Twin Cities Real Estate Market Update – Fall 2021

November 5, 2021November 5, 2021 MaryLeave a comment

Let’s talk about the Real Estate Market in the twin cities! It’s been a little bit since I’ve done one of these updates, and typically there is some seasonality to the real estate market, with a big slow down in the fall as holidays approach and things picking up in the early spring. Is that the case this year? Let’s find out!

So, how’s the market? If there is one question every agent hears all the time, this is IT! And I think everyone knows the market has been GREAT for sellers and really rough for buyers, so the question is has that changed? The information I’ll give you here applies to the 7 county metro area, but you should know that every neighborhood has its own micro market and behaves a bit independently from the whole, this information is just a snapshot of the general market behavior right now, if you’re curious about your own little niche – let me know and I get you more specific #’s that apply to your specific area in the metro – just send me an email about that and I’m happy to help.

I was able to get a look at some historical data comparing this year to 10 years ago and one of the things that stood out were that the # of active listings that are available to be sold has continually decreased to nearly HALF of what we had then – we had 10,229 homes to choose from in 2016 and now have only 5,692. This isn’t sudden, it’s a distinct trend line going down over the past 10 years. The inventory issue did not sneak up on us and it isn’t going anywhere.

If it’s prices that are freaking you out they peaked in summer and we are now seeing the fall dip. So this could be the time to get a better deal on a home than getting into the scrum with everyone else during peak season.

If you remember from other updates, I like to reference the “absorption rate” how many months would it take for the market to sell or absorb all the homes for sale on the market if no others were listed?

5-7 months worth of housing inventory is considered “balanced” and any number of months less than that indicates a sellers market and a number HIGHER than that is a buyers market.

Right now we have 1.03 mo supply of single family homes, 1.34 mo supply or condos and townhomes, and 1.12 combined mo supply of homes total. A very distinct sellers market! STILL! but better in some degree than earlier this summer when it was less than one month – somewhere around 2-3 weeks, and that takes into consideration days on market and active contingencies like inspection. Reality was that things were sold in a couple of days. And that is STILL the reality depending the price point, condition and the location of the home.

Pricing Trends

Let’s look at what sellers are deeming a good offer right now:

Offer Acceptance Rate: 62% -this has been as low as about 33% this year
Inspections Waived: 31% which is down from the highs over 50%. I am still seeing this come up a lot in multiple offer situations, and if people are bidding on a competitive house getting an inspection can still be a sticking point.
Pre-MLS Sales: 2.74% – this is lower than it’s been for most of this year – we have seen these off market properties make up around 5% of sales over most of the summer
Average Purchase to List Price: sellers are getting of their asking price 100.67% – great news for buyers and not awful news for sellers. You’ll probably get your asking price.

I will say that this is much MORE likely if it is a single family home as condos and townhomes are still soft spots.

The most recent 3 transactions that I have had have ALL had multiple offers, (7-9 offers), one had an accepted offer at 10% over list price, one at nearly 6% over list and the last I don’t know the outcome because we didn’t get it but we offered (and lost) at 10% over list and were told they accepted a cash offer with NO contingencies (no inspection!).

All of these homes were in the tightest price bracket of $300-$500K. No matter what the statistics say this continues to be an area of really fierce competition when it comes to homes that are in high demand areas and in good condition.

Financing Types:

Cash 14%, – if you have the means to make this kind of offer it can really give you an edge. I am aware of some mortgage products that allow you to make a cash offer so if you’re in a competitive price point, and feel like this might be the answer, know that there are options out there and I give help you find out about this.

Conventional loans are still the big dog at 74% of loans.
FHA represented 10% of the accepted offers which is a nice bump up! This is great to see for people that may be first time buyers and need the extra room that an FHA loan grants them. It’s just been difficult to get an FHA loan accepted in this market when you’re being outbid by people that can guarantee appraisal gaps or provide other financial incentives (like cash purchases!).
VA 1% still a tough spot to be in , if you’re not familiar with VA loans, they are a zero down loan. This is a really tough spot when appraisal gap coverage is needed, so if you’re in a position to take any other type of loan, that would probably be beneficial to your offer.
USDA 0% – these are typically on land or rural purchases, seeing a low number here for a metro area is not surprising.
Other = 1%.
Seller Paid Closing Costs: 31% – this keeps going up!
Home Warranties: were included 9.6% – another statistic on the rise – so these indicators all show a very slight softening from the harsh days of early summer for buyers
Contingent Upon the Sale of the Buyer’s Property: 7.5% A little lower than we’ve seen in other months, but present!

Thanks for stopping by! If you’re interested in learning more about the different neighborhoods and suburbs around the twin cities, check out some of my videos highlighting those! I have a playlist dedicated to this with lots of good information if you’re thinking about making a move.

Home Buying

Reasons you should RENT and not BUY… PLUS a resource if this is you.

September 5, 2021September 5, 2021 MaryLeave a comment

Sometimes RENTING is the way to go. If you are moving to (or within) Minneapolis I’ll give you some reasons why you may want to choose RENTING a house or an apartment vs buying one.

I see people juggling this decision about where to live daily. A lot of people WANT to buy, but certain circumstances may mean that renting is actually the best choice, at least for now.
The number one reason people that I speak with most often are looking for a rental is that they are moving to the Minneapolis area from out of state. Not everyone is ready to buy sight unseen (but if you are I have a video about how I help people do that!). In this tight market, if you can possibly avoid having a home sale contingency on your offer you are FAR better off and that means there will be a period of time where you may be without a permanent home and need a place to rent.

A lot of my clients move to Minneapolis because they have been freed from having to work in an office and now work remotely and can live where they choose. This means that they have a LOT of options – that’s both a good thing AND a bad thing. Having the flexibility to explore without committing to a particular neighborhood is a great reason to rent! If this is YOU, let me know – I put together a list of rental options specifically with this in mind, you can email me and I’ll send it to you.

Most often people I work with that are relocating to Minneapolis may be looking for a short term rental to use as a base while they house hunt. I do not work in rentals for several reasons, but I am happy to email you a list of resources that I have recently compiled of places to start your search.

When you don’t have to eliminate any particular area because the commute is too long, it means that you have a lot to choose from and likely want to choose carefully based on what kind of lifestyle you want to live.

Do you want to live downtown in highrise condo overlooking the famous stone arch bridge and the Mississippi River? Taking advantage of easy access to all of the wonderful restaurants, clubs and outdoor spaces?

Or do you see yourself in a quiet suburban neighborhood with a cul de sac and playgrounds for the kids? Is being close to a large park to pursue outdoor activities important to you?
Maybe you want to be convenient to shopping or find a single level floor plan? You may need time to explore and figure out where the things that are most important to you are.

man standing beside his wife teaching their child how to ride bicycle — Photo by Agung Pandit Wiguna on Pexels.com

Juggling a move from one part of the country to the other will necessarily have some uncomfortable times – it’s emotionally stressful and often physically a bit uncomfortable too as you adjust to temporary housing and figuring out your way around the cities. Having a home base to operate out of even for a short time can ease that pain.

Another thing to mention – because rentals are in high demand if you need to sublet because you found a permanent place to live you’ll likely have an easy time finding a taker – just make sure that the landlord on your rental is ok with that before you sign.

Not everyone wants to or should be a home owner! Do you need to move often? Buying a home has a lot of associated expenses and they are typically not easily recouped in a short period of time.

If you want and need the flexibility to move without all of the expenses associated with buying or selling a home, then you should definitely rent. Renting can be an option for any type of home or area in the Twin Cities – there are a lot of downtown condos available if you want to be in the heart of it all as well as options reaching out to the single family homes or townhouses in the suburbs. Most single family homes are rented by owner, and not listed with an agent or a property management company.

Another reason to rent is that you are saving up for a downpayment on a home because you DO want to become a homeowner eventually. The rental market in the twin cities is very tight, so this may not be the money saving option that you hope for unless you’re able to split the rent with roommates or somehow find something that will be well under your budget.

Rents vary across the metro area but Average Rents in Minneapolis are:

Minneapolis studio apartment is $1,297
Minneapolis 1-bedroom apartment is $1,541
Minneapolis 2-bedroom apartment is $2,432
Minneapolis 3-bedroom apartment is $2,960

How much do you need to save in order to buy? Probably not as much as you think! There is a commonly held myth that you need to have 20% of the price of the home for a downpayment. This is just not true. You can get a conventional loan with as little as 3% down. Having more cash saved IS better, because you will want to have a cushion available when making offers in this environment.

If you’ve seen any of my videos this year about how tough of a market it is for buyers, you’ll know that having the option to offer over list or to cover an appraisal gap is going to be very helpful for you in getting an offer accepted. Even if you do not need to use all of your cash for a downpayment, moving into a home naturally leads to you to want to change a few things and make it your own so you should also plan to have some cash on hand in the event that you have something to change or fix. When you own your own home, there is no landlord and if the AC unit or water heater break that is now your problem, so try not to make your budget too tight.

For comparison to rental costs take a look at these estimated numbers by Nerdwallet. $380,000 is the median price of a single family in the Twin Cities as of August 2021. We currently have exceptionally low interest rates if your credit is good – 3%! and even if you have to pay for private mortgage insurance (PMI) because you did not have a 20% down payment you are still in a good position relative to renting IF buying is your preference.

There are some other benefits to buying, including tax benefits and property value appreciation over time, so if you DO buy you’ll likely come out of it better off than when you purchased. People talk about “generational wealth” or having something to pass down to help the next generation and home ownership is a fundamental element of that. The National Association of Realtors said that prices appreciated by 22.9% in the past year – this is the result of a very tight supply of homes. If you had purchased a home last year you actually may have been able to make some money selling it this year, but this is NOT the norm. Prices rise and fall but the overall trend in values is UP. Add this to the fact that you’ve built equity by paying your mortgage down over time and a home could be a spring board to other opportunities.

Another reason you may want to rent – if you do not want to be the one responsible for the maintenance on a house – either by paying someone to fix it or putting on that toolbelt and fixing it yourself, stick to renting and leave the headache to the landlord. The fact of the matter is that houses are nearly constantly in need of something and they are the biggest asset that most people own, so keeping them in good shape is important to your comfort AND your bottom line.

Let me know if you want that list of places to start looking for a rental home, or if you’re wondering about how you can STOP renting and buy your own home – I’m here to help either way.

Home Buying · home selling · Living in Minneapolis

March Real Estate Market Update

April 2, 2021April 2, 2021 MaryLeave a comment

My last post & video about this were pretty well received, so even though numbers aren’t flashy, I’m going to try to make this a monthly feature as we navigate through this crazy market. This post has some good little nuggets in it if you’re in certain segments of the market, so stick with me.

A bright spot for buyers?!!

Last time I posted about the market I gave an overview of “absorption rates”, this is going to be a recurring theme, so if you want to check that out you can find that post here: https://twin-cities-living.com/2021/02/26/i-had-other-plans-for-this-weeks-post/

There is an obvious lag in the data because we need to look after homes close and that shows up in the MLS, but I do get some data relatively quickly thanks to Minnesota Transaction Coordinators, a company that helps many of us with processing our transactions.

Let’s start there with their analysis of terms that they see in contracts.

Inspections

In the past couple of months we’ve seen quite a few buyers deciding to waive the inspection in order to release one more contingency ahead of everyone else. By “a lot” I mean 38% of buyers were waiving inspection in the first 2.5 weeks of the month, but when they looked at the first through the 26th the rate went to 31%. That means that enough people have STOPPED waiving them to lower this percentage by 7%. Buyers are insisting on protecting themselves and sellers are acquiescing to that.

Offer acceptance rates

Even better, offer acceptance has gone from 31% for the month last week, to 39% for the month over all as of the 26th. YAY!!!! Sellers are accepting offers! I represent a lot of buyers and it has just been TOUGH. So this is great news.

Homes listed on the open market vs witheld

In an office as large as mine, we often hold listings off market and only market to agents within the office. This shrinks the pool of who looks at the house which is desirable for a lot of reasons – from Covid, to privacy, to simply wanting to not have to deal with the preparation and hassle of selling on the open market. Sellers can name their terms and if another agent has a buyer that can meet those, there is a happy meeting of the minds without all of the associated prep work, exposure, etc and everyone feels satisfied. The number of sales that they have worked on in this status is down to 5.6%. This is good because more homes are hitting the market than have been.

Percentage of list price received

Current purchase price to list price ratio is “down to” 104% from 105% last week. It has been hovering between 103% and 105% in the past couple of months. It’s good to have that number in mind, even though it’s not a fixed price, it’s an idea of what you should think about when offering on a property that has a lot of interest. Price is not the entirety of a an offer, there are a lot of other terms that need to be in line as well, but this is good info for this metric.

Seller paid closing costs

26% of deals include some seller paid closing costs. I have to assume in this market that the offer price was increased to account for these, but I like that we are seeing it because it means sellers are accepting these terms.

Forms of financing

76% of loans are conventional (you do NOT need 20% down for a conventional loan! These are viewed as more favorable and if you can get a conventional loan it’s one more check mark on the list of terms).

FHA loans represent 10% of the offers, CASH 10%, and VA & USDA loans are at 4%.

Traditionally, inventory really increases around this time of year (inventory = homes being listed and available for sale). We currently have less than HALF of the listings we had 6 months ago.

Good news for downtown condo buyers!

Downtown condos are in a balanced market right now! If you are looking for a condo in the central city including neighborhoods like Loring Park, Downtown, University, Dinkytown, Elliot Park etc… now is the time. We believe that this is caused by the pandemic and people wanting to live in less dense housing + fewer people needing to be downtown for work, but don’t expect it to last with the speedy rollout of vaccine and life returning to somewhat new normal.

Days on Market are up to 41 (only from 38), but these are the kinds of indicators that let buyers know that they will not likely have to pay more than list, that sellers will be willing to negotiate because they know you can find another condo to buy and someone will play ball with you.

So that is what is happening! Sellers are still mostly in control of things, but if you’re a downtown condo buyer you’re in the sweet spot!

Let me know if you have questions.

Home Buying · home selling · Uncategorized

I had other plans for this week’s post…

February 26, 2021February 27, 2021 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 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

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… 🙂

Home Buying · Living in Minneapolis · Uncategorized

Getting a win in a seller’s market…

July 5, 2020 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!

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.
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.
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.
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.
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$.
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.
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.
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.
*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

Home Buying · Living in Minneapolis · Neighborhood Tours

Is your kid headed to the U?

June 28, 2020 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.

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

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

Home Buying

Buying a home – online!

May 17, 2020May 18, 2020 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:

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.
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.
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.
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.
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

Home Buying · Home equity

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

April 17, 2020April 17, 2020 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!

March 25, 2020 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

Home Buying

Who pays a buyer’s agent in real estate?

March 20, 2020March 28, 2020 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!