The risk of loss clause

I ran into a Realtor who did not understand the “Risk of loss” clause in the standard purchase agreement. If the property is damaged after the final acceptance date on the contract but before the closing, the buyer has the option of canceling the contract.  The buyer must do so in writing and the buyer and seller must sign a cancellation and earnest monies are refunded to the buyer.

Damage can occur after a severe storm or maybe an accident. Some home repairs fail eventually, siding, roofs, furnaces, and water heaters wear out or malfunction.

There isn’t anything in the contract that would require the owner to make repairs either. Homebuyers should do a final walkthrough of the

fire fighters
firefighters

home before the closing. If something in the home has been damaged or is broken it should be addressed before closing.

Closing dates can be changed as needed with an agreement from both parties.

The risk of loss clause doesn’t specify the amount of damage that has to have happened to the property. If a home burns to the ground after an offer has been accepted but before the closing, the buyer does not have to proceed with the purchase.

If the roof develops a leak before the closing there are all kinds of remedies. One remedy is to put money in escrow for repairs. The seller can get a bid and have that amount of money withheld from the proceeds of the sale. The money can be held by the title company.

There is a myth out there that money held in escrow must be 1.5 times the amount needed to make the repairs. That is only true in some cases where the buyer’s lender asks that money be put in escrow to pay for repairs.

When choosing a real estate agent it is a good idea to find someone who has some experience. The unexpected can happen at any point in a real estate transaction. A good real estate agent can find solutions to any problem that arises. Having experience really helps. There are times though when the buyer or seller should consult an attorney.

Winter is the time to test for radon

January is national radon awareness month and the winter months are the perfect time to test for radon. You can do the test yourself, and right now radon test kits are discounted.

Homebuyers should always have a radon test as part of the home inspection.  It doesn’t matter if the next-door neighbors have tested and do not have radon or if no one knows of anyone in the neighborhood who has ever had a positive radon test.

When buying or selling a house the radon test should be conducted by a professional. 

Most homeowners have never tested for radon even though it is estimated that nearly half of all Minnesota an estimated 40% of homes have elevated levels of radon.

I’ll never forget the time the real estate agent told the buyers that she had never heard of radon in the neighborhood. It just doesn’t work that way.

Radon gas can be anywhere and everywhere. Radon is a colorless and odorless gas that comes from the soil. When inhaled these fine particles can damage the lungs. Exposure to radon over a long period of time can lead to lung cancer.

The average radon level in Minnesota is more than three times higher than the U.S. radon level. This is due to our geology and how our homes are operated. Minnesota homes are closed up or heated most of the year, which can result in higher levels of radon. In Minnesota, more than two in five homes have radon levels that pose a significant health risk.

Learn more from the Minnesota Department of Health

Info graphic national radon hotline 1-800-sos-radon

More houses to come on the market soon

During the holiday’s homeowners sometimes have their houses put in a “temporarily not available to show” status so that they remain for sale

old brick building and new apartment building
Panama Flats and Irvine Exchange apartments

but no showings are allowed. That way they can enjoy the holidays without having to worry about people wanting to tour their home.

When homes for sale are put in the TNAS status they kind of disappear from web sites and apps that show homes for sale.

Starting as early as today those houses will start going active again. If you are serious about buying a house now is the time to watch the market while others are headed for the gym or emersed in finding recipes for their keto diet or busy riding their stationary bike.

There will also be some homes that will come on the market for the first time in January, which is a good thing because right now there are fewer than 400 homes for sale in St. Paul.

Sellers should be aware that for the last several years the spring housing market is well underway by the end of January.

Home ownership rebounding

Homeownership rates took a nosedive during the great recession and have been slowly rebounding ever since. In St. Paul about 49% of households own and 51% rent. Homeownership peaked just before the housing market crash.

Minnesota homeownership rates are the highest in the suburbs and poverty rates are lower.

Numbers from the National Association of Realtors

What is a escalation clause?

Multiple offers on homes for sale used to just happen in the spring but now they happen all year. The way multiple offers

old brick building and new apartment building
Panama Flats and Irvine Exchange apartments

usually work is that the buyer is told that there are other offers and asked if they would like to change their offer.

At that point, the buyers do not know what is in other offers and their offer may already be the highest or maybe not.

There is one tool they can use that they don’t end up paying more than they have to and that is an escalation clause and it goes something like this:

Buyers offer X dollars more than the highest offer up to X amount. 

It is a way that buyers can bid against other buyers without offering any more than they have to to win.

If you are buying a house and working with a real estate agent you might want to ask them about escalation clauses.

Please leave some lights on

House for sale

I went to show some clients a house at 6:30 one evening last week. There wasn’t a for sale sign on the property which isn’t terribly unusual. None of the street lights in the area were on if there were any.

The house was pitch black but I could kind of make out the shape of a house. I used my trusty flashlight to verify the address and waited for my clients.

When they came I used my flashlight to light the way to the door. One of my clients held the light while I worked the combination. As soon as I got into the house I started turning on lights. Some rooms did not have over headlights. I would have gone out to my car to get more flashlights but my clients didn’t seem to like the house at all.

After the showing, and while I was locking up the house one of my clients stepped into a hole in the front lawn and twisted an ankle. There is no sidewalk or walkway in front of the house.

With the short days, it is hard for people who have full-time jobs to look at homes for sale during daylight hours. It is a good idea to leave a light on if your home is for sale.

Homeowners can put light on timers. Go one step further and use a timer that can be controlled via wifi, turn it on before showings and off when they are over for the day.