Homes MSP Real Estate Blog: Buying a Home

Buying a Home

February 12, 2012

Old Highland Neighborhood... historic architecture, strong community, affordable prices

Old Highland Neighborhood is a Minneapolis community minutes from downtown Minneapolis and the North Loop neighborhood. Part of the Near North neighborhood, this is a strong community that many people don't even know exists... a community where many share the common goal of restoring and preserving their architectural heritage.

Platted in the 1860's, much of the development of the area occured in the late 1800's and early 1900's. It became known as Highland because it was located on the first high land as you come out of downtown Minneapolis. Although many historic buildings have been lost, many have also been preserved, with many thanks to Old Highland home preservationists. (click to see short video)

When I visited a home built in 1910 in this neighborhood last week I couldn't get out of my mind what a wonderful opportunity this is for someone who wants to renovate a historic home and live in a strong community of people sharing that same vision.

Although not one of the beautiful Victorians, this 1910 home is typical of the neighborhood... longtime owners who raised their family and lived there over 50 years. It was amazing to me to find strong structural integrity but minimal updating throughout its century of life... striking woodwork, original light fixtures, leaded and stained glass windows, original doorknobs... kitchen nearly unchanged with original cabinets and icebox with exterior access for ice delivery!

Although the electrical panel was updated, the only electricity in the four bedrooms was from the original wall sconces... gas at one time and updated with electricity, the only electrical supply in the whole bedroom!

If you are looking to find a historic home to restore at an affordable price, don't overlook the Old Highland Neighborhood in north Minneapolis... a strong, vibrant neighborhood that calls itself 'a small town in the big city'.

It is a stable community with many long-time residents so homes aren't always available for sale but there can be great finds when they are. The house referenced above will be available for sale soon... let me know if you would like a private tour!

Sharlene Hensrud, RE/MAX Results - Email - Minneapolis Realtor

North Loop... one of the most unique neighborhoods in the city

Posted by Sharlene Hensrud in Art & Architecture, Buying a Home, Homes for Sale, Sunday's Site | Permalink | Comments (0) | TrackBack (0)

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February 10, 2012

What happens at the inspection? Should the buyer be there?

Ok... you have negotiated the deal to buy your new home and signed the purchase agreement contingent upon inspection. So what happens next?

Your purchase agreement dictates how much time you have to complete and respond to the inspection, so be sure to get it scheduled right away... you might even want to schedule it before signing off on the purchase agreement to be sure the timing works. If you plan to have a radon test, be sure to allow a couple days for that as well. The most common time frame for completing and responding to the inspection in a traditional sale is 5-7 days, but it can sometimes be shorter or longer depending on circumstances. Foreclosures usually give a total of 10 days.

The purchase agreement states that Buyer shall satisfy Buyer as to the qualifications of the Inspector(s) so you can have anyone you feel comfortable with perform the inspection, even 'Uncle Charlie'. However, since buying a home is one of the biggest investments most people make, most buyers hire a professional home inspector.

When scheduling, allow about 2-3 hours for the inspection... but it can be shorter for a small property in great condition, or longer for a larger property or more issues.

The inspection usually starts with the exterior of the property, checking everything from the roof, windows, siding and landscaping (is water directed away from the foundation?) to the garage and even fencing if there is any. Then you will move inside, usually starting with the basement to check structure, furnace, electrical, moisture issues, etc... then moving up all the way through the house to the attic. Think of your home inspection like a thorough house exam.

Should you plan to be there for the inspection? Yes!!! Perhaps the biggest value in the home inspection, especially if you are a first-time homeowner, is learning about your new home and planning ahead for maintenance and future repairs... so you know what to look for and do to keep your home in good condition.

You will learn about routine maintenance issues, but what you will usually ask the seller to address as a result of the inspection are items that are deferred maintenance affecting the integrity, safety and use and enjoyment of the home... sometimes issues the sellers themselves may not be aware of.

You may even find issues of big enough concern to you to cancel the purchase agreement and have your earnest money refunded... how the inspection contingency protects you and your investment.

Sharlene Hensrud, RE/MAX Results - Email - Minneapolis Buyer's Agent

Posted by Sharlene Hensrud in Buying a Home, Inspections | Permalink | Comments (0) | TrackBack (0)

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January 30, 2012

First Look Initiative gives homebuyers advantage over investors

If you are considering buying a foreclosed home you should be aware of the First Look Initiative on Fannie Mae, Freddie Mac and HUD foreclosed homes.

This plan was initiated in the fall of 2010 because buyers who planned to live in the homes they were purchasing were having a hard time competing with cash investors who were snatching them up before most people even knew they were available for sale.

The First Look program supports homebuyers who plan to occupy the home and help stabilize the community by eliminating competition from investors.

In most cases the first 15 days a foreclosed Fannie, Freddie or HUD property is on the market sales are restricted to owner occupant homebuyers or nonprofit Neighborhood Stabilization programs (NSP). If you purchase a home during the restricted time period you will be required to sign an affadavit confirming you will occupy the home as your primary residence within 60 days and will live there for at least one year. If you don't, you may be subject to a $10,000 fine.

No one who signs the purchase agreement during the restricted time period can own another property. That means if you have a co-signer who owns another property you won't qualify even if you are the primary buyer and you plan to live there.

While investors play an important role in the foreclosure market, owner occupants better help stabilize communities. It is the goal of the First Look Initiative to promote owner occupancy and homeowner involvement in their community.

Sharlene Hensrud, RE/MAX Results - Email - HomesMSP.com

Posted by Sharlene Hensrud in Buying a Home, Foreclosures-Short Sales | Permalink | Comments (0) | TrackBack (0)

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January 23, 2012

Why are townhouse and condo association fees sometimes so high?

If you are considering buying a townhome or condominium don't forget to consider the cost of HOA (homeowner association) fees as well as the purchase price when calculating your monthly payments. When qualifying for a mortgage, HOA dues are added to monthly loan and tax payments to get your qualifying monthly payment. Including those fees means you will qualify for a lower priced townhouse or condo than a house.

Association fees vary, but are usually highest for condos and typically the higher the association fees the more coverage. For instance in townhomes your assocation fees usually include trash removal, snow/lawn care, exterior maintenance, hazard insurance, sometimes water/sewer... and in a condo your fees could also include heat, sometimes even air conditioning and cable.

It is important to keep in mind, however, that you will be personally responsible for items covered by association dues when you own a house... those costs just aren't factored into your qualifying expenses. In a house you are responsible for everything associated with the house so if the siding needs to be replaced you must pay for it yourself... in most associations it would be covered by the HOA. In a CIC (Common Interest Community) the monthly fees you pay go towards services provided by the association as well as capital improvements/maintenance so you aren't as likely to have as many surprises.

When association fees are higher or lower than that of comparable complexes first check to see what is covered... are fees covering more or fewer services than in other complexes? Also check to see if the association has adequate reserves for repair/replacement costs... are they making up for inadequate reserves in the past? for special assessments because of needed repairs with inadequate reserve funds?

Coops may have fees that are higher still... often because they may also include a common mortgage for the whole property. In a coop you own a share in a corporation that owns real estate rather than owning the real estate itself.

Sharlene Hensrud, RE/MAX Results - Email - Minneapolis Condo Realtor

Posted by Sharlene Hensrud in Buying a Home, Condos-Townhouses, Townhomes/Condos | Permalink | Comments (1) | TrackBack (0)

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January 20, 2012

Listings Needed!!!

The number of new listings entering the market last year was the lowest it has been since the turn of the century... down from a peak of 108,033 in 2006 to only 68,875 in 2011.

That low number of sellers entering the marketplace coupled with buyers snatching them up resulted in a supply of homes for sale that dropped off my chart... only 16,191 active listings at the end of 2011.

If you look at the laws of supply and demand, indications are this could be a good year for sellers. The months supply of inventory in December was down to 4.2 months... indicating a seller's market for the first time since 2005!

Unemployment has been holding buyers back, but the unemployment rate has now reached its lowest level in three years. The decline since August was the biggest decline over any 4-month period dating back to 1976! That, combined with continued record-low mortgage rates and rising rental rates, has bolstered demand.

Traditional sellers have been holding back during the last few turbulent years, resulting in a high percentage of short sales and foreclosures...

...which in turn have contributed to declining prices encouraging traditional sellers to stay out of the market.

Overall median sale price last year was $150,000, but when you break it out by traditional, short sales and foreclosures you see that median price for traditional sales was almost double that for foreclosures.

This could be the year of the move up buyer... selling to first-time homebuyers eager to buy to escape rising rents... then buying up with not only price savings but also with the increased buying power of low interest rates.

Thinking about selling? It's time to start getting your home ready, listings are needed... !!!

Sharlene Hensrud, RE/MAX Results - Minneapolis - St. Paul Seller's Agent

Posted by Sharlene Hensrud in Buying a Home, Market, Selling a Home | Permalink | Comments (1) | TrackBack (0)

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January 16, 2012

Price-to-rent ratio tips towards buying rather than renting

As Twin Cities rents go up in in response to high demand and the lowest vacancy rates in 10 years some renters are starting to wonder if it finally makes more sense to buy.

While there are many factors involved in such a decision, if it boils down to whether buying makes financial sense given current market conditions a good gauge is the price-to-rent ratio.

The price-to-rent ratio is the cost of the median home divided by a year's median rent. Median price of a home in the 13-county Minneapolis-St. Paul area was $150,000 at the end of 2011. Median rent was $1,100/month or $13,200 annually. Dividing $150,000 by $13,200 gives a ratio of 11.36.

So what does that mean? The classic rule of thumb is that when the ratio is over 20 you should rent... 15-20 you could go either way... under 15 it makes more sense to buy. At the peak of the bubble the ratio was 21.69... long-term average from 1989 to 2003 was 13.48.

At 11.36 the price-to-rent ratio is below both the peak and the long-term average, which seems to tip the scale towards buying vs renting.

Sharlene Hensrud, RE/MAX Results - Minneapolis - St. Paul Buyer's Agent

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January 09, 2012

Why do some homes for sale say they won't accept FHA financing?

If you are using FHA financing it's important to understand why some properties may raise red flags and not be approved for FHA financing even if the listing says they will accept it... and why FHA financing could work for some properties even if they don't list it as an approved form of financing.

Appraisals are more strict with FHA financing because they are more cautious about the health and safety of the buyers, as well as protecting buyers from issues which may cause additional expense. If they find issues of concern at the appraisal they may issue work orders which must be completed prior to closing.

Here are just some of the things which may prevent a property from being approved for FHA financing...

A condominium complex which is not FHA approved (check with your lender before making an offer, even if the listing says they will accept FHA financing)
Leaking or worn out roof (should have at least 2 years of remaining life)
Signs of water damage, mold or structural problems
Broken windows
Peeling and chipping paint
A furnace at or near the end of its life

Sometimes the seller is willing to make the required repairs and sometimes not. If not, you may be able to finance with an FHA 203k rehab loan. Check with your lender so you know your options before writing an offer on a property that may be questionable.

Sharlene Hensrud, RE/MAX Results - Email - HomesMSP.com

Posted by Sharlene Hensrud in Buying a Home, Financing | Permalink | Comments (2) | TrackBack (0)

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January 02, 2012

Can I make a verbal offer to buy a home?

Do you really have to write a full offer (now often more than 20 pages!) to make an offer to buy a home? Wouldn't it be much more efficient to just call and make a verbal offer, then do all the paperwork afterwards if you come to an agreement?

It certainly seems to make sense... and can sometimes work in unique circumstances. However, most sellers won't consider offers unless they are written.

Why? Mainly because there is no commitment on either side with a verbal offer.

The seller doesn't know if the buyer is serious about buying, or is even qualified to purchase
Even if buyer and seller come to an agreement, there is nothing in writing confirming the agreement and holding them to it
- Buyer or seller could change their minds
- Another written offer could come in that the seller accepts and the verbal buyer would be simply out of luck with nothing in writing showing they had even made an offer

With REO (Real Estate Owned) foreclosure sales, banks will not respond to verbal offers.... everything must be in writing for the seller to consider. However, just as is typical with traditional sellers, the selling bank will typically verbally negotiate a written offer, then follow up with completing the signed paperwork after coming to an agreement.

Sharlene Hensrud, RE/MAX Results - Email - HomesMSP.com

Steps in Buying a Home

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December 03, 2011

Remodeling ROI - Cost vs Value Report 2011-2012

Average remodeling costs dropped again for the third year in a row, although more slowly this year. Nationwide costs decreased 6.9% in 2009, 2.3% in 2010 and only 1.9% in 2011. Average project cost in the Minneapolis-St. Paul area for 2011 was $44,840.

However, overall return on investment dropped more due to continued volatility in housing prices. From a peak return of 86.7% in 20o5 it has fallen to a national average of 57.7%... and an even lower 49.5% in our Minneapolis-St. Paul region.

Repair and replacement projects took precedence over additions and remodeling, with siding and window replacements ranking in the top tier of return on investment. However, even the project with the highest return in the Twin Cities this year, upscale fiber cement siding replacement, still only recouped 66.7% of the cost at time of sale.

The attic bedroom project jumped up to the number 2 slot this year... with deck additions, two-story addition and minor kitchen remodel rounding out the top ten.

See this year's results below with average job cost and estimated % of cost recouped at time of sale (ROI), ranked by highest return on investment (ROI). Click here to see the complete report compiled annually by Remodeling magazine in cooperation with the National Association of Realtors, including national numbers and reports from past years going back to 2002.

MINNEAPOLIS-ST. PAUL Remodeling Cost vs Value 2011-2012

UPSCALE siding replacement (fiber-cement) - $13,503 - 66.7%
Attic bedroom - $50,006 - 59.9%
Deck addition (wood) - $9,774 - 59.41%
Siding replacement (vinyl) - $11,608 - 59.0%
UPSCALE siding replacement (foam-backed vinyl) - $14,042 - 58.9%
UPSCALE window replacement (vinyl) - $14,348 - 58.7%
Window replacement (vinyl) - $11,386 - 55.9%
Two-story addition - $172,913 - 55.7%
Minor kitchen remodel - $19,598 - 55.5%
Deck addition (composite) - $15,386 - 55.2%
Major kitchen remodel - $57,300 - 55.0%
Window replacement (wood) - $12,230 - 53.1%
Basement remodel - $63,228 - 52.6%
Garage door replacement - $1,520 - 52.6%
UPSCALE garage door replacement - $3,017 - 51.8%
Master suite addition - $106,234 - 50.8%
Family room addition - $82,931 - 50.5%
Entry door replacement - $1,242 - 49.9%
UPSCALE window replacement - $18,948 - 49.5%
Bathroom remodel - $16,470 - 49.1%
UPSCALE major kitchen remodel - $110,541 - 48.7%
Garage addition - $58,052 - 46.2%
UPSCALE deck addition (composite) - $37,410 - 46.2%
UPSCALE grand entrance - $7,516 - 45.6%
UPSCALE bathroom remodel - $52,200 - 44.4%
UPSCALE roof replacement - $37,181 - 43.3%
UPSCALE master suite addition - $226,652 - 43.0%
Roofing replacement - $20,894 - 42.8%
Entry door replacement - $3,547 - 42.1%
UPSCALE bathroom addition - $76,361 - 41.1%
UPSCALE garage addition - $86,291 - 41.1%
Bathroom addition - $40,064 - 39.0%
Sunroom addition - $74,119 - 38.9%
Back-up power generator - $14,933 - 36.5%
Home office remodel - $27,952 - 32.4%

Sharlene Hensrud, RE/MAX Results - Email - HomesMSP.com

Posted by Sharlene Hensrud in Buying a Home, Home Maintenance, Market, Renovations, Selling a Home | Permalink | Comments (0) | TrackBack (0)

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December 02, 2011

Tis the season for home buying deals

If you have been waiting for the best time of year for home buying deals wait no more... tis the season. There usually aren't as many homes available for sale, but there also usually aren't as many buyers... so if you can find a home you like you have a better chance of getting a better deal than at any other time of the year.

As you can see from the chart above, sales typically drop off during the holidays and the cold of winter... making home buyers a hot commodity at this time of year.

I have been contacted by more home buyers lately than usual at this time of year so it will be interesting to see if there is any change in the trend this year... smart buyers have figured out that home prices and mortgage rates have fallen so far that the monthly cost of owning a home is more affordable than at any point in the past 15 years!

Happy holidays... and happy ho-ho-home buying!

Sharlene Hensrud, RE/MAX Results - Minneapolis Buyer's Agent

Posted by Sharlene Hensrud in Buying a Home, Market | Permalink | Comments (0) | TrackBack (0)