You’re not helpless when it comes to mortgage interest rates! A lot of buyers are concerned about monthly payments now that the interest rates have gone up.
I talked with Chris O’Connell at Loan Depot about 4 options that home buyers have to pay a lower interest rate and therefore a lower monthly mortgage payment. Chris had one that was surprising to me and we talked a bit about the one that seems to be getting a lot of attention in the real estate world right now, the 2/1 buy down and why that may not be the BEST option.
Take a look at this video interview if that is something that is worrying you as you think about buying a house now.
I suffer from nostalgia and I’m a sucker for charming old homes and neighborhoods that remind me of movie sets. And that’s why I feel squishy inside when I spend time in Highland Park in St. Paul. It’s a condition, don’t mock me!
Types of homes
The Highland Park neighborhood of St Paul is right next to the MacGroveland neighborhood and shares so many of the same characteristics. The homes are here older and filled with all of that original charm. St. Paul was settled before Minneapolis and the housing stock there reflects it in many areas.
Many of the homes were built in the early 1900’s and often have original hard wood floors, beautiful wide wood moldings, built-ins, plaster walls, detached garages and other features of homes built at that time. Another feature that I love on old homes that you’ll often see here are porches where you can sit and enjoy the gorgeous weather that we have here spring through fall. I think porches and sidewalks encourage a sense of community and give opportunities to see and talk to neighbors.
As you enter the neighborhood from the west on Ford Parkway you’ll notice a large construction site which is a planned community / new construction development, so if you want the city lifestyle and access but AREN’T interested in old homes, this can be a great option for you. It’s called Highland Bridge and its a couple of different developments including row homes and a senior living development, community park, shops and restaurants. This won’t be where you find a bargain – row homes are at the upper end of the pricing for this part of St. Paul at $1.5M+, there are also custom single family homes being built with lot prices starting at around $500K.
One of the things I like about city living is the access to sidewalks and bike lanes as well as the ability to get to restaurants parks and shops relatively easily, on foot, on bike, or in a vehicle. Highland Park is home to all of these things, it has a robust commercial area so you won’t need to go far to grab a bite or do some shopping and recreation is convenient as well, it has a golf course, and easy access to the massive park system along the Mississippi River with all of the bike trails that run throughout (72 miles along the Mississippi rover alone!) and connect to so many local and regional trails in the Minneapolis St Paul region.
The average home price in Highland Park for the typical house is a little more than $441K, its charming neighbor, MacGroveland is just a little bit more from an average home price perspective.
This neighborhood also has easy access to both Minneapolis and St. Paul for work – as well as the freeways that lead to the South, SW and SE suburbs, or anywhere that you want to go within the metro area. Typically if you work on one side of the river you try to live on that side for easy commuting, but I think Highland Park benefits from a great central location from a commuting perspective. Light rail is also within 1 mile of the neighborhood and there is a bus system in St. Paul.
It seems like one of the big benefits of the suburbs would be easy access to stores like Target, and Highland Park actually has an adorable little Target in their main commercial area off of Ford Parkway & Cleveland.
Groceries are within easy reach at the Target, Lunds and Byerlys or a short drive to Kowalskis.
Children living in this area will attend St. Paul public schools Horace Mann Elementary, Highland Park Middle School, and Highland Park Senior High.
Whether you like historic homes with that old fashioned charm or you’re looking for new construction urban townhomes, this neighborhood has both, along with all the things that people choose city living for.
I routinely help people move to MN from out of state and because nearly every state is south of us, warmer than us, and doesn’t have quite the winter that we do, most people aren’t mentally or physically prepared for winter here in MN. I sense a lot of excitement, but also fear?
Let me reassure you that people in MN aren’t some mutant breed, we aren’t the huskies of the human race that want to roll around in ice in summer. We just like seasons and recognize that winter is one of them, and have found ways to make it comfortable, safe and doable. In this video I’m taking you to SNOW SCHOOL and giving you the tips that you’ll need to get through winter comfortably and safely!
Winter and snow can be downright magical if you can sit inside a warm house with a cup of coffee and a fire blazing watching it fall from the sky. But eventually you have to leave the house. I’m going to start off with how to DRESS for winter here and I’ll do another video on other considerations like driving in it, managing it around your home and preparing your actual house for winter as well as staying safe outside in winter.
It’s September and that means it is HIGH time to start preparing for winter. Costco has their gloves and hats out, Christmas decor is usually up right around now and its a great reminder to get your act together while the getting’s good.
Today I’m going to start with the basics! How should you plan to dress here in winter?
It will vary across the season, with peak winter gear needed in January when we often see stretches of well below zero weather. Our seasons are pretty prompt here, with a definite change in the air that hits right at the 3 month mark of any season. I’m recording this at the beginning of September, and the weatherman here pointed out that we have just seen our last after 8pm sunset until next April and that means that we are on our way into fall. Our temps have been in the mid-50’s overnight lately (and I LOVE IT) with highs in the mid 70’s. Northern MN has the high 30’s for overnight temps – winter is coming!
I don’t mind the short days (in the depths of winter it’s starting to get dark here by around 4:30 and it won’t be light til well after 8am), I sleep well in winter! I may be part bear. We do have the flip side in summer with extremely long days, so if that’s your cup of tea you’ll have it to look forward to.
Everyone has their own definition of cold, but I would say that it starts to get cold at the end of October (highs in the 30’s lows in the 20’s overnight). We often see at least some snow around Halloween. And fun fact – if you see snow it means it’s NOT THAT COLD. It actually will NOT snow when it is truly cold here, there needs to be some moisture in the air to achieve snow and intense cold is also intensely DRY.
Your mom may have mentioned wearing LAYERS to you, and she knew what she was talking about. If you’ll be outside in very cold weather you should plan to have 3 layers on. The first layer is a snug base layer. Do not wear cotton as it holds moisture and having damp skin or clothes is dangerous. Pick a synthetic material that wicks moisture away from the skin.
Your second layer should be your fleece or other clothing (sweater, sweatshirt, something!) that insulates and holds pockets of warm air close to your body. Do you need 2 layers on your legs -yep! If it’s cold, having warm legs makes a world of difference. I feel like there is an artificial focus on the upper body for warmth, but having your legs warm (I mean 50% of your body?!) makes a HUGE difference in comfort if you’re going to be outside.
My dogs don’t seem to mind cold weather at all and still want their walks, and having snow pants on changes everything. They come in varying styles and weights. I’m a dork and wear the thick (and WARM) snow pants you see on kids. You probably have more shame/fashion sense than me and You can get some “sleeker” pants that insulate and block wind, those can be pricey but you’ll look as amazing as you CAN look while wearing snow pants. If I’m going to be out walking dogs or clearing the sidewalk I’ll wear a base layer – long johns, leggings or even tights – and then pull the snow pants over that and I’m super comfy.
Final layer! You’ll want something WIND and WATER proof! These two elements can literally be the death of you if you don’t prepare. Down is a wonderful insulating material but if it gets wet, it’s worse than useless. Blocking wind and water will be what keeps you feeling toasty warm. And when I say water – I don’t mean rain. Snow can be quite wet and soak right through your coat. I can think of nothing worse than being cold and wet at the same time.
When looking at coats for actual winter weather here, you probably want a parka vs a “jacket”. A parka is generally longer and will cover your backside better. I would actually say that having both is not a bad idea. If you’re running around doing errands and will be in and out of the car and heated spaces you can scurry around in your jacket and be fine, but for warmth – I like a parka. Parkas also come with hoods (often detachable) and when the wind is ripping around I’ll use it. If you buy from a quality place they often have ratings on their winter items and you can see that clothing is rated to X degrees below zero. You’ll need that in winter. My favorite combination is down with a wind and waterproof shell.
For your extremities, you definitely need a beanie or tuque (interchangeable – you’ll hear both words!), gloves or if you really want warm hands, get mittens. Having your digits all together in one pocket of fabric makes for a much warmer hand. Feet should have wicking socks. The best are wool or smart wool (they aren’t itchy – I promise!) and then boots that are insulated and waterproof. I see lots of feet looking stylish and warm in Sorel’s but North Face are super popular here as are less expensive brands like Lands End.
My husband hates the cold and we also stock up on the hand warmer things in winter and he will keep those in his pocket when walking the dogs or clearing. So if you tend toward the chilly side, that’s another option.
My last tip is don’t wait! When winter things appear in the store, buy them. They disappear pretty fast next thing you know it’s -20 and the stores are stocked with swim suits for spring break.
I’ll do another post and video for driving and dealing with cold in general shortly, I also did one a while back on getting your house ready for winter, you can check out my YouTube Playlist for life in Minneapolis and you’ll see that!
I hear some interesting assumptions/stereotypes? when talking to people about Minnesota so I’m here today to set you straight about a couple of them at least! Some of these may be controversial! Don’t shoot the messenger.
Let’s start out slow, shall we? The weather. If there is one consistent thing I hear it’s that Minnesota is COLD. I don’t feel like other states spark this much fear about weather, and I’m not quite sure why we do? Yes – it does get cold here in the winter. Sometimes VERY cold, in the double digits below zero for days or a couple of weeks at a time. This is manageable – we have heated homes, heated cars, and we dress appropriately. We have a saying (not proprietary to MN!) that there is no such thing as bad weather, only bad clothing choices. I’ll have to do an entire video on dressing for your first winter in Minnesota! A client actually requested that (hi Linda!).
And yes, we also do get snow, and people DO enjoy being out in it. Minnesotans as a rule are very outdoorsy and I think that even if you’re not one to want to sit on the ice in the middle of a lake in winter trying to catch a fish, you WILL probably find that spending time outside is the way to go. I have helped a lot of people move here from very hot climates, many specifically because they wanted relief from the unrelenting heat and the ability to enjoy being outside most of the year. I’ll have to check with them on the first winter experiences.
A myth that I hear is that you don’t need AC here. This will shock some, but we don’t live in a bubble of cold air year round, in fact I would say that we get some pretty extreme temperature changes and people that live here love to make jokes about the the fact that the windchill can be deep in the double digits below freezing and then 6 months later have a heat index of 115. We don’t mess around. You DO need air conditioning here. if you really want to fit in, when it’s bitterly cold make sure you say something like “it wouldn’t be so bad if it weren’t for the wind”, “could be worse” applies to all seasons, and in summer throw out “it’s not the heat, it’s the humidity!” Add an “Uffda” in there and no one will be the wiser that you’re from out of state.
Speaking of weather – I’ve had some surprised clients when I tell them to be prepared for tornadoes. Spring and fall are very active weather seasons in MN as cold and hot air start trading places – spinning, if you will! The twin cities area tests their tornado sirens every first wednesday of the month at 1pm. It’s good to know this so you don’t wonder what the heck is happening and why no one at Target is panicking when they hear that. Most minnesota homes have basements and that is a GOOD THING. Even if you don’t love them (and if you don’t love them, keep that to yourself, people here seem to really love basements! remember – conform conform. lol) You’ll want to have an underground lair to escape to if you hear a legit tornado siren. It seems like they only happen at night. I like that we have a comfy bed there so I can sleep while I wait for the tornadoes to potentially demolish my house. When tornado warning sounds it means that they have SEEN A TORNADO AND YOU SHOULD SEEK SHELTER. DO NOT GO STAND ON YOUR PORCH AND LOOK FOR IT!!
Other potential natural disasters are flooding, drought, blizzard and severe thunderstorm. But look at the bright side! no real earthquakes, volcanic eruptions, wild fires or hurricanes!
OK – Here I go – I’m going to touch the third rail and tell you about the political climate here! Minnesota has a reputation as a progressive and liberal state. This is true in the urban areas but less so as you move out to the the rural parts of the state where it becomes quite conservative. I think this is true of most places in the united states and possibly the world. We currently have a divided government with a Democratic Governor, the State Senate is majority Republican and the State House is majority Democrat. People have to compromise. The state voted for Joe Biden by a significant margin in the 2020 Presidential election, but make no mistake, Republicans do have a strong voice in the state government here.
Minnesota IS quite progressive in many ways, and the Twin Cities area even more so. The Human Rights Campaign gives both Minneapolis and St. Paul a score of 100 for LGBTQ policies and the state as a whole scores highly in pro equality laws. We aren’t perfect, but this is an inclusive place to live.
Minneapolis passed a minimum wage increase to $15/hour which is being phased in by 2024 and is currently $13.50/hour.
The focus on education here has been in place since the so called “Minnesota Miracle” in 1971 wherein the state government readjusted taxes to benefit the schools. This emphasis has faded a bit over time, but education remains a high priority in MN – at least as compared to the other 5 states I’ve lived in.
Lastly on the progressive policies – while we aren’t Colorado, medical marijuana is legal in Minnesota as are low dose THC edibles.
Wildlife and Cautions
What should you be afraid of here? Well, not all wildlife is benign in Minnesota and it’s not all confined to the northern wilderness areas of the state. Suburbs of the Twin Cities metro area have frequently reported black bear sightings, coyotes are regular visitors (and typically harmless to humans), and we do have cougars. The cat. And probably the women too – but that’s your business.
We don’t really have venomous insects (a few spiders that will bite and leave you with the equivalent of a bee sting) but we DO have a LOT of TICKS. If you’re walking through high grass it’s best to have long sleeved shirts and long pants on, tucked into socks is ideal. Permethrin is a spray that you can put on your shoes and clothing to repel ticks and if you’re spending time outdoors its probably a good idea. Ticks do not jump, rather they attach as you walk by and brush against the grass. They then like to burrow in warm dark areas of your body… I’ll let you think of the possibilities here. Ticks are mainly a problem because they spread diseases like Lyme Disease among many other illnesses. A key indicator that you may have Lyme is if you’ve been where ticks may be (everywhere) and you see a bullseye shaped inflamation on your body. Go to a dr and get treated – Lyme disease can have long lasting effects that attack your joints and make you feel miserable.
If you can’t handle these things maybe you should consider a different state? But in my opinion it’s well worth the risks to live here. We love it!
I specialize in helping people relocate to MN from other parts of the United States and the world thanks to people finding me on my YouTube channel. It’s a niche that I love to serve, people are choosing Minnesota and I love to welcome them here.
I know that this can be a difficult thing to do – uprooting your life to make a change to a completely different everything! The climate, the people, the way that Minnesotans live – which is very much OUTDOORS. Many people make the choice for that very reason. One of the other themes that I hear often is affordability and high quality of life.
If you’re curious about the perspective of this couple, what things felt like challenges, how they overcame those, what made them choose MN, what surprised them when they got here and what they have enjoyed so far, you’ll probably enjoy this video!
If this is a move you are considering making and you have questions please don’t hesitate to ask! It’s what I do day in and day out. 🙂
I’m sticking closer to home today and taking you on a tour of the Armatage neighborhood in Southwest Minneapolis! If you want to see what the homes and area look like – watch this video!
Homes in the Armatage neighborhood began to be built in the 1940s, and by 1960 most of the neighborhood was established. The homes in the area really reflect the time period, a lot of post-war (WWII!) bungalows and as the construction reached the ’60’s they began putting up what Minnesotans call “ramblers” and the rest of the country calls “ranch” homes. You still see some 1 car garages, and most garages are accessed off the alley which gives the street and yard areas of the homes a really beautiful feel because they aren’t broken up with driveways, cars and trashcans.
I did a comparison of median home prices for Armatage and the surrounding areas including Edina which is the suburb which borders the neighborhood on the west, the Kenny neighborhood to the east and the city of Minneapolis over all. You can see where Armatage stacks up and how it compares to prices in the city overall.
The highest priced home on the market in Armatage today is a house that was originally built in 1948, but has since undergone a complete renovation and has had a second floor added. It was priced at $799,900. It has 5 bedrooms, 5 baths, a 4 car garage and nearly 3,000 sf. This is not a typical home in the area, but we have seen a lot of homes pop upward like this as people try to stay in the neighborhood but want more living space than the 1940’s or 1950’s bungalows provide.
A more typical house for sale right now is a bungalow priced near the median at $445K, built in 1951 and still reflecting the character of the day. It has about 2000 sf and has 3 beds, 3 baths and a 2 car garage. The lowest priced home I saw currently listed is at $285, a 3 bed, 1 bath home that has been used as a rental and can probably use a bit of TLC.
Armatage has a very active neighborhood association and they hold several events throughout the year including a chili cook off, a holiday light display competition, free movies in the park in summer, a fire-on-ice winter celebration with bonfires and ice skating at the park rink, food truck nights and a summer festival. If you have children the park district has after school programs through community education at Armatage Park Community Center and they also have all day programming there throughout the summer.
In addition to the focus on kids, the community center also hosts events like “Tech Help for Seniors” and a community garden tool swap.
Children in the neighborhood are currently zoned for Armatage Elementary (formerly a Montessori magnet school) In 1952, the Armatage Community School was built, children move on to Susan B Anthony Middle School which is International Baccalaureate School, and then Southwest High School.
Armatage has a close community feel and has the benefit of easily accessible local favorites for restaurants including Pizzeria Lola,Red Wagon Pizza, Book Club, Colita, & Cafe Ceres. It’s a quick ride to shopping to Edina for Southdale Mall or any of the surrounding shops and restaurants including the Galleria for more upscale shopping. Groceries are easy to find at nearby Lunds and Byerly’s or Kowalskis, or if you’re just down the street in Edina you can hit Whole Foods or Trader Joes. Costco people will find the St. Louis Park location the closest – but in my opinion it’s also the craziest one – always mobbed and worth it to drive to Eagan or Eden Prairie instead.
In addition to the large community park, Armatage is well located to reach the paths around Lake Harriet or Minnehaha Creek. As with all areas of Minneapolis, there is a large focus on bicycling and public streets have bike lanes which are heavily used. The city of Minneapolis also has sidewalks lining both sides of the street so you’ll be safe if you decide to walk up to the lake or creek as well.
If you’re curious about other area of the city or suburbs, check out my playlist on YouTube! I cover a bunch of them and I’m always adding more, if there is an area that you’re interested in and you don’t see a video – reach out and I may add it to the list, but can at least answer questions.
Need access to the cities but want a small town feel, White Bear Lake has it! I love where I live but every single time I go to White Bear Lake I want to move there! This suburb of Saint Paul just has a good feel to it – from the historic downtown to the lake and parks. If you’re looking for a walkable lifestyle this should be on your list of places you consider! Watch the video below to see what I mean – lots of footage of the downtown and the homes.
White Bear Lake sits north of St Paul (so if you’re not from around here that’s the east side of Minneapolis St. Paul), if you work in downtown Saint Paul you’re about a 15 minute commute or to downtown Minneapolis it’s about 25 minutes. Getting to the airport will take a little longer because it’s on the opposite side of the city, but if you’re only heading there periodically it shouldn’t be a problem, it’s less than 30 minutes in decent traffic.
Downtown White Bear Lake drips CHARM from top to bottom. Most of the homes in the downtown area have a historic look and feel, but are well maintained. As you move out away from that central downtown area homes get a little newer but this is not the place to look if you want new build / subdivision feel. WBL was an old resort town and escape from the city and the rail line still runs right up to it, it retains that feeling of a lakeside vacation area today. The old downtown has a ton of options for restaurants, pubs, bakeries, shops and other services like salons or day spas. The library is downtown as well, it’s a busy bright and modern space that is part of the Ramsey County Library System.
In the summer and fall, Grab your morning coffee and a muffin from one of the bakeries and then enjoy the community and seeing your neighbors while you shop for locally produced eggs, honey, fruits and vegetables at the farmers market held in downtown every Friday morning from June through October.
For a small town white bear lake has a pretty big focus on the arts and you can take classes or take in a show at the White Bear Center for the Arts, The Player’s Theater or the Children’s Performing Arts.
Home prices in WBL range from the mid-$200’s for a townhouse to $1.2M for a new construction lake front home. If you want to live directly on the lake, prices are consistently over $1M, but you can find something more moderately priced with lake front access.
Currently White Bear Lake has a tighter sellers market than the metro area as a whole – they are sitting at only .7 months of inventory whereas the twin cities is a little over a month on average.
White Bear Lake Area Schools are the big cahuna in this part of the metro they serve all or parts of Birchwood, Gem Lake, Hugo, Lino Lakes, Little Canada, Maplewood, North Oaks, Vadnais Heights, White Bear Lake and White Bear Township.There are a lot of schools in the district, so do your research and see which one will work best for your kids. You can look at sites like Great Schools or Niche.com, but schools welcome visitors that want to tour and get questions answered before making a decision.
White bear lake is home to 24 parks including access to docks at the lake, a disc golf course, and access to Bald Eagle-Otter Lakes Park which is one of 4 Ramsey County regional parks. This park has a playground, boat launch, fishing pier, access to the Tamarack Nature Center and an off-leash dog area. If you’re looking for swimming, White Bear Lake County park has a swimming beach, this park is located just north of the downtown area.
A city in Minnesota couldn’t hold up it’s head if they didn’t have an ice arena – White Bear Lake is home to the Sports Center Ice Arena where you can participate in or watch the state sport of MN – ice hockey – or for those without the urge to body check someone simply some ice skating. You don’t have to be a member to use the ice here, it’s pay as you go!
Hey – if you have questions about anything real estate or living in the Twin Cities related, let me know! I’m happy to help!
I went out and looked at some of the homes on the Parade of Homes tour and this custom build was so pretty. Click to watch my tour with the listing agent. It was a truly grim day on the outside, but bright and comfortable inside!
Whenever I venture out into the hinterlands for a client, I like to get some video and some information on that community for my clients but also so I can pass it along to YOU. Today I’ll show you around Buffalo, MN. It’s a small city in the western exurbs of Minneapolis and a great option if you like a small town feel, lake culture and yet still want to be within about a 35 mile drive of the cities.
I ended up out in Buffalo for the reason I think a lot of people may end up out in Buffalo! My clients were interested in getting a lot of house and the prices are more affordable out there, they were also excited about the prospect of being able to avoid “bidding wars” on pre-existing homes by buying new construction. Most new construction in the Twin Cities is going to be on the outer edges of the cities where buildable land is still available.
When I went out there I met the agent representing the builder and was chatting with him about what is drawing people to Buffalo and his impression was that a lot of people discover it when they become priced out of homes in northwest suburbs like Maple Grove for the size and style of home that they are looking for. I pulled the median prices for Buffalo and the MEDIAN price is $329k for a single family home. For comparison’s sake the median price in Maple Grove is $375K and for the twin cities REGION which I believe includes 14 counties it is $340K.
Digging a little deeper I found that right now there are only 39 homes for sale in Buffalo, fully 30% of those are under construction or completed new builds. Prices range from the very lowest end for a townhouse at $250K up to a 120 acre horse farm with a circa 1900 farm house priced at $1.5 million. If you’re interested in a big house with lake frontage there were a couple of these homes hovering around the million dollar plus mark as well, but MOST homes are much more reasonably priced.
Where the in the heck is Buffalo? Well, head about 35 miles north and west of Minneapolis on rt 55 and you’ll drive right past. If you need to be at the airport for any reason you should plan for about a 50 minute drive to get to MSP airport on the south side of Minneapolis.
Things that I found charming about Buffalo were the shops in the historic business district right on beautiful and large Buffalo Lake. The city still has their post office, library (1 of 30 in the Great River Library District), and other city services right there in the center of town. The one that really caught my eye because I have a thing for books and coffee was the charming and aptly named Buffalo Books and Coffee. I would be a regular if I lived out there! Unfortunately I think Covid may have killed the movie theater, but there are quite a few restaurants either of the chain variety or local favorites within the city limits – not all downtown.
If you have children they will attend the Buffalo-Hanover-Montrose schools, when I looked at Niche.com to check out the district it looked like they are rated a solid B or B+.
The good people of Buffalo have quite a few options for grocery shopping they can choose from Cub which is a large regional chain, they also have a Walmart Supercenter, a Target, and one of the smaller local grocery stores called Coburns Market.
I like to see if cities allow fencing and chickens because I always get asked. Fences, la la la … the usual. Get a permit, 4′ facing the street and 6′ in back. When I looked up chickens I was pretty shocked because the answer was short and sweet but the combination of animals was a little odd – Buffalo stipulates that you may not have a mountain lion or chickens and they phrase it as “no wild animals”. I think this may need some clarification and may be contingent on how large your lot size is at least as far as the chickens go – I can’t imagine the city having an issue with chickens on a 120 acre horse farm.
Another somewhat unusual feature of Buffalo is that they have a small municipal airport. So if your hobby is flying – this would be a really nice convenience for you.
Buffalo likes to party and they have a lot of events every year including things like an Arts and Crafts show, a rodeo, the week long Buffalo Days with marching bands, a carnival and a beer garden, you can jump in the lake if you compete in the annual Buffalo Triathlon (or anytime you want to I suppose) there are free concerts in the park all summer, and in the winter they have a Kites on Ice celebration. There were a lot of other events listed as well, for a small city they seem to have a lot going on.
I can’t leave out the parks! Buffalo has 4 larger regional parks as well as 24 community parks. They have a golf course, a dog park, and a skate park. The parks offer bicycle and boat rentals so you can enjoy the paths or the water and they have trails for fat tire bikes or snow shoeing for winter activites.
Check out my YouTube Channel to see more community profiles on my Neighborhoods and Suburbs or Exurbs and Small Towns playlists!
Does the phrase “appraisal gap” strike terror in your heart? Or leave you scratching your head? What about hearing tales of “appraisal guarantees” that are often needed when you’re a buyer in this seller’s market? If you’re a buyer or seller and you’re not spending every waking (and sleeping!) moment thinking about the real estate market, you may be confused about what these terms mean for you, and they may feel a little scary. Knowledge is power, so let’s talk about what an “appraisal gap” is and what an “appraisal guarantee” means for a buyer or a seller.
If you’ve watched any of my market update videos you’ve heard one thing reiterated and that is that we are in a historically strong sellers market. We have a lot of buyers competing for every home and that means that we nearly always have multiple offers and those offers are often for well over list price as buyers do whatever they can to beat the competition.
On the surface you may wonder “how can that be a problem”? if you’re paying with CASH it’s not a problem, you can pay any price you choose to pay for something as long as you can show that you have the funds available to do it. This is a big reason why cash buyers have an advantage right now, the price is the price and the seller doesn’t have to worry about the bank’s appraised value.
However 80+% of people are NOT cash buyers, they have to get a mortgage for their home purchase and as part of that loan the bank will hire an independent appraiser to look at the property and determine if it’s worth the amount they are loaning you for it. They don’t want to be stuck with worthless collateral to sell if you default on your loan. This evaluation of value is called an “appraisal”.
Sometimes your mortgage lender’s appraiser says the house IS worth less than you agreed to pay. This is known as an appraisal gap or a low appraisal.
I sometimes hear buyers with high loan approval amounts suggest that it might be a good strategy to buy a lower priced home and just throw a large amount of money at it because they can qualify for a loan of that size, but that still doesn’t eliminate the issues around homes appraising for the value of the loan. And really, appraisals exist for this very reason.
Options as a buyer
What are your options as the buyer if you’re worried that the appraisal will come in lower than what you have offered? after all – Sellers want to get the price you’ve offered in the contract whether or not the appraiser says it’s worth that amount as loan collateral.
The option that has been most successful with sellers is writing appraisal gap coverage or an appraisal guarantee into the contract for the purchase of the house. We are seeing this happen about 45% of the time now and it is getting to be more common as the market continues to be tight.
What this essentially means is that you will put a larger down payment on the home which bridges the gap between what you’ve offered and what the bank is willing to loan and preserves your ability to finance the purchase and close on the home.
A typical home purchase contract has an appraisal contingency: wording that says the buyer can call off the deal if the property appraises for lower than the buyer offered. But in hot real estate markets, where buyers outnumber sellers, some buyers waive the appraisal contingency. These buyers either pay cash for the home or gamble that they have money to pay the difference between the appraised value and the price, however much that may be.
rather than waiving the Appraisal contingency entirely, offering to cover the gap on a low appriasal is the middle path. You’re offering some amount that you will make up via a larger down payment.
Take the example of the $120,000 offer on the $100,000 home that has a $10,000 difference between the purchase price and the appraised value:
If you had offered to cover an appraisal gap up to $10,000, you would proceed with the purchase, bringing that extra $10,000 as a larger down payment.
If you had offered to cover an appraisal gap up to $5,000, you would be entitled to withdraw your offer and get your earnest money deposit back. That’s because the difference between the offered price and the appraised value is greater than the $5,000 appraisal gap coverage.
At this point, the seller may wish to negotiate with you to keep the transaction in tact and they may agree to lower the price by the remaining $5000.00 difference, or they may choose to go to the next buyer.
You’re more likely to succeed when offering appraisal gap coverage if you include proof of funds to do this as well.
If you’re lucky, you may not have to worry about appraisal at all. The bank may waive the required appraisal if they can see market conditions support it and that the buyer is bringing 20% or more as the down payment. This means that they look at the market data and determine that the property is likely worth the purchase price, but you will not know this until you’re closer to closing.
Things to think about
A couple of things to add as you consider whether or not to do this on your next purchase agreement:
Think about the home you’re buying, it’s condition, price, and location and what you’re willing to do to purchase that home. You want to be doing this for a home that will hold or appreciate in value.
Because of the market conditions, home prices nationally increased over 14% year over year. Median home prices in Minneapolis and the Twin cities went up 10.9% year over year according to the Minneapolis Area Association of Realtors.
Put that into perspective with your purchase.
If you are buying a home priced at $100,000 today and prices continue on their current path, that home would be valued at $111,000 a year from now.
If you’ve agreed to make up $5000, or $10,000 in low appraisal, the likelihood that you will be “whole” in a short period of time is there.
Another consideration is whether or not you will be able to afford a home in a year or two if this continues and if interest rates continue to rise.
So, it’s a math problem. Never been a big fan of math problems, but looking at it this way really adds some clarity and perspective.
Reach out with questions! I’m always happy to help.