Twin Cities Real Estate

I like Candy

It is Halloween and we should just give up the idea of a "healthy" trick and treating. When kids are young, about up to the age of four, you can try the stickers, raisins, or pencils.  They come at that age with their cute, plastic, pumpkins.  Once they hit school age ,they are "big kids" and come with the pillow cases ready to get a haul. 

 

There is a dentist in Richfield, Minnesota who is offering a $1.00/ pound up to 5 pounds for each pound of candy a child brings to his office on Monday.  A great idea ,but it is really hard to get that candy away from those monsters.  My kids used to sort their loot into piles according to their likes and dislikes.  The Smarty's were in the likes and the Almond Joys fell into the pile to give to dad.  After a day or two, I would find the pillow case in their closets forgotten, and they would get onto the next adventure in life.

 

We all need to be careful as we drive through our neighborhoods tonight.  Kids don't take much care as they run from house to house.  They are very excited and don't think as they dash across the street.  As adults we need to watch for them and caution them on some of the risks they take.  Porch lights should be put on ,so they see the steps and sidewalks.  Take care and it will be a safe holiday for all.

 

Don't forget the parents that will be strolling along.  Toss them the Heath Bar that the kids don't want.  I hope we can keep this holiday for the kids.  Adult parties should be kept in private homes.  How I dislike seeing this holiday become a time for people to get drunk in the bars and get behind the wheel of their vehicles.  I encourage all residents of our communities to keep the holiday within its intentions.  Have a Happy Halloween.

Why Listings Are Not Selling

Tuesday I showed 15 houses in Southwest Minneapolis.  I normally show about 8 houses at the most to a buyer at one time.  It gets so confusing and tiring to show more than that.  In this case my buyer had taken the day off work, so we needed to push it to the limit. We did push it to the limit.  In the end ,even with good note taking, they had a mixture of pictures in their mind of houses.

 

What they did come away with was the impression that most of the sellers were not motivated to sell.  Pets, smells, unkempt houses, poor yard work, lack of updating, over-pricing, and lack of information about the property when viewing were common aspects about the properties.  Of the 15 houses,three were kept in the running.  The others were dropped off the list for various reasons.  The buyers continued to ask the question, "Do these people really want to sell?"  They would make suggestions such as; replace outdated kitchen appliances, paint the front door, prune the trees, contain the dog, replace worn bed spreads, deciliter kitchens, and open the blinds.  None of their suggestions were that costly or hard for the seller to do.  The buyers did note that the longer the house had been on the market,60+ days, the more tired and unkempt the property looked.

 

My point is this.  If an untrained buyer can pick up on this, then why did a trained listing agent let the house continue to be on the market with these objections?  Buyers have too much product out there,and they will not settle for less.  It is important that as listing agents we stay in contact with our sellers and keep them informed on how the market is reacting to the property.  None of us can hit it dead on target when we list a house, but all agents have the ability to make adjustments as the listing continues. 

 

I am often asked why my listings are selling in this challenging market.  My answer is that I am very honest with my sellers and share the feedback with them of what the buyers are saying.  If three buyers say they do not like the color of the kitchen, then I guess it is time to change the color of the kitchen. I do not have fairy dust to sprinkle on a house, but I do have years in the business and the courage to tell a seller when things are not going right.  I want my properties to be on the save list of a buyers' list and not the dropped list.

Home Owners Misjudge Home Value

In my business perception does not always match up with reality.  A research company did a survey of home owners recently and 62% of the owners surveyed believed their home values have increased or held steady in the past year. In reality 73% of U.S. homes have lost value.The survey went on to show that 75% of these homeowners expect their property to increase or remain level in the next 6 months. 

 

This survey had my heart pause.  How could so many people not know that their house had declined in value?  Then I said to myself, "Silly me, think of all the owners you meet with who expect their house to be listed higher." It is a challenge as I meet with people to help them list their house and arrive at a realistic list price. The seller will look at their tax value and expect the property to be worth 10-15% more than that amount.  The tax evaluations are on yesterday's values and have not been adjusted to reflect the declining market.  I don't want to be the "bad person" here, but I do find it necessary to bring a reality check to the meeting.

 

Lower values do not mean home owners have lost money, if they purchased five years or greater.  On paper the value might not be there, but nothing fell out of their pockets.  Owners that bought high, refinanced, or have home equity loans on their properties are suffering.  Using our houses during appreciating periods as a money maker is fine.  What is dangerous is when we actually use that money and then the value drops.  We no longer have that money that we thought was there for us. 

 

Growth in value of our houses will return.  It will be slow in coming and the growth will return to about 3-5% a year.  That is normal for the Twin Cities.  Normal is good.  We found out the ugly truth about the roller coaster ride of "crazy appreciation."

Expires

Expired. What an interesting term we use in real estate to mean a listing has come to an end. The contract between the listing broker and seller is no longer in effect. They might choose to live in the house and give up the idea of selling. They might continue living in it and go on the market at a later date. The seller might re-list with the same Realtor and come on as a new listing, or the seller might elect to list with a different Realtor.

A house can expire for several reasons.

1) The listing was short and not enough time was given to sell the property in the existing market conditions.

2) The condition of the property was never corrected so that it met buyer expectations.

3) The price was not adjusted to meet market conditions.

A seller who really wants to sell can sell in this market, if they meet with a Realtor who knows their neighborhood and has experience in selling in this kind of market. A Realtor who has 15+ years of experience will know how to sell in a down market. An agent who has been selling for five years is at a disadvantage as they have known only fast markets.

Look for a Realtor who is honest with you and not trying to buy your listing. Right now agents do not need one more un-sellable house in their inventory. A listing agent who tells you the orange kitchen has to go is better than your former agent who told you it was "interesting." The agent, who tells you the freeway sounds like the waves of the ocean pounding on the beach, is a bigger problem than living next to the freeway. The Realtor who says," Let’s try it as the same price you had it listed at," is legally insane. He is doing the same thing over and over but expecting a different outcome.

I’m not that Realtor looking for "road kill" That is the seller who has been run over by the tough market and can’t be revived. I do welcome meeting with sellers who want a fresh approach to selling and who will work with me to get the sold sign up. No listing needs to expire, but they do because of lack of effort on the parts of many parties.

A Bye Week

 

This is a bye weekend for the Minnesota Vikings. They are not playing which means they can rest their tired bodies and get their heads together. In the world of sports, a bye is seen as a plus/minus. It is a plus if you have an injured team and need the time to mend. It is seen as a minus if you have momentum going and you want to keep it going.

I am calling this a bye weekend in real estate. I think we all need to sit back and relax and not think about anything related to housing. How much more can we have this market beaten up? We need to meditate, have a message, read a book, listen to public radio, zone out, or take a long nap. Then we can come back refreshed and positive.

Hope. There is hope out there. It might be hard to believe this afternoon as mixed snow and rain is falling The wind is blowing so hard that all the raking you have done is for naught as your neighbor’s leaves are now in your yard. It is there. We can believe like Annie that tomorrow will be better. You need to look at the issues like a large elephant you need to eat. You eat an elephant one bite at a time. We won’t resolve everything tomorrow, but tomorrow we will have the chance to take one bite.

Relax, take a deep breath and let go.

Interest Rates

Interest rates are jumpy.  They are tied to the T bill, so as the stock market jumps around so will interest rates on mortgages.  For the weekend I am being quoted by a major lender in the Twin Cities a rate of 6% on a conforming,30 year conventional mortgage and 6.5% on a FHA 30 year mortgage.  We could get distraught and say what terrible rates, or one could say those are still good rates.  The second answer is correct.  Rates are still low.

 

Consumers need to remember that 22 years ago we had double digit interest rates on mortgages Looking at a 40 year history of interest rates, these are good rates.

 

I am expecting these rates to slide up and down and go from 5.75% to 6.5% in the months to come.  You need to have a purchase agreement signed in order to apply for a mortgage and then lock-in your rate..It does no good to worry about rates and not be in the buying mode.  One has to stop testing the temperature of the water and jump in.

 

This is an excellent time to buy.  House prices continue to fall.  Donald Trump, who made his fortune in real estate, says buy low and sell high.  Guess what, this is the time to buy low!  I am not sure what people are so fearful of.  We all need a roof over our heads ,and it is better for you to profit from owning that roof than the landlord.  

Qualifying for a Mortgage

 

The world wants us all to believe that getting a mortgage right now is impossible.  That is not true.  The rules have changed, but there is money available.  Get this, if you don't have a job or if your credit score is below 680 you don't qualify!  To me that is logical.  That type of buyer is too great a risk.  If you have a credit score of 680+, a record of employment for 2 years, and 3% of the purchase price in liquid funds for a down payment, you are a buyer.  That kicker is the 3% down.  I might sound cruel, but I do believe someone making the largest financial investment of their lives should have some investment in the deal.  Who would want a business partner that is putting zero dollars into starting the business?  A mortgage is a business relationship with a lender.

 

It truly was too easy to purchase in the last 4 years.  Now we are seeing what happens when we get creative with financing.  It happened in the 70's when graduated mortgages were invented.  We suffer from memory loss, as we did not learn from that mess. 

 

As a Realtor, I help people purchase houses, but I also counsel them on finances.  I will only work with a lender who helps the buyers select a mortgage product that will get the deal done but also protects the buyer.  75% of those working today do not have 2 months of savings that they could live on if something happened to their job.  I encourage a buyer to have 6 months.  We used to call that "rainy day money."  Truly, the majority of us are living check to check.

 

Lending guide lines will often let one have 41% of their gross income be debt.  Forget about going to Taco Bell!  Don't just look at the amount your are qualified for, look at what that means in monthly payment, PITI+MIP.  Purchasing a property for $200,000 with 3% down with today's interest rates means about $1350 per month in PITI+MIP.  If one has been paying $900 per month for rent, that is a considerable change in their budget.The saving grace is the tax right offs.Once you get your return it will look more like $1050 a month. 

 

Meeting with me and one of my loan officers prior to even going through the first open house, will help a buyer stay on the right course to buying a house.  It is easy, fun, and a positive experience.

The Second Hand Consumer

There is a new creature out there called the second hand consumer.  This consumer has been created due to economic conditions in our country.  A year ago consumers demanded new and shinny, and now they are searching out deals.  Reports tell us more buyers are looking for used cars, appliances, clothes, books,CD"s, the list goes on.

 

It is great that we are looking for deals, and that we are compromising and not demanding such new items.  The negative side to this new consumer is that car dealers are going out of business, book stores are closing, appliance stores are hurting, and all this means people lose their jobs. I am not wise enough to know how we reverse this process.  I want people to buy within their means, but I don't want anyone losing their jobs.

 

In tough times we all change our spending habits.  I no longer color my hair.  I found the time and dollar amount I spent in the salon was a waste.  I am now natural.  People might not be getting expensive hair cuts and many are going 2-4 weeks longer than usual to get a cut.  Get ready to seeing men who need a hair cut.  We might see people leaving their snow mobile in the garage this winter not due to lack of snow but due to budget cuts.  That $10.00 per movie ticket might become a treat rather than a Friday night habit.  Gift giving might become a hand made item rather than a gift card.  It will all change. 

 

Ask someone aged 70 plus how they survived the depression and then World War II rationing.  Their suggestions might help us through this time.  We might want this change, but this change is what we need to right the sinking ship.  Good luck with changing your habits. Don't hesitate to email me your suggestions, jane@thepaulusteam.com. I will share them with readers.

Unwinding the Financial Problems

Finger pointing is something we learned when we were children.  "He did it," is one of the first phrases we learned as small children.  None of us want to take the blame for anything.  The financial crisis that we are in is not a simple finger pointing exercise.  It happened under everyone's watch.  It is not just a political issue, a banking issue, or Wall Street, It is also the common person's issue..

 

It took time to wind up the present woes we are in, and it will take time to unwind it.  I love the way we spend time and money investigating who got us where. Yes,we might learn from these mistakes. We might find someone to punish. I think most of all it is therapy to get rid of guilt.

 

Mike Larson who writes for Money and Market magazine helps us walk through this mess.  He first states that Greenspan during his tenure was too generous with lowering interest rates.  It did help stimulate the economy, but at the same time it gave artificial growth to business and allowed people to buy houses too easily.

 

Banks loved making money during this time.  There were smart people working in those banks knowing the bubble would burst and the result would not be good.  Those bankers were charged with making money and not looking out for the welfare of the people.

 

Wall Street is all about profits.  They push corporations to increase their profits.  Wall Street is based on Bear and Bull markets ,and they ride the cycles.Again, they are not concerned about the common person. We now call that common person, Main Street.

 

Republicans don't want government regulations.  Without some control, the greed comes out in people.  The Democrats want the American dream to be realized by all and in helping so many reach that dream, a nightmare is created.  Common and reasonable ground needs to be reached by both political parties. 

 

Lastly,the people of the streets need to take the blame for going into the "candy store" and eating their fill of sweets and now are suffering a stomach ache.  Did many of us know it was too good to be true?  Yes.  Did we push away from the banker's desk and say,"I know that mortgage is not right and in the end I will be in foreclosure.Thanks, but no thanks."  No. Main Street dreamed too big, and they are now feeling the pain of those dreams.

 

Mike Larson feels giving stimulus packages to citizens will be short lived.  It had a small effect last time it was used.  Will giving money to financial institutions and Wall Street help?  It can easily be mismanaged.  He says the clock has been wound too tight and the only way to fix it is to let it unwind by itself.  That is not the answer we want to hear, but it sounds the most logical.  Patience,we need a large dose of that.

Encroachments

Encroachment sounds like a nasty word, and it can be.  An encroachment is when one property owner has something from his property sitting on land that is not part of his legal property.  It can be as simple as a play set, a bit more complicated as a fence, worse yet a retaining wall, and the hardest is part of the garage or house.

 

How does an encroachment happen?  In Minnesota survey's are not necessary at the time of transferring title.  When you get new financing, the appraiser will drive to the property and do a plat drawing.  The plat drawing simply says here are the supposed lot lines and here are the buildings.  The new lender is happy with that.  The new buyer is then happy.  This goes on and no one realizes that some time back in history the encroachment occurred.  It will come to the surface when one of the owners needs a survey for a specific reason.

 

This Saturday I showed a house in Eden Prairie and the seller on the his disclosure stated that there was an encroachment.  His house was the first home built in 1986 on this cul-de-sac.  His builder put the house 5 feet too close to the front yard set-back and 5 feet closer to the side yard set-back than it should have been.  When his neighbor's house was built in 1990 that surverior found the errors.  The city of Eden Prairie gave a variance and the front yard issue has been put to rest.  The side yard issue remains. The situation gets a little dicer as the owner of the property I showed has constructed a retaining wall and put in gardens.  All three owners of the house next door have said it is okay as long as he maintains it and keeps it looking nice.

 

He tells the potential buyer it is no problem.  I see it as a problem.  What if that neighbor changes his mind and demands the wall be removed? What if he moves and the new resident demands that it is moved?  The present owner says fine, pay $10,000 more for my house and I will have it relandscaped before closing. Get this, his house is over-priced by $45,000 so this is almost comical. Stay tuned to see how this is resolved.

 

An owner that knows he has an encroachment should remedy that situation before he lists his property.  Few new owners would want to take on the encroachment.  We live in a society today where we just are not that friendly with our neighbors.