Home Buying · home selling · market updates

Minneapolis Real Estate Market Update Feb 2022

A month goes by in a hurry it seems, so here we are! Did a month make a difference with the real estate market? YES. It is notably busier!

Click here to watch. ūüôā

I don’t think I’m telling you anything you don’t already know, but the real estate market is on fire.¬† Someone hit the gas pedal on the housing market in February and they have a lead foot. What does this mean specifically?¬† Let’s look at the twin cities housing market as of Feb 18 2022.¬†¬†

signages for real property selling
Photo by RODNAE Productions on Pexels.com

If you are a seller – LIST NOW and you’ll be partying all the way to the bank.¬†

Just about every listing is getting multiple offers in the first couple of days. The supply of buyers is so great and the supply of homes is so low right now Р15% fewer listings on the market than last year at this point! 

Why are sellers hesitating? I assume that it’s because they are worried about finding THEIR next home.¬† As an agent that represents a lot of buyers, I can tell you that sellers can not only command great prices for their homes they¬†can still get a closing date that suits their needs. For example, if a seller is considering putting their home on the market, but are worried it will be gone in a blink, there is a great likelihood¬†that the seller can ask for and receive a 60 close, flexible closing, or recently I’ve seen them asking for a seller’s home purchase contingency or lastly a rent back situation after closing remembering that most conventional¬†loans require the transaction to close in 60 days on the buy side so no long term rentals this way! but this way the seller will have cash in hand and be able to buy while also have a roof over their heads while they wait for their next home to be available.¬†¬†

One of the things that I really like about real estate is that EVERYTHING is negotiable – as long as the parties work it out (within the law!) and get it in a signed contract, the parties can work together to find a solution that works for everyone. Do you have a creative way to structure a contract that lets everyone get what they need?  Bring it up and there may be a way to make it work out!

This past week we had offer acceptance rates at 15%, which means that sellers are receiving 6-7 offers on average. But the average for the month is hovering around 35% according to Home Free Transaction Coordinators. I’ll give you more info on what they see in a successful offer after I take you through current market conditions.¬†

Absorption rate

It’s a seller’s market, but to what degree? In the past I’ve explained that the way that we determine this is based on the absorption rate or how many months worth of housing inventory we have at a given time if nothing new were added to the market.¬† 5-6 months is considered balanced, more than that is a buyer’s market and less is a seller’s market. Obviously the more extreme the number the¬†more it favors one or the other. That obviously varies by housing type.¬†¬†

Single family homes have a .56 months (about 17 days) supply now as compared to one year ago when they were at .62 (about 19 days).  We have started this year off with available inventory down by 21% year over year. New listings this month are down by 15% from last year.  

I was looking for a bright spot and looked at new construction. Builders are responding to the need for houses and have started increasing their production too.

This image shows the big dip and now the increase starting in single family new builds between $400 & $600K. Its not dramatic, but any amount helps – if you have 50 more houses that’s 50 buyers that have found something.

If you have been thinking about selling and are curious about what your home is worth today, let me know. I’ll give you a free estimate of what your home is worth today – absolutely no obligation, just for your information if you want to know – just send me an email. We need homes and now is definitely the time to get the maximum amount of money out of your sale! mschumann@kw.com if you’re curious. I’m happy to do it.

Townhouse/ Condo properties are at .97 months (29 days) vs 1.13 a year ago (34 days). Prices on Townhouses are at a median of $267,000 which is UP 12.2%.  Average days on market for a townhouse is down 26% to 14. 

Condo prices are at a median of $195,000 up 6.6% from last year and are on the market for about 30 days. If you are a first time buyer or someone that likes condo living, this is the softest spot in the market today and your biggest opportunity. 

Single family homes in the 14 county metro area have a median price of $370,000, a gain of 12.1% year over year. They are on the market for NINE DAYS. Only about half of what we saw a year ago. And don’t fool yourself thinking you have 9 days to think about it, this is a listing going live on a Thursday, showing through the weekend, closing offers on Sunday and allowing a 5 day inspection period before heading to pending.¬†

The combined absorption rate (all property types) is at .67 months or 20 days of inventory as opposed to one year ago when we had a whopping .75 months or 22 days of inventory. 

What can you do if you’re a buyer?  

Here are my suggestions and strategies:

1.my office posts properties to agents internally that are off market and that sellers are willing to part with before going onto the MLS, so having that network available helps a lot!  

2. make sure you see what is available in “coming soon” and get in there quickly¬†

3. even better if you have the nerve-  offer “sight unseen” while in this status. if the seller will do it, you can usually negotiate an inspection this way and if there is something wrong with the property get out of the contract without losing your earnest money, this does require a good offer out the gate. It’s not a way to get a bargain, but is a way to quit losing in multiples.

4. make your offer more appealing are to offer appraisal gap coverage. This means that if you are financing you are stating that you have the ability to make a larger downpayment¬†in order to cover the gap between your offer and what the bank is willing to loan you, having cash is a very important piece of the puzzle in this environment.¬† You can offer any amount of appraisal gap coverage – it doesn’t have to be 100% of the difference!

5 Look at “wallflowers” these¬†are properties that have been on the market for longer than 4 days. This means they have made it through a weekend without getting an offer and may be more willing to negotiate or look at a reasonable but not extreme offer. These can be homes that a buyer got cold feet on, that their financing fell through or other scenarios.¬†

6. Don’t ignore properties that need work!  You can get a home loan that rolls a remodel into it. Not everyone can look past a dirty unfinished basement but it’s rarely a bad investment to add finished square footage to a house – especially in an in demand neighborhood. 

7. Do you have time? Offer on new construction. You eliminate multiple offers and choose your finishes.  Just be aware that contracts allow builders to cancel your contract if the price of materials goes up and you can’t cover the increase. Don’t get yourself in too deep. 

8. There aren’t a ton of these available but spec houses are a good option. They may be completed new builds OR they may be nearly completed with an estimated move in date already.  

9. my last option coming to¬†mind to look at loans that allow you to offer as if you’re offering CASH – without a financing contingency. This seems like a HUH??! moment, but in my video next week I’ll interview a lender with a program like this that may give you a leg up and I’ll post it here, of course!

Accepted offers

OK – lets look at what’s been going on with offers per HFTC: 

Buyers are waiving inspection 46% of the time, this is a lot, but that also means that 54% of the time they are getting an inspection. 

Off market sales are at 12% – this is the “private listing network” that I mentioned where agents that have upcoming listings market them internally first.

Sales Contingent on the sale of the buyer’s home is down to 5% of the time. 

Average sale to list price is 103.2%. I don’t know where these are happening because my buyers have been offering at 15% over and losing… We would be happy with 103%!

Cash is at 17% of offers, Conventional at 69%, FHA has ticked up to 5%, VA is at 0. 

Hey! I would love to hear from you in a comment or an email or a smoke signal … reach out if you have questions! 

Home Buying · home selling · market updates

Twin Cities Real Estate Market Update – Fall 2021

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  Рsomewhere 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.

Median Price for Single Family Homes
Median Townhome Price
Median Condo Price


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.¬†

market updates

Twin Cities housing market update – June & a bit o’ July 2021

Is the feeding frenzy OVER?!? Not quite, but it seems to be a LOT better? Of course that is relative! and in this case I mean relative to the crazy times we were in in March – May!

In this video and blog post I’m giving you the current conditions of the market for the 7 county Twin Cities area broken down by property type and then I’ll go into a bit about what we see as far as what terms are resulting in accepted offers right now. These are the encouraging signs I’ve been looking for!

This year has definitely been one for the books! It has been the strongest sellers market that anyone I know can remember Рand this is AMAZING if you have a home to SELL! Prices are higher than ever and you can dictate the terms for the MOST part РHOWEVER! Buyers! Do not despair!  Things ARE getting easier for you now (at least compared to a couple of months ago when it was an all out SCRUM!)

A note about these graphs – I chose to make them show monthly ups and downs without the smoothing effect that softens the seasonal aspects, so keep that in mind as you look at the dips and heights. the market changes constantly, and this shows those changes month to month.

The median SFH price in the Twin Cities sits at $380,000 – that is UP from $326,100 at the beginning of this year.

Median Price TC Metro Single family Homes


You’ll often hear me talk about the “absorption rate” or the # of months supply¬†of housing available to be sold if no other homes were to go on the market. For context it is considered a BALANCED market if there is 5-6 months of supply.¬† We have been UNDER 1 month for different segments of the market for much of this year, mainly anything under about about $600K. Right now we are STILL at .8 months for anything under about $400k.¬† For single family homes in general we are at a little over 1 month’s supply of homes.¬†

Months supply of Single Family Homes

Homes are only on the market for FIVE DAYS!!! a year and a half ago it was FOURTY FIVE! And only 6 months ago around 20!   So still homes are still flying off the market. 

Days on market – SFH

Let’s look at the 2 softer spots – Townhomes and Condos.¬†

The median price for a townhome is consistent with the rest of the market rise in prices and is at $271,000 from $240,000 in January.

Median Price for Townhomes

For Townhomes there is a little uptick in supply and we have a full month available right now. 

Months supply of Townhomes

Condos! This is the place if you’re looking for any kind of deal! Sellers are negotiating! You can get an INSPECTION!   ūüôā
Condo prices are at $171,000 for a median price, up a similar amount from the beginning of the year as other property types are. 

Condo median price

The supply of condos is where the opportunity comes in РStill a sellers market but for people selling condos it can feel like a whole different world. There are 2.5 months worth of inventory available. This has dropped a small amount since January but has been relatively flat this year overall. 

Months supply of condos

Now let’s look at what kinds of offers are being accepted!¬†

This is a valuable bit of information that the Minnesota Transaction Coordinators gives us on a regular basis and I’ll add my 2 cents to about what I am seeing (although as a much smaller segment of the market)

Offer Acceptance Rate: 42%

Inspections Waived: 31% – we haven’t been in the 30% range since March 

My 2 cents: the last 6 contracts (this past month or so) that I have either written or accepted have had inspections included and accepted. that’s 100% of my sales in the past several weeks. I’ve been thrilled for my buyers and I am 100% fine with it for my seller as well because I feel like inspections protect EVERYONE, the buyer, the seller and ME.

Pre-market Sales that happen without hitting the MLS : 2.8%. This is DOWN from earlier this year! It was over 5% for quite a while Рmaybe due to pandemic fears about having too many people in a home?

Average Purchase to List Price: 102.7% – about the lowest it’s been since the spring market!¬†

Still great for sellers, but also good news for buyers! And a lesson to sellers about pricing appropriately. Things change, you want to not have YOUR home sit because it’s been priced too high as well as understanding that unless you have something really special that the insane bidding wars may be over for now.  

I have talked to many agents saying that showings are down from earlier this spring when agents were setting overlapping showings and having the home packed full of people for 12 hours per day.  Now there are private showings again. There may be open spaces in the calendar. More than one offer may come in but they aren’t seeing the literal STACKS of offers that they were before.  

Financing Types:

Cash 11.5%, which is higher than it’s been

Conventional 68.5%, – a little lower than its been 

FHA 8.5%, higher! 

VA 3%, Still a rough spot!¬†People that use VA are often choosing it because it is a no downpayment loan, which means they are short on cash. If you can’t make appraisal gap guarantees, or add other sweeteners that need ready cash available this can be a VERY tough time to buy.

USDA 8.5% (this is a high number and I wonder if it is a function of the sample size that they had Рif they had 2 transactions it could hit this #). These loans are generally for rural buyers.

Seller Paid Closing Costs: are at 12%

Home Warranties: 5.7% – I was able to negotiate this recently as well! 

Contingent Upon the Sale of the Buyer’s Property: 8.5% (this seems HIGH to me! I’m still cautious about having this particular contingency, it can be a real weak spot in an offer if you have any competition at all. I would avoid this at all costs or you may have to make it an offer they can’t refuse due to price, or magically find a seller that wants to stay a little longer.

And that is ALL for this week.¬† I’ll be back next week with some more neighborhood profiles.¬†I’ve been AWOL due to this insane market and actually getting a vacation for the first time in YEARS. No regrets. ūüėČ

See you then! 

Home Buying · home selling

March Real Estate Market Update

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…

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

I swear … it was this big!

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

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

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

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

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

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

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

What is the Twin Cities absorption rate today?

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

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

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

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

Absorption rate by price point

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

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

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

Let me know if you have questions… ūüôā

Uncategorized

The hard truth…

I did a video about winning as a buyer in a seller’s market last summer. I thought it was bad then. I was right, but I was wrong. I really didn’t conceive of how much harder things would get for buyers and I have all of my fingers and toes crossed hoping that it gets easier soon for buyers – I represent a LOT of them and it can be really hard to keep trying and not succeeding.

The only way that it will get easier is if more people decide to put their homes on the market. If you have been thinking about listing your home – now is the time! You may not even need to show it.

New construction is an option for people that want to buy, but at the same time demand for that is very high as well and they will be happy to take a contract now and begin to dig… in September, October or later.

Right now you have something like a 65% chance of NOT having your offer accepted right now. And that is if you’re in a GOOD position and well qualified and throw everything you have at it.

It’s come to this.

At our team meeting today we were talking about this subject and people are saying things like “37 offers”, “25 offers”, on a single listing in a couple of days. How can you possibly win in a situation like that? Sellers are looking at a spreadsheet of offers – what will make YOURS stand out in this crowd? List price isn’t going to do it.

Someone in my office said that one of the questions they now ask every buyer is “what can you bring to the table that no one else can? What will make YOU stand out?” At a certain point you can’t throw any more money at the problem and you have to get creative.

Examples that she gave of things that made sellers select their offer over others were tickets to a Packers game, a weekend at their cabin, etc.

Photo by Karolina Grabowska on Pexels.com

I know this ridiculous on some level, like … this should be about getting a fair price and good terms for a home. It should not be the Hunger Games. But it IS the Hunger Games. If you understand this going in, you may have a shot at winning instead of making offer after offer and NOT winning, growing discouraged and frustrated and possibly homeless in the process.

The seller holds all the cards.

Price

When you make an offer on a property there will be several things that you’ll have to decide on, and I’ll give you a list of the fundamentals but you have to go beyond that. In a balanced market or in a buyers market you would not have to throw absolutely everything at the wall to see what actually sticks, but we are in a market that is so firmly in the seller’s favor that you have to ask yourself “what am I NOT willing to do to get this property?”

In this market, the price is not the price. The price is the floor. If you find a magical property with no other offers you may be able to get away with list price. When I think I have found one of these I STILL encourage an escalation clause that will bump my buyer’s offer over the net price of the next highest offer in the event that one (or more) come in between when we submit it and when they evaluate the offer.

So understand what the maximum amount of money you are willing to pay for a property and then put that number in there and know that if you do not get the property you did AS MUCH as you could price-wise, and price is the number one consideration, but it isn’t everything!

Earnest money

In Minnesota, it is normal and typical to give 1% of purchase price for earnest money. In this market you want to demonstrate seriousness by giving MORE. You can pick a lump sum, or decide on a percentage. In normal circumstances this is refundable if the purchase agreement is cancelled because it doesn’t meet a contingency – inspection or financing or something else.

Some clients are designating an amount as NON-REFUNDABLE.

Financing

There is no offer without a pre-approval from a reputable bank. Not a pre-qualification – a pre-approval! Without some sort of statement that you can execute on the contract your offer will be placed directly into the trash bin.

The MOST desired form of financing is CONVENTIONAL. The reason for this is that there are no FHA or VA appraisers that may find inspection issues with a home. It’s one less potential hurdle to a successful closing.

Conventional financing has some misconceptions – many people think that means that you have to have 20% down. You do NOT have to have a 20% downpayment to get conventional financing. Talk to a loan officer about what your options are.

Speaking of downpayment, having a large one available is also a bonus. It shows financial health and stability and again gives the seller a feeling of comfort that the sale will actually close.

Not everyone can do it, but if you can, a cash deal carries weight! It’s one less contingency that has to be cleared before the transaction can close. If you do have the means, you will include proof of funds with your offer in the form of a statement or a screen shot of an account with the relevant account numbers removed from the image.

Close Date

Sometimes this is an important criteria for a seller, and if you have the flexibility to be able to meet that sate, it is certainly a factor.

Written statement

A purchase agreement has an option to indicate that the lender will supply a written statement to the seller that the loan is basically approved and ready to go. Having this in your offer is another thing that the listing agent will be looking for, not having that is a point of weakness.

Inspection

This is a biggie.

Inspection periods are being reduced to very short time periods – 3 to 5 days instead of what was typically 10 as recently as one year go.

Buyers are waiving inspection, OR putting in writing that they will not ask for any repairs under x$ in value. You’re taking that risk either mostly or entirely off the seller. I would be selective on the homes that I chose to do this on if it were me buying. Some homes give a relative sense of comfort, while others you walk into and just feel that there is work that probably needs to be done. If the surface isn’t good, the subsurface likely isn’t much better.

A question to ask yourself when considering inspections and their value to you as a home buyer is to think about what information they give you and what would make you walk away from the home?

Home inspections can give you a certain amount of information, but even they are not a guarantee that the home will be problem free. It’s a status check. Do the appliances work they way they should, do the mechanicals? How is the roof? Is there anything frightening about the electrical? The inspector is looking for health and safety concerns.

If the inspector found that the the electrical needed a $1000 fix, would you walk away or would it take more than that?

If they find that the dishwasher works but is on it’s last legs and needs replacing soon, would that be enough? (If so, you’re probably not buying the right property).

I’m saying this because if you waive inspection and find a $1000 or a $5000 fix after you move in, will you still be happy you bought the home or will you regret your purchase?

If it means that you will not get the home if you’re in competition with someone that removes this contingency are you ok with that?

Appraisal

Because list price is basically the floor right now, sellers are getting large sums of money over asking price and that raises questions about meeting appraisal value if the home is being financed.

In the past, buyers and sellers would either meet somewhere in the middle or the seller may reduce their price, that is no longer the case.

Now buyers need to give a guarantee that they can make up the difference in cash if the appraisal comes in low. This is one reason why a high down payment is important, if it comes down to it, the amount financed can be higher and that money can be used to make up the difference on the appraisal.

Many of my sales in the past year have had appraisals waived by the bank because they can see that the value of the home is there by looking at neighborhood statistics, but if the other sales don’t support this an appraisal will still happen.

On listings, I have provided appraisers with copies of back-up offers that support the price that the buyers are getting. We work together to make sure that important information is shared.

Common Interest Community Recision Period

In Minnesota, if you’re buying a into a neighborhood that has an HOA, you are entitled to a 10 day right of recision period from the point at which you have received the last HOA document. On a recent offer the agent came back and said that not only did they want inspection waived but they wanted it in writing that the right of recision on the docs would be reduced to 3 days instead of 10.

Closing Costs

In a BUYER’S market, we often ask for a seller to contribute to the buyer’s closing costs. That is a NO right now, the only way it could exist at all is to raise the offer price to cover that difference. In fact, on a listing that I had the BUYER paid the SELLER’S government closing fees. No one had ever heard of this before and now I’m seeing agents mention it all the time.

Home Warranty

This one… well, a home warranty is a 500-700 dollars, it’s not something that you’ll want to ask a seller for at this point. One thing you can do is purchase one of your own.

So! That is the hard truth about buying in this market. Are you ready to get in the mix? Or better yet – thinking of selling? Now is the time – YOU dictate the terms.

home selling · Uncategorized

Selling your home FAST during the holidays (or hey, how about just in WINTER!)

Believe it or not people here in these northern climes still buy and sell real estate even when Christmas is coming or we are in the depths of a bitterly cold winter. People have to move. I’m one of those people – 4 out of the last 5 moves that I have made have been in either the end of December or the beginning of January.

Summer sales have the benefit of showing your home at its lovely best – flowers in the pots, green grass, leafy trees, birds chirping… no ice, no black snow, no howling wind. But in the winter? Well, you have the benefit of less competition both on the sell and the buy side. People who are serious are looking and those who have a hobby of looking at homes without pulling the trigger may actually decide to stay home.

So how do you attract buyers to your home like a moth to a flame? Here are 6 strategies to use when you’re selling your home in what you might not think is the “ideal” time.

Make your online presence shine

Photo by Ryutaro Tsukata on Pexels.com

Most people shop online first! So the number one thing you can do to make sure that your home stands out is have a really beautiful online presence. Your realtor should be hiring a professional real estate photographer – NOT snapping pics on their iPhone, even if it’s the latest and greatest. Professional real estate photographers know how to make a home shine online.

Do the prep work to get the home “staged” before pictures too. You don’t have to hire someone to come in, and you can use your own things, but take a critical look at the quantity (less is more to a point) and then make it look cozy with appropriate art, accessories and pillows. You’re creating an ideal for someone. You want to make it look like a space that they can imagine themselves living in.

Play up the holidays!

Photo by Any Lane on Pexels.com

If you have a sweeping staircase or a mantel, put greenery and twinkle lights on them, set up some candles – faux are great because they don’t have a scent, no fire risk, and they can be on during open houses or showings. If you have a gas fireplace, have it lit for photos, or turn it on before showings if you’ll be right back. If you don’t need to worry about little ones, I would even say to have your table set as if you’re about to have a party.

But, keep it simple and understated, not over the top. You’re creating a mood, and you don’t want that mood to be “I just stepped into Santa’s workshop”.

Make sure that the home has every light on, and that none are burned out, it gets dark in MN at 4:30 in the winter, people want to feel like they are being welcomed into a comforting space. Lighting goes a long way.

Be flexible with showings.

We all have a lot going on during the holidays, people are visiting, they may be entertaining (or at least in normal times) and not want to have showings that interrupt. It probably won’t feel that convenient to be letting people in to see the home in the midst of this, but, try your best to have the home show ready at a moment’s notice. People need to see it to decide if they want to buy, the more open, available & flexible you can be the better.

Make Curb Appeal a TOP Priority!

Photo by Lina Kivaka on Pexels.com

People will literally slow their roll – and then speed it right back up again if the house looks less than appealing on the exterior.

Make sure gutters are clean, sidewalks are shoveled and ice free, paint on doors etc is in top shape – maybe a fresh coat to the front door to make it pop?

Hang a pretty wreath, put down a cute new welcome mat, put evergreen boughs in your planters and highlight features that get use year ’round like fire pits or hot tubs.

Incentives!

If homes in your market aren’t moving very quickly or if you have a home that has a negative feature that is a challenge to overcome, especially with good competition, think about offering an incentive. If there is an appliance that you can replace, a home warranty to offer, a TV, or some closing costs that could be picked up if an offer comes in by a certain date – consider that as a carrot to entice a buyer to get off the fence and get that bit of extra incentive.

Do a themed open house!

Photo by Pavel Danilyuk on Pexels.com

Use the holiday to create a fun open house! Offer some holiday themed treats, have appropriate music, and make the buyers really envision spending their next holiday in the home.

Have questions about living in Minneapolis or the Twin Cities? Let me know!

Home Buying · Living in Minneapolis · Uncategorized

Getting a win in a seller’s market…

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

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

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

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

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