Category: Home Buying

I had other plans for this week’s post…
Home Buying · home selling · Uncategorized

I had other plans for this week’s post…

Mary1 Comment

Next week I’ll give you another neighborhood profile – I’m excited about my small town series, and I have one I love and plan to talk about, but this week I’m going to beat a dead horse a bit and talk some more about what is happening in the real estate market in the Twin Cities metro area. I don’t usually do “market update” posts or videos on my YouTube channel, but the fact of the matter is that right now I’m actively helping 6 buyers try to navigate this market and I want to share a bit of how we look at the market and measure it and then also show you what that means for the Twin Cities right now.

I swear … it was this big!

I feel like anecdotal evidence about how many offers a listing gets, how fast something sells or how far over list price the offers are is shocking at times or maybe sounds like a fish tale that we like to tell – “the big one that got away” kind of thing. Stories are great and interesting, but in this post I want to talk about DATA. Weee! Exciting!

Not exciting? Well, I disagree. I think this tells a very clear story and because it looks at the entire market and then breaks it down by price it might tell the story in a way that makes sense in a different way to more people. This is the WHY behind the HOW that I’ve talked about before when I’ve done videos/posts about making the best offer.

How DATA tells you if it is a buyer or a seller’s market: Meet the “Absorption Rate”

These are my words, not something from a real estate dictionary somewhere.

When we look at a market and try to decide who it favors we look at the number of active listings available in a 30 day period and then look at the sales. It’s a ratio. But the way that I think is easiest to visualize this ratio is as the “absorption rate”. This rate shows us how long it would take for ALL houses actively listed to be sold if NO OTHER homes were put on the market during that time.

We are measuring time in months for this exercise, and the magic number of months where REALTORS feel that the market is in balance is 5 (not set in stone, some argue for 6 months etc). This means that when it would take 5 months for every home to be sold should no other homes be listed, the market does not favor either a buyer OR a seller.

Any number smaller than 5 indicates a sellers market. The smaller the number the more it favors sellers. This works in the converse as well, the LARGER the number over 5 the more the market favors buyers.

What is the Twin Cities absorption rate today?

Emphasis on TODAY because this rate changes seasonally and with market forces – I’ll talk a bit about what those are too.

The current absorption rate for the Twin Cities metro is 0.86. LESS than one month’s supply of homes. Very much in the favor of the seller. And it is not getting better – in the past 6 weeks the rate has consistently decreased from 1.32 the first week of January to where we are today.

The last half of 2020 was a crazy market, due to Covid hitting in spring and the uncertainty that brought with it there was a lull in what would typically be the busy spring market, but once everyone got their bearings it was off to the races and it never really slowed, even during the holidays. Add extremely low interest rates into the mix (under 3% for a pretty extended stretch), and a bubble of Gen Y aging into home ownership and bumping up what was already high demand from buyers, and things have just not cooled at all. All of this to say we sold a LOT of homes last year and possibly ate into what would have been inventory for this year. January 2021 started with 38% FEWER listings than we had in January 2020.

Supply continues to drop, particularly in the under $300K price range where new listings are down 15% YTD. The over all market YTD has 6.9% fewer listings. If you’ve taken any economics classes at all you’ll know that price is a function of supply and demand. We have low supply and high demand and that is pushing prices higher as people bid against each other for homes.

Absorption rate by price point

The best way to show this is to give you a screen shot of the table that we looked at in our data meeting this week. I love this table because it breaks it out by general price points and you can see the trend over the past 9-10 months for each. You’ll notice that higher price points have slightly looser markets because there are fewer buyers that can manage those budgets. I do think that the $500-$1M may need to be broken up a bit because at $500K there is still a quite a large bubble of buyers that are able to enter the market and compete for homes at that price. There may be a break closer to the mid $600’s where the ratio gets closer to 1.4, but I think $500 is still quite competitive.

credit to Tim Sipprell who pulled this together for our office
baby data geek

So, that is the data geek light version of the market at this point in time in the Twin Cities. An opportunity again for me to encourage you to be as prepared as you possibly can be before you enter the fray. You really need to be in the best position possible if you want to land at the top of the heap when you get into this market.

Let me know if you have questions… 🙂

Getting a win in a seller’s market…
Home Buying · Living in Minneapolis · Uncategorized

Getting a win in a seller’s market…

MaryLeave a comment

oh my gosh… being a buyer right now is like being thrown into the Gladiator pit. It. Is TOUGH. During our team meeting the other day agents that have been at this for many many years are saying that this is the roughest market for buyers that they have EVER seen.

I thought it was crazy last summer. And then I think everyone kind of held their breath and hoped that one “positive” of having a pandemic may be a bit more balance in the housing market. It has not happened.

So, if you want to buy a home in the Twin Cities metro, there are things you need to know and understand up front before you innocently walk into the pit thinking you can take your time, or not be prepared, or ask for seller concessions. Just for fun I’m going to post some screen shots of a discussion we recently had on our office facebook group – a bunch of agents discussing what it’s like representing buyers right now. Hold onto your hats! Horror stories coming!

So what is a buyer to do? Well, I am going to tell you!

  1. FINANCES. The most important thing you can do is to be pre-approved for a loan. Know what you can afford and have proof in the form of a letter that you can attach to a purchase agreement. In addition to this, know that a conventional loan with a decent downpayment or a cash offer are far more attractive to sellers than an FHA loan or another that puts requirements on the seller and indicates that credit may not be as clean as it could be.
  2. SPEED. Do not use one of the big search engines to find a home. Zillow and others are notoriously inaccurate and will not have updated info available in a timely manner. Your agent will set up a search that reflects exactly what YOU want and can set it to send the listings to you immediately. Speed is very important! If you can be the first one to see a listing (or have your agent see it and do a virtual showing as I often do) and put in your offer you are far better off than coming in to a multiple offer situation.
  3. CLEAN. Have as few contingencies as possible. What is a contingency? Well, it’s any barrier to closing the deal. If you have another home to sell, have to get approved for financing, want the home to pass an inspection, etc. Your best bet is to have your financing ready, be able to perform on the purchase of the home without needing to sell, and make your inspection contingency as light as possible. If there are contingencies related to selling a home, you MUST have a contract on that home already and a close date to add to the contract.
  4. CLOSING COSTS. the best approach is to plan to pay them and not ask for seller contribution OR ask for very little, possibly with the sale price elevated to account for it, essentially rolling them into the mortgage. The big catch here is that you’ll pay interest on them over time and the house needs to appraise for the amount you offer if you’re getting a loan.
  5. SKIN IN THE GAME. Earnest money. Here in MN we typically do 1% of the sale price as earnest money. Earnest money is your good faith deposit on a home. If you increase the size of this deposit it shows that you are more serious about the property, and some are even stipulating that all or part will be non-refundable to the buyer for a home that is particularly desirable and in multiple offers. It shows a seriousness about the offer and is a tempting carrot for the seller to know they will get at least X$.
  6. INSPECTION. Make your inspection period shorter if possible. Typical has been 10 days and I really work to still get that for my clients because I work with a lot of relocation clients and traveling to MN or arranging for inspection remedy long distance can be a challenge. That said, sellers want to have a good idea if a deal will go through or if they should take the next offer as quickly as possible so that they do not have wasted days on market without the potential to sell to someone else.
  7. INSPECTION PART II. Request only health and safety remedies. If things are functioning but not brand new, that is acceptable. No house is perfect. EVERY house has flaws, even brand spanking new ones. One of the best favors you can do for yourself is to get the inspection as early in the inspection period as possible. This is important for a couple of reasons: 1.) if the house doesn’t come near to passing inspection in your opinion, you can exit the transaction and be on to the next one as soon as possible and 2.) if you request remedies, there is time to work with the seller on it and not be forced into a corner. What I mean is that if you get an inspection on the last day of the period and require remedies (fixes), if the seller doesn’t respond to that request by the end of the period your options are to a.) accept the original agreement as written (no fixes) OR b.) cancel the agreement entirely. In this market that favors sellers 100% because they likely have another offer waiting and are fine with a cancellation.
  8. MOVE IN DATE. From a risk perspective, you always want to take possession of the home at closing. However, your best option for getting to that point is knowing what the preferred closing date is for the seller if you have any wiggle room at all. Many of them are being cast into the same pit to find a home and may need some extra time to do so, knowing their preferences up front may sweeten the deal for them because having that uncertainty may be worth more than money.
  9. *LETTER. This one can be a tipping point or make no difference whatsoever. If you write a letter to the seller telling them why you love their home and neighborhood and how you look forward to caring for it and enjoying it in the way that they have. Avoid mentioning anything to do with protected groups and focus on what you love about the house and area and what made you pick that home. Most people have some emotional attachment to their home and want to feel that they are passing it on to someone who will care for it.
mschumann@kw.com
612-234-5703

Is your kid headed to the U?
Home Buying · Living in Minneapolis · Neighborhood Tours

Is your kid headed to the U?

MaryLeave a comment

In the past couple of months I’ve had multiple people contact me as they explore housing options for their kids as they head off to college – either as an undergraduate coming from overseas to attend college in the US, or somewhat more locally, students from other parts of the US to pursue a graduate degree here in MN.

One parent in particular said that he had focused on tuition costs while saving for college and didn’t really give much thought to the fact that housing alone would be another $1000-$2000 / mo. Ouch. And that is to share a dorm room with between one and 3 other people.

So, maybe you start to think about renting an apartment instead? Well, rents here are not any better even if your space may be larger. Is renting a space the best way to spend your housing dollar? Possibly! But another thing to think about is buying a place and reaping the rental rewards for yourself, while enjoying possible tax benefits and putting your dollars toward an asset that you can eventually sell.

I used nerdwallet to see if this would be a “smart” move and made some assumptions – one that you’re buying a condo or a home with a purchase price of $300K and that because your family member is living there that you can put 20% down (not 25% as in an investment property). I also assumed that the interest rate would be around 3.5% which is actually HIGH for loans these days if you have decent credit. Why the BIG arrow and the underline and the exclamation point? Well, look at that payment!

This week I viewed condos that could have 3-4 students in them and were NICE listed at around $300K, walking distance or easy public transit to the U and they were getting $3000/mo in rent.

I’m quite literally sitting here wishing that I had $60K to put down RIGHT NOW so I could buy that condo and start bringing in an additional $1500/mo in rental income. (ok – this is a goal of mine for my own kid and yes, she’s only 12, and, ok, she may not attend the UMN, BUT!!!, I still have deep desires for income properties near the U.)

Median sales price in Marcy Holmes by the U over the past 3 years compared to the Twin Cities as a whole.

MLS / Infosparks 6/26/2020

I even like this graph that shows that days on market are longer there – more of a buyers market! 🙂

MLS / Infosparks 6/26/20

OK – today’s video is a little tour of the area. I hope you like it. Let me know if you have questions!

mschumann@kw.com
612-234-5703

Buying a home – online!
Home Buying

Buying a home – online!

MaryLeave a comment

Dr. appointments are held via telemedicine & Zoom calls. My cousin just ordered a CAR online and had it delivered to her house. You may now be buying your groceries online for delivery or curbside pick-up. We also buy just about everything from Amazon, pajamas for my kid, water filters for my fridge, I’ve even ordered a new antennae for my old VW Beetle from Amazon! We read a lot in our family and the libraries are mostly closed with some drive up options, but now we do kindle and download (I know that’s old hat, but it’s a new way for us).

Would you ever consider buying a home online?

This topic likely could have been one of the first that I put on my blog, but sometimes you do something so much that you forget that it’s unusual! Covid is bringing a lot of attention to it right now – a friend sent me a copy of this article in the Wall Street Journal about the fact that buying without seeing a home in person has gone from 3.5% of agents saying that they have done a contract this way to a whopping 31% in April of this year! All I could do was nod my way through it.

Buyers do this when they are in the military, moving from overseas, or simply relocating from another state. Obviously at any point a visit is welcome, but if it’s not possible then there are ways to make it work.

I know people start shopping for homes that way – they like to visit the big online portals for listings so that they can see what homes are for sale, see pictures, get information on taxes and prices etc.

I have a good understanding of the difficulty of relocation because of my personal history of moving from state to state for fun or job relocation and also knowing how hard that was without being able to piece together what life looked like – most especially when I moved to Minneapolis from Chicago, which had much higher stakes for us, we had a kid changing schools, no family here, homes to sell and buy…

I started my YouTube channel and have focused a lot on showcasing neighborhoods and homes of every price and type, as well as trying to show a bit about what life is like here in Minnesota.

I thought I would help people like me.

And I *AM*!!

I regularly get calls or emails from people that are moving to Minneapolis for work, school, medical care or just because they want to, and they are coming from every part of the United States and across the world. They may be thinking of renting at first or may also be ready to buy a home here.

So, how do you buy a home from a long way away? Well, it’s definitely not the same as when you’re here in person, and the most important thing is to find an agent that you can trust. Agents always act as your partner in the purchase of a home, but when you are buying from a distance this is far more important. Your agent will be able to give you the information that you need before making a decision. This can be data on sales, rising and taxes, information about what schools are there, to just being able to provide you with video and commentary on what is in the area.

A very important aspect is that you are very open and clear with your agent as to what you prefer and what things are important to you in a home. I’ve had clients that were very specific about wanting 2 acres of property in the south suburbs, to those that prefer a high rise in the heart of downtown and everything in between. For out of town clients I preview all homes for them and take a video tour. In some cases, I’ll look at anything available in their price range that meets their criteria – listings sometimes aren’t enough to decide. More than once I have bought a home that I didn’t even think I wanted to see based on the photos. If nothing else, this gives a very clear picture of the competition and a better idea of what to offer once you’ve narrowed down your choices.

You’ll still need to do all the basic things like get pre-approved for a mortgage (easily accomplished ONLINE!) so you know how much you can afford to buy. But after your preferences and budget are clear I generally try to do the following:

  1. Set up a search on the MLS for you. People generally seem to love Zillow, but I believe that is probably because it’s what is available and people are used to it. It is also notoriously inaccurate. The best thing to do is to have an agent set up a search that meets YOUR criteria. This can be very specific – certain streets, specific layouts (ranch, 2 story, town house…), school districts. This is tailored specifically to YOU.
  2. When you have an idea about neighborhood, I will film a neighborhood tour – this gives you a good sense of what the neighborhood looks like, what the streets look like, what businesses are there, is it very residential or mixed with industrial? Do you want to be able to walk or bike ride? What about public transportation and schools? Any funky smells? I can show these to you and you’ll have a private link on YouTube to look from afar.
  3. When you find the neighborhood that you like and narrow down the homes, we can take this a step further. Agents always present their listings to the best advantage in pictures, but does this always match reality? No. So again – a video tour of the home, inside and out so that ALL aspects of the home and its situation are available for your evaluation – closets, basements, the street, the back yard. This can be on a video link or through Facetime so you can be “present” on the tour.
  4. If the home is acceptable and you decide to move forward video can continue to do its job. The inspector may take video or your agent can attend in your place and video the inspection. This is helpful because you can pause at any time and rewatch as you like – it gives you some time to process what you’re seeing and hearing in the video. Sometimes inspections can feel overwhelming if it’s a first time buyer, but this actually gives you a way to slow it down.
  5. We already do so much of our business on line – we sign contracts and loan docs, transfer money, search for homes, communicate often and easily via text or msg, this is just the last piece. You can likely close remotely assuming that signatures are notarized or witnessed, and you’ll be able to get keys either sent to you or held for pick up when you’re ready.

It’s always best if you can see the home yourself. Then you KNOW. But if you can’t, that doesn’t have to stop you from getting a home for yourself.

You just need to find an agent that is used to working remotely and is willing to put in the time to show you what you need to know to feel comfortable with your decision. I personally find this to be a really satisfying client to serve – it gives me a new perspective on my city and I get to welcome new residents to a place I love.

Are you in this situation? I’d love to help you out. Contact me or leave a comment with questions!

mschumann@kw.com
612-234-5703
Should you buy a fixer? Here are 4 things to consider FIRST.
Home Buying · Home equity

Should you buy a fixer? Here are 4 things to consider FIRST.

MaryLeave a comment

HGTV makes it look really easy and smart to buy a fixer but before you do, think about the following things:

Give the location and the price a really hard look. This is where your agent will come in and help you make a clear-eyed decision based on actual data to see if what looks like a good purchase actually IS a good purchase.

You’ll want to have a clear sense of what other homes in the neighborhood have gone for and what the homes offered. How updated are they? How far would this home have to go? Is it cosmetic changes or do you need to shore up the foundation? And even if the foundation is the problem – is it priced where this would make sense to invest in it?

Look for instant or inexpensive ways to create equity. Is the worst thing about the house the flocked wallpaper and shag carpet? If it’s mostly surfaces that need refinishing, and you’re good with a paint brush and can pull up old carpet, your cost for the return will be really low. A fresh coat of paint goes a really long way. One thing that I have considered in the past is what would make the most impact – floors & walls are enormous parts of the home and resurfacing those pieces can really make a big impact on value. MOST people can’t seem to look past bad decorating. If you can – BONUS!

If there are projects that will require professional help – make sure that they are projects that will bring you good return on the cost of having to hire out. Going back to surfaces – having wood floors refinished is a good return. In Minneapolis we have to have our homes inspected for energy efficiency and paying for insulation will increase the price that the home commands, in addition to paying dividends in reduced energy costs. And there are a lot of incentives provided by the city and energy companies in the form of rebates and low interest loans to help home owners achieve the highest efficiency possible. If you live in Minneapolis you know you want low bills and a snug home.

Lastly – evaluate your ability to live in or with chaos. It can be hard at times if you’re living in a construction site. Even if you’re not and you’re trying to manage the project from outside of it, make sure that you can handle set backs, messes, etc. It always looks so much worse before it gets better.

If you’re curious about a way to do this while having someone else help pay – check out my video on house hacking. 🙂

Comments or questions? I’d love to hear from you. If there is a video that you’d be interested in seeing or a topic that you’re curious about, let me know.

mschumann@kw.com
Home Buying

House hacking!

MaryLeave a comment

What’s that, you say?? If you want to buy a home and you want to have someone else pay all or part of your mortgage, this may be the strategy you’re looking for.

House hacking is when you buy a duplex or multi-family home, live in one of the units and rent the others out.

This is a great idea if you are handy and willing to put some sweat equity into a house as well because you can fix up one side and then the move and do the other. Refinance, or simply live there and if you now have an updated rental, you may be able to raise rent and attract a long term tenant.

I especially like this for people that have low down payments – because you are living in the multi-family (up to 4 units) you can qualify for an FHA 3.5% down loan at a higher rate and the lender will take your rent into account as part of your income.

Loan limits on a single family home are $331,760 in MN, and up to $736,450 for a fourplex.

Check out the Bigger Pockets podcast for more real estate investment info. 🙂

https://www.biggerpockets.com/podcast

Let me know how I can help you!

mschumann@kw.com

 

Who pays a buyer’s agent in real estate?
Home Buying

Who pays a buyer’s agent in real estate?

MaryLeave a comment

Did you know that the SELLER pays the commission for the buyer’s agent? It’s true! If you are embarking on your first home purchase, you may be wondering about that and it can feel weird to ask.Buying your first house can be intimidating on a lot of levels, but especially financially, so this is a great benefit if you are on the buy side- you get all of the services of an agent and the seller pays!

How does this work?

When someone puts their home on the market, they negotiate a fee with the agent that is listing their home. Generally, this fee covers the marketing cost of the home (advertising, flyers, listing photographs etc) as well as a commission for the listing agent (which they split with their broker) AND the agent of the buyer (usually called the “selling agent”).

So, if the listing agent charges 6% they will offer some percentage of that to the selling agent as a commission – let’s say that it’s half. If the home is $100,000 that means that the selling (buyer’s) agent will get a check for $3000 at close and they will then split that with their broker at whatever percentage they have agreed to. From whatever remains, the agent will have to put aside 30% for income taxes, some percentage for costs of doing business and then keep whatever is left as income to pay bills.

In my office, the only fee that a buyer pays directly is a $399 administrative fee and that goes to the broker as well. As part of this fee, the records on the transaction are maintained and accessible to the client forever.

And that’s it! If you are a buyer – do not hesitate to find yourself a great agent to help you through the process!

Should you get a home inspection?
Home Buying

Should you get a home inspection?

MaryLeave a comment

Short answer – YES. Unless you’re buying the home to gut it and you’ll be addressing most of the fundamentals then anyway, you really need to know what you’re buying.

In my office we actually require that buyers sign an acknowledgement that we have recommended an inspection! It’s that important. If you choose not to, we want it in writing that you elected to do that against advice.

In MN, when you’ve managed to get an accepted purchase agreement and you’re ready to move forward with the transaction, the next stage is called the “inspection period”. It’s generally 10 days from the date that the agreement has been reached (although like everything else in real estate, this is negotiable!). In this time period you’ll have a home inspection at a minimum, and may have other inspections such as radon and sewer line as well.

What do home inspectors look for? Well, they look past the surfaces that enchant a lot of buyers. Their interest is – does it work? Is it safe? They don’t care if you have quartz counters and stainless appliances. Does the refrigerator cool to the right temperature? Do all of the burners on the stove work? They will test all of the fundamentals of the home – the furnace, water softener, outlets, water pressure and faucets, flush the toilets, check the insulation and the roof and gutters – soup to nuts.

I think this is often an overwhelming process for the buyer, especially if they have never bought a home before. You are paying them to point out every little “flaw” in a home so that you know exactly what you’re buying. You’ll end up with an enormous report that talks about everything from switch plate covers ($1 or $2 each) to potentially large problems with the foundation or roof. It can be hard to keep a sense of perspective. Not everyone is handy, but not every “problem” needs to be fixed by the seller, or even by you to live comfortably in the home.

Once you have this report, you have choices – you can ask the seller to make repairs, you can ask them to give a credit to reduce the cost of the home in order to compensate you for having to fix things, you can ask for nothing and accept the house as-is, or, if you’re agent has properly written the contract as being contingent on passing inspection, you can decide to walk away from the home and keep looking.

In addition to the normal inspection, you’ll want to consider other inspections such as a radon test and a sewer line inspection, and depending on where you’re buying, potentially an inspection of a septic tank or a well. The buyer generally pays for any inspections that they have performed as due diligence, and in almost all cases inspections are limited to non-invasive tests.

One thing I think is important to mention is that IF you decide to request repairs, you should think about what you want them to fix carefully. If it’s a small, easily correctable item that you can do yourself, you may want to leave that off the list. Focus primarily on items that relate to health and safety – what are things that will make you willing to walk away from the house? I’ve had buyers that get that 40 page list and think that the seller should fix it ALL. If it were a strong buyer’s market and sellers were waiting forever to sell their homes, this may get a little more traction, but in today’s market they know a more reasonable buyer is right around the corner and will ask for less.

If you have questions or comments I’d love to hear from you!

mschumann@kw.com

Buying and selling homes and Corona Virus…
Home Buying · home selling

Buying and selling homes and Corona Virus…

MaryLeave a comment

I wanted to talk a bit about how to navigate buying or selling a home now that we have to contend with corona virus. It’s an uncertain time and we all want to remain safe, and fortunately people have been buying and selling properties at a distance for a long time and we are equipped to adjust our business to minimize close contact and reduce the possibility of contracting it for ourselves and others.

Some recommended steps:

  1. If you are selling your home – you can list it in a ‘withheld” status. This limits marketing to only agents within a broker’s offices, NOT the general public. My broker has 800 agents, and any buyers that they represent would then be able to match their clients with your home. So, it’s not AS many people, but they are qualified people.
  2. As a withheld listing you would not be able to hold open houses (general public), but when you want to avoid contact with people, open houses aren’t recommended. Consider having a virtual open house if you want one, with the use of a 360 camera you can allow buyers to navigate on their own virtually, and it can exist for viewing longer than the hours of an open would.
  3. Virtual showings… if you don’t want to see every property in person, your agent can video the property and see if there are odors, defects that aren’t evident in the photos, a view of the neighborhood, etc. It cuts down on seeing quite as many properties in person.
  4. I ask sellers to leave ALL doors open, ALL lights on to minimize the surfaces that would have to be touched in the home.
  5. I bring Lysol wipes to all showings – and I wipe down the key box, kets, door handle, light switches, railings, etc so that surfaces are clean.
  6. Continuing with sanitation – hand sanitizer on the way IN to a house and hand sanitizer on the way OUT of the house.
  7. Screen buyers with health and travel questions.
  8. Use a virtual broker like Keller Mortgage… they do great work and they save you money! no loan origination fee, low rate, $1000 credit at closing for loans over $150K
  9. About the “market” – the one you sell in is also likely the one that you will buy in. If your home loses a little on price, the house you are buying likely will as well.
  10. Finally – people stay in their homes for 7-10 years on average. Home prices trend UP over TIME, the daily market conditions are only relevant if you’re buying and selling daily!
  11. You don’t have to be present for MOST things – even closings can often be done remotely. We use e-signatures on documents regularly – it’s a standard way of doing business already.

Thinking about buying or selling and have questions? Let me know your thoughts!

mschumann@kw.com
Rent or buy?!?!
Home Buying · Living in Minneapolis

Rent or buy?!?!

MaryLeave a comment

If you currently rent and you’re on the fence about whether or not to buy I’m going to lay out some pros and cons for your consideration…

Financial reasons…

You’re not spending your money to make your landlord rich. Every payment you make takes you one step closer to actually OWNING your home.

Rents in Minneapolis are averaging $1850 for a 2 bedroom apartment. If you can afford to pay $1850/mo for space in an apartment building and you have good credit, you could afford a home with a price close to about $300K – even with an FHA loan (3.5% down instead of 20%) and including mortgage insurance, homeowners insurance and property taxes. (According to NerdWallet.com mortgage calculator). The average price in Minneapolis is about $280K!

If the house appreciates (increases) in value – that increase is YOURS. This is more than theory, it’s actual equity in your home. This means that if you refinance or need to rid yourself of mortgage insurance ($100+/month if you didn’t put 20% down) because now you DO have 20% equity – you can have the house reappraised and get out from under that monthly bill. Any money that is going in your pocket instead of someone else’s is a WIN.

In addition to that, if you live in your house 8 years and the value increases by $50,000 while you live there – that money is YOUR money. Not a landlord’s!

There are tax breaks to incentivize home ownership. Mortgage interest (and at first that is most of your payment) is typically deductible on your income tax! YAY!

Rents go up… but your house payment will stay the same. Having that stability can be a very reassuring thing when other things are uncertain.

Non-financial reasons…

It’s your home – want pink walls and green carpet? No one will say you can’t do that. You can choose to live in an environment that speaks to YOU.

Privacy… tired of listening to your neighbors walking on your ceiling? Sick of dealing with someone parking over the line in the lot? Next apartment have a dog that barks constantly? If you have your own place, you don’t have to deal with that.

I’m going to add a sense of community here. Something I love about owning a home is being invested in my neighborhood. Knowing my neighbors. Enjoying local businesses. Having my kid have long term friends nearby.

Reasons to continue to rent!

If you need, or like to, move often – owning might not be your thing. It’s more difficult to sell a home than to break a lease.

You’ll be responsible for maintenance and repairs – if it’s a single family home that likely means lawn mowing and possibly shoveling. If something breaks – you have to find someone to fix it. I recommend learning to do as much of this yourself as possible – it feels good to be able to take care of your own home.

If you have a lot of debt – you may wish to take the time to pay that down before jumping into home ownership. Having less debt when you apply for a loan is a positive and can pay off in the long term.

Do you have questions about the home buying process? Let me know. I like helping people out.

mschumann@kw.com