What happens to that earnest money?

coinsI get asked questions about earnest money all the time. Recently I encountered a situation where the home buyer was worried that the earnest money would be stolen. Your earnest money is safe.

Earnest money is a deposit made by the buyer. It is held in a real estate broker’s trust account until the sale closes. The purchase agreement spells out who will get to keep the earnest money if the buyer fails to close.

A home can be purchased without earnest money if both parties agree.

Earnest money does not go to the seller. The most common practice is earnest money held by the seller’s broker. The money is usually electronically sent directly to that trust account and there are all kinds of rules and laws governing trust accounts.

Ultimately the money goes toward the purchase price. It will show up on the settlement statement as a credit.

The amount of earnest money depends upon the price of the house.  A larger earnest money deposit can make a buyer’s offer look better to a seller. It shows that the buyer is committed to the purchase.

What is walkable?

IcecreamI walk a lot but I have found that there is no single definition for walkable. Some of my destinations are considered further away than what is considered walkable.

There are a few things that make walking easier. Sidewalks and crosswalks. I can’t see myself living in any kind of urban or suburban setting that doesn’t have sidewalks. I can’t even imagine having to drive for miles to buy eggs or bread. It seems expensive and time-consuming.

Walking is a great way to get exercise and I am told it is good for the brain. Walking instead of driving can also lead to cleaner air. Cars are expensive which is another reason why I enjoy walking.

Walkability is something to consider before buying a house. Can errands be done on foot? Is there a grocery nearby? What about restaurants, drug stores, and ice cream? Are there bike paths and is there mass transit nearby?

Finding a house Vs. Buying a house

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

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.

Buying a house and making repairs

brick turretMost of the houses I sell are old because St. Paul has mostly old houses and that is mainly where I work. My own house is over 165 years old. I have sold new houses and new construction too.

One mistake old house buyers commonly make is to try and fix and or upgrade everything right away. That isn’t a good idea. A home buyer can end up spending too much money.

The best approach, and this advice is from a Realtor® and an old house owner is to come up with a plan. Prioritize repairs and upgrades and create a budget. Start with a big list and break it down into a 3 or 5 year plan.

Also have an emergency fund. Things wear out in any house. It helps to have funds available to replace major appliances.

It is important to keep in mind that everything doesn’t have to be fixed right away.

Owning an old house, or a historic house like mine isn’t for everyone but all houses require maintenance and periodic repairs. Most everything in a house can be upgraded.

Baby boomers own a lot of real estate, when will they sell.

The boomer housing sell off is going to be gradual but will drop 9.2 million homes in the next 10 years . . according to Freddie Mac.

  • Declining boomer ownership will free up 9.2 million homes by 2035, a Freddie Mac report found.
  • The 32 million homes owned by boomers will drop to 23 million by 2035, when the oldest members of the group are pushing 90.
  • Homeownership rates “gradually starting to decline as households age beyond age 75,” the report said.

“The offloading of homes will accelerate in the 2030s as boomers reach the ages of 70 to 80, Freddie Mac said, based on an analysis using American Consumer Survey data. The 32 million homes owned by the generation as of 2022 will drop to 23 million in 2035, when the oldest boomers will be close to 90 years old.” [Business Insider]

. . . but don’t start making plans or knitting little things because this model is based upon the trends of former generations and so far the baby boom generation has been unpredictable and doesn’t always follow their elders.

House
House