejected they start to get it and learn to be a bit more strategic.

I have worked in real estate for 20 years and this spring has been the hardest for homebuyers in the metro area. That isn’t to say that the last few years have been easy, they have not. The housing market is very stressful for people who are looking for housing and for the real estate agents who are trying to help them.

Higher interest rates are not enough to discourage home buyers and even if they do get discouraged there are plenty of cash buyers who are ready to take advantage of the situation.

Mallet