Home Buying

Buying a home – online!

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!

Home Buying · Home equity

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

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.

Home Buying

Who pays a buyer’s agent in real estate?

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!

Uncategorized

Should you agree to work with a “double agent”?

Let’s talk “agency”, shall we?

If you’ve never bought a home before you might think the best way to go about this is to drive around or check whatever app you use until you see a house you like, and then call the agent on the sign so you can go take a look.

Groovy – I guarantee they will ask you if you have signed an exclusive buyer representation agreement or not. I feel like making a flow chart here, but I’m going to stick to words…

If you HAVE signed with an agent – GREAT call them and let them know you want to see the property. Do NOT call the listing agent. You are having your agent do the job that you have hired them to do! You are NOT bothering them.

Your agent wants to see what you see and see it not only through YOUR eyes, but also through their own. They are there as your advocates and will be looking for anything that may impact your use and enjoyment of the home. In fact, an agent is a “fiduciary” – which means that they are obligated to act in YOUR best interests! Even if it conflicts with their OWN best interests. For example – if the agent were looking for a similar property to the one that you wanted and knew that the property would suit you and that you would buy it – they would be OBLIGATED to make sure you knew about that property even though they may then not be able to purchase it themselves. You want someone like this on your side.

If you have NOT signed with an agent of your own and are walking into that house unrepresented with the listing agent you should be aware of a couple of things – 1.) that agent owes a fiduciary duty to the SELLER of the home – NOT YOU. You’re like a fly that just walked into the spider’s web. 2.) Anything that you say to that agent can and will be shared with the seller!

So if you are walking around the property and you’re beside yourself with joy because this is exactly what you’re looking for! And your budget is 10X as high as this house is priced! Isn’t that great?!? Well, now the seller knows how badly you want it AND that they probably don’t need to give any ground on the price.

But wait! There’s more! If you’re cool with all of that (and there are reasons why you might be) and you go ahead and sign with that agent for the purposes of purchasing that home you need to know a couple more things – one… that agent will “take both sides” of the commission, meaning they get the commission for both being the agent of the seller AND the agent of the buyer.

In addition to this, let’s go back to fiduciary duty … if an agent is bound to only actions that would benefit their client and they are in the middle of a transaction, representing both, they are between a rock and a hard place when it comes time for one of the key functions of an agent – NEGOTIATING and ADVISING. They can give you information about prices and time on market and other stats, but anything that they advise you cannot adversely affect the seller. Tough spot and maybe not where you want to be as a buyer – particularly if it is your first home purchase.

In MN, we are legally obligated to explain what agency relationships mean at the first “substantive contact” with a potential client. No dual agency can occur unless both parties agree to it, and in MN, dual agency means MORE than just the same AGENT representing both the buyer and the seller. This is a twist worth understanding when you are deciding whether or not to agree to double agency in MN – here is applies to any agent working for the same broker. So while I may represent you, I cannot show you a home listed by an agent in my office (my BROKER – not the company) unless we’ve agreed to dual agency. It’s like dual agency lite. Your agent will still work on your behalf, but they aren’t in that middle space between the seller and yourself and they do not get “both sides” of the commission even though dual agency technically still applies.

While agreeing to dual agency may not be right for every occasion it can be right for some. And in the current market in Minneapolis not having access to every home on the market in your price range can be a large detriment to your search. If you’re not comfortable with it and your agent has a listing of their own that is PERFECT for you – you can ask to be referred to a different agent.

Now for sellers… This has happened to me personally when I sold a house in another state, my agent had an open house, an unrepresented buyer came through and wanted the home, and our agent signed that buyer. If we hadn’t agreed to dual agency we would not have sold our home to that person and we were READY to go. So while in the end, we didn’t get too much help with the negotiating, we had already had the benefit of understanding what the market would support for our house and we could negotiate fairly comfortably, but it’s up to each seller to make that decision.

Questions? Comments? Need help with real estate?

Uncategorized

Buying your first home EVER! Gimme the keys!

You found a house! Your offer’s been accepted! Clear sailing from here on out, right?

Well, maybe, but you should know what comes next.

Earnest Money

As part of your offer you will submit a deposit, called “earnest money” (I did a video on that – check out my YouTube channel if you’re interested.) It’s basically putting some skin into the game so that you have some incentive to adhere to the terms of the contract and perform the duties that you are committed to on the schedule that you’ve agreed to.

You need to meet the deadlines and SO DOES THE SELLER. If you don’t, there is the potential that the seller keeps your earnest money and the house goes back on the market. If they don’t or the contingencies around inspections, appraisals and loans aren’t satisfied, you can break the contract and have your earnest money refunded.

Inspection and Appraisal

Well, as part of the purchase agreement you’ll negotiate some terms, like an inspection, the fact that the your financing depends on the home appraising for the amount you’ve agreed to pay, that you can have your financing approved and ready to go by a certain point in the process.

If you decide that you are, or the seller is, willing to fix whatever is discovered in the inspection, or if you can work out a credit to the price to compensate for the issues (and there are ALWAYS some issues!), the process keeps moving – if not, you can ask for a refund of your earnest money and look for something else.

At the same time, the lender is completing your loan approval. You’ll want to be very responsive to your lender as they request documents etc, because missing a funding deadline can either delay closing or put you in breach of your contract enabling the seller to keep your earnest money and sell to someone else.

As a part of obtaining financing the lender will also order an appraisal of the home. The bank wants to know that the collateral on their loan (the home) is worth what they are lending you and they will be able to sell it and recoup their money if you default for some reason.

If the home does not appraise for the amount that you’re borrowing, a few things can happen. You can renegotiate the price downward to make up for the difference, you can come up with the cash to make up the difference, or you can walk away if the financing contingency is not met and specified in the contract.

On the flip side, homes have been known to appraise for MORE than you’ve agreed to – in this case it’s like you’ve been given a prize because it’s effectively instant equity in the home that you didn’t have to wait or pay for. Yay!

Title search

While your lender is working on your loan, you’re having your inspections done and the sellers are making their repairs, the title company is doing a search to make sure that the title is clean and there are no other claims on the home so that you can take possession at closing. When you get to the closing table you will be encouraged to buy title insurance, and that is a very good idea! Should something come up in the future, you’ll be protected.

Walk through…

Now it’s getting real!

The night before or the morning of closing, you will go to the home and take a walk though. You’re looking at the condition of the home to make sure that everything you expect to see there is present and in the right condition, that the home looks the way it should and that when you sign the papers and the home becomes yours that the house is the way it should be.

Closing!

Your lender will let you know to the penny what you need to be prepared to bring to the closing table financially. They will also tell you how that money will be transferred – often it is simply a wire transfer from the bank.

You’ll sign a lot of loan documents that reaffirm the interest rate, dollar amount, how much the loan will cost you over the term, how long the term is, when payments are due etc etc. And, if you are in MN, you will leave with a set of keys to your home because you take possession immediately unless you’ve agreed to another arrangement.

Last thing!

If you will be living in the house, do NOT forget to file for your homestead exemption!! This is a big discount on your property taxes because you’re occupying the house. You’ll get this info at the closing table, but make sure you put it on the top of the pile so that you don’t forget.

And now you own a home! Congratulations!

Home Buying

Buying your first home – Part 2!

Once you have determined that you are financially ready, you’ve selected an agent, and you have that pre-approval letter in hand, you are ready to start looking!

See what is out there…

Many buyers will have already started looking at what is on the market via online real estate sites, Realtor.com, etc, but be cautious with Zillow! It is notorious with agents for having very outdated or inaccurate information. People often find listings on Zillow that are under contract and not available or have not been taken off the site despite being sold.

You’ve selected a realtor, hopefully you had a conversation about what things you MUST have – how many bedrooms, where the home needs to be located, if it needs to be single level living, etc, so let them send you listings. You decide how often you want them – Immediately? Daily? Weekly?

We have access to the MLS and the information on there is ACCURATE. You won’t be looking at homes that aren’t available. We can select very specific areas via a drawing tool on a map, search by commute times to and from your job at particular times of day, add or eliminate homes based on very specific criteria that is important to you – patio space? Gym in a condo building? Access to a pool? Main floor bath? Let us send you what YOU want to see.

Understand how the market is behaving…

Buyers should look for a home that fits the 80/10/10 rule – 80% of what you love, 10% that you can change, and 10% that may not be your favorite but you can live with it.

Your agent can help you learn what the market is like in your area – is it a buyers market or a sellers market? What percent of asking price are sellers able to get on their homes? How long is it taking for sellers to get their homes under contract? Do sellers typically contribute to closing costs?

Realize that depending on the market you may not get your offer accepted on the first home. At this moment in Minneapolis, anyone buying a home under about $350K can expect to have some competition on their offer and also needs to be prepared to act quickly. In other words, it’s a sellers market and your best bet is to make the most attractive offer possible.

Head out and view properties!

Finally – start looking with your agent. Plan to give 24 hours notice if at all possible. Selling is hard – people want to clean, they may have kids and dogs they need to take somewhere, it’s just courteous. Best case scenario they have moved already and the home is available to show as needed, but be prepared to give some notice.

Do you have questions? Click one of the links below or leave a comment!

Home Buying

Do you need 20% for a down payment?

An FHA loan may be the key to home ownership!

I think this is one of the greatest misconceptions that people hold about buying a home – you do not need 20% down to buy a home!

I did a video on my channel that talks about why an FHA loan may be a great choice if you don’t have 20% to put down. The federal government has long encouraged home ownership and this is one of the ways that they help people get into homes of their own.

FHA all the way!

If you’re thinking about buying a home and you want to learn about the process you can download my free home buyers guide, it’s a link in the description below the video.

If you are in Minnesota and you’re interested in downpayment assistance contact me and I can help you find resources on that.
Minnesota offers up to $15,000 in down payment assistance so it’s a great
resource if you’re looking to get into a house and you don’t have that large down
payment.

Here is why the FHA down payment requirement might make this the right loan for you if you don’t have a large amount of money to put down on a new home…

What is an FHA loan? Well, an FHA loan is simply a loan that is insured by the federal government and it enables people without a lot of money or with less than stellar credit to get into a home in a less expensive way and the price that you pay for that, “the catch”, is that you have to get something called PMI. Private Mortgage Insurance.

It’s required on all FHA loans.

You do not have to be a first-time homebuyer in order to get an FHA loan. The requirements of an FHA loan are as follows:

It’s billed as as little as three and a half percent down and, that’s true, but you should plan to have about six percent of the purchase price of the home available because
you’ll have that three and a half percent that you’ll put as a down
payment and then an additional two and a half three percent that would go toward
closing costs.

Now in Minnesota often we get the sellers to pay about three
percent in closing costs but they are not obligated to do that. So if you
have that money available it just strengthens your ability to purchase
that home.

Before you get an FHA loan:

First the lender will need to verify your income and they prefer to see two years
employment, hopefully in the same field
. They’re going to ask for pay stubs and
verification of income.

The mortgage amount that you are able to borrow – the payment on that amount- needs to be less than thirty five percent of your income. And your total debt payments (car loan, credit card, student loan PLUS mortgage) must be less than 48 percent of your income.

In another video I talked about things that you could do to get ready to buy a home and one of those was paying down debt. Another thing you could do is consolidate debt so that you have one payment at a relatively easy interest rate and just make sure that you’re always, always on time with your payment.

Check out the home affordability calculator linked in the video. It’s going to tell you if you can qualify for an FHA loan based on what your payment’s are today. One of the other qualifications that they like to see is two lines of credit so if you have a student loan perhaps and a credit card or a car payment they’ll look at those two lines of credit and check out your payment history and make sure that you are a qualified risk.

Then there is your FICO score. Your FICO score is the credit score that lenders use to determine whether or not you’re credit worthy and you can get a hold of that in your annual free credit report where you can look out there and see what things are maybe pulling your credit score down, what things you could pay off, maybe things that you have paid and need to dispute. That is free – you can get it every year.

One of the last qualifications is how much you can borrow. In 2020 they have changed the amounts that you can borrow. In the Minneapolis metro area you can borrow, this is the actual loan amount, up to $382,950 on a single-family home.That’s a that’s a pretty large amount to take out as a mortgage and you’ll have a lot of options especially if you were to be in the northern part of the city or the suburbs that could buy you a lot.

Then there’s the even a better option, in my opinion, which is if you wanted to do a “home hack” which is this idea of buying a two family home and moving into one side of it and renting the other. You can borrow up to $490,250 and then they would account for that rent on the other side as part of your income and you can, depending on your situation if you get into the right one, be paying most or all of your mortgage through the rent on the other side of your house. It’s a good way to get your foot in the door and build some wealth!

Questions? Leave a comment or tap one of the icons below. 🙂