Friday, June 21, 2013

Real Estate Word of the Day: Easement

I was talking to an old friend recently who mentioned new company had moved into Minneapolis/St. Paul area named FICO. I was taken aback by the confusion because most people living in the Twin Cities north metro are aware the business analytics company, Fair Isaac Corporation, has been located in Shoreview for decades. So the "new" company was just  Fair Issac being renamed as it's acronym, FICO. But it was eyeopening that few outside the real estate and mortgage industry may have made this connection.

Once again, I was a bit surprised that such a simple term I use everyday as a REALTOR® would be unknown to others. But then it got me thinking of all the times a glazed look came over a buyer’s eyes when I talked about escrow or earnest money. These can easily be confused with other real estate and mortgage terms like down payment or cash to close. It is totally understandable because most home buyers do not buy houses everyday.

There are so many terms that could possibly confuse a First Time Home buyer that I thought an online glossary of real estate terms might be helpful. So over the next several weeks I am going to have a series of posts for the first time homebuyer with explanations of the most often used (and sometimes confusing) real estate terms. This way you can skip buying that big “how to buy a house” book or attending that
First Time Home Buyer Class and have a quick resource at your fingertips. Today’s Real Estate Term is:

Easement—A right given by the landowner for a specific use of a portion of his/her property granted to a third party. Once the right is given and recorded on the title it continues unless vacated by the entity that received it. Common easements include utility and driveway easements. There can be more than one easement on any given property. When buying a home it is important to understand where the easements are as they can dictate what you can and cannot do with the land.

For instance, a new septic system, storage shed or flower garden cannot be constructed in a utility easement as the easement holder uses the easement for access to under and above ground utilities. Likewise a drainage easement could literally wash away your landscaping investment.

Driveway easements allow access to a landlocked property. While such agreements often provide an acceptable solution for access, they can cause headaches for neighbors who aren’t respectful of each others.

Easement holder does not own the land but has a right to use the land as specified in the easement agreement. This differs from an encroachment where a third party uses the land without permission.

Copyright 2013

Thursday, June 20, 2013

Real Estate Word of the Day: Deeded Access

A typical person will buyer only buys a home once every five to eight years. Many will only buy one or two properties in a lifetime. First time buyers and repeat home buyer alike can forget some of the simple terms used in real estate on a daily basis. For some it can be hard to remember whether the earnest money or money escrowed becomes part of  the down payment  or not. Often buyers are easily confused by similar sounding terms like easement and encroachment as they both deal with property lines and usage but what do they really mean?

Whether you are a novice, first time buyer or someone who owned a home previously but hasn’t purchased a home for several years, sometimes a refresher on real estate terms can be very helpful. I often notice buyers (and sellers) with a glazed look on their face when certain terms come up so I thought an online real estate glossary would be a useful tool. The real estate term for today is:

Deeded Access Deeded access is access to the lakeshore as outlined in the deed for the property. As a Minnesota REALTOR® I deal with lots of lakeshore properties. Heck, it is the “Land of 10,000 Lakes” after all. Some properties are right on the shoreline and the riparian rights (right to use the lakeshore) is obviously the property owners. But sometimes a property within close proximity to a lake will allow homeowners to use the lake as well. These rights can include the ability to use a private beach, put in a dock, dock a boat or other various rights. Not all deeded access is created equal. To understand the riparian rights associated with the property, a buyer must inquire and read the specifics outlined in the deed.

Copyright 2013

Tuesday, June 11, 2013

RELOCATE to Forest Lake MN Where the Schools are Full of Ranger Pride!

Forest Lake Area School District #831 is more than it appears--Much More. Many people would not realize how many communities and neighborhoods are a part of school district located in the northeastern Minneapolis/St Paul metro area. It is a district that strives to Inspire the Learner…Ignite the Potential which is the district motto.

Located 35 minutes northeast of the downtown St. Paul, Minnesota, the Forest Lake School district is geographically quite large. Its borders encompass with over 240 square miles of area making it one of the largest school districts in Minnesota geographically, Forest Lake schools are the educational home of 12 communities in 3 different counties. Students come from Columbus, East Bethel, Ham Lake, Lino Lakes, Linwood in Anoka County. Other attendees are from Wyoming and Stacy in Chisago County. Many children are from homes in New Scandia Township, Forest Lake, Hugo, Marine on the St. Croix or May Township in Washington County.

® in the north metro Twin Cities suburbs, I have sold a number of homes within the District #831. Many residents love the fact that the schools are structured with kindergarten through 6th grade in the elementary schools, 7-9 grades in the junior highs and 10-12th grades in the senior high. It may be “old school” but preferred by many in the area.

There is one high school, Forest Lake High School that was just ranked as one of the top 2000 high schools in the nation according to Newsweek/Daily Beast. Students show Ranger pride by wearing maroon and gold as they attend classes on a five period schedule allowing for additional time to learn each subject. There are programs for college bound and vocational students alike. Advanced placement classes, advanced technical/vocational classes and College in the Schools are popular programs at FLHS.
With awarding winning sports, theater, speech, music and other extra curricular activities, there is no end to Ranger Pride!
The two junior high schools, Century and Southwest are both located in the heart of Forest Lake. Century Junior High is located across from the high school on highway 97 and Southwest Junior High is on 10th street just south of the business district.

There are 8 traditional community elementary schools and one tuition-free Montessori school that are a part of the Forest Lake district. Columbus Elementary, Forest Lake Elementary, Forest View Elementary, Lino Lakes Elementary, Linwood Elementary, Scandia Elementary and Wyoming Elementary are all schools in district #831. Six of the eight schools have been named Minnesota Schools of Excellence.
Central Montessori is one of the gems of the district. It provides public elementary education based on Montessori teaching methods and is available tuition-free to all elementary students in the Forest Lake district. Another elementary stand out is Lino Lakes Elementary's STEM program focusing on Science, Technology, Engineering and Math. 

Copyright 2013

Monday, June 10, 2013

The BIG Affect a Rise in Interest & Price has on Home Affordability


(Or Why NOW may truly be the best time to buy a house.)

For a number of years the housing market in the Minneapolis/St Paul metro has be extremely affordable. Even with the rise in housing prices since the beginning of the year, our market continues to be affordable compared to other areas of the country. A home buyer can find a very good quality starter home for under $200,000 in the Twin Cities if they are flexible with their location. But that appears to be changing.

Housing prices are on the rise across the metro area. And, interest rates won’t be at historically low levels forever. In fact, rates have crept up a bit in the past few weeks. So when a REALTOR® tells you “NOW is the Best Time to Buy”, I’m not just marketing. It will be more expensive to purchase a home next year if the economy and real estate market continue to improve.

Don’t just take my word for it. An article I read on the KCM (Keeping Current Matters) Blog today,  Buying a House: Is NOW the Time? reiterates this point. It shows how the slight uptick in the market really affects the payment on an every day starter home purchase from 2012 to 2013. This is based on prices rising 10% from June 2012 to June 2013. According to KCM, a home priced at $200,000 in June of 2012 would have roughly $100/month higher payment if purchased today. And  the required down payment for the same house would be higher too.

Home prices in Twin Cities north and east metro are continuing to rise. In Anoka County MN, the average sales price of a single family home is up 14% since the beginning of the year. The average sales price of Washington County homes is up 4.5% and Chisago County has seen a dramatic  23% increase in average home value just in 2013.  These rising prices did affect by buying clients this year. Most had to spend more than they had expected as prices changed dramatically from the time they initially began the buying process about 6-12 months ago. Whether they were looking at townhomes in Hugo or single family homes in Blaine, prices jumped since the beginning of the year and it did affect where they bought and what the paid for a home. Almost all buyers were in multiple offer situations too.

Local real estate market remain poised for continued improvement affecting home prices AND interest rates. I don’t need a crystal ball to know that this could be the best time to purchase. Of course, I could look back with my 20/20 hindsight and say that last year was better too. But there are still MANY OPPORTUNITIES in this market still. It would be wise to listen up and realize it isn’t just marketing puffery, NOW is a great time to buy a home!

Copyright 2013

Friday, June 7, 2013

Blown Over Tree Cancel Your Home Sale? Understanding Risk of Loss

We are currently experiencing a real estate market rebound and though it may seem unrelated a crazy storm weather pattern. With the summer storm season is upon us and sold signs appearing on homes throughout the Minneapolis/St Paul metro, there are bound to be homes that will sustain storm damage before closing.  

So what if the unthinkable happens and a few weeks prior to the closing, straight-line winds blow through town and damage your property. Maybe picturesque hundred year old oak trees that gave the home character have been uprooted. Or worse yet, what if one of the huge oaks fell onto your house severely damaging the roof. What happens now?

What you might not realize is that this situation has been addressed in the purchase agreement you have signed. Risk of Loss is one of those “boiler plate” clauses on page four of the purchase agreement used for almost every real estate transaction in the State of Minnesota. Being preprinted, some agents and/or their clients will gloss over this clause when dealing with closing dates and net prices but it is a very important concept to understand, as is every other line in the document you sign to buy or sell a home.

This paragraph clearly states that the risk of loss due to any reason whether an act of God or the acts of vandals will be the responsibility of the seller from the time the purchase agreement is signed until the date of closing. That means if there is a fire or accident the seller will be required to bring the home into the condition that it was in at the time the contract was written and signed.

So if that temperamental decade old washing machine goes on the fritz, the seller is required to replace it. If a neighbor backs over the mailbox at the end of your driveway, it must be repaired or replaced with a new one. Final walk-throughs of the property are essential to ascertain the condition of the home is acceptable to the buyer prior to signing the closing documents. 
But what happens if it is irreplaceable picturesque trees that have fallen on the roof?
Even if there is substantial time prior to a closing, for the seller to call their insurance company and have the home repaired, that may not be enough. But, Is it the same house? And more importantly does the buyer still have to buy the home? In a word, no.

The clause goes on to say that in the case where there is substantial damage to the home or property, it is the buyer’s option to cancel or continue with the purchase agreement. The situation outlined above is common situation where the landscaping is changed due to storm damage. Often this cannot be replaced. The damage to the home could also result in an insurance claim that would now be reflected in a
CLUE insurance report. This could affect the cost to insure the home. Buyers can opt to cancel the contract in this situation with all earnest money refunded.

Risk of loss comes into play from time to time in residential real estate transactions. In most cases the repairs are made quickly to both the buyer’s and seller’s satisfaction and the contract will close on time. But when the property sustains significant damage as determined in the buyers' eyes, they have the option of continuing to closing or walking away from the deal. Boilerplate or not, risk of loss is an important clause to understand when buying or selling a home.

Copyright 2013

Tuesday, June 4, 2013

Why Should a Home Seller Pay the Buyer's Closing Costs?

Sellers are excited about being in the driver's seat again...yes, it is a sellers market in the Minneapolis/St Paul north metro again. When I do a market analysis on a home for a potential home seller, I give always net sheet of estimated of closing costs associated with closing the sale of the home. 

One of the items on the list is “Seller contribution to the Buyer’s Closing Costs.” This particular cost doesn't sit well with most homeowners. Every now and again,  a seller will verbally scoff and say something to the effect of, “My own closing costs are high enough. Why would I want to contribute to the BUYERS too?”
But even in this seller's market, the answer is quite simple:
So they can BUY your house!
Today most buyers are required to put down a minimum of 3-5% of the purchase price of the home as a down payment. The closing costs for a buyer include title insurance, home owner’s insurance, appraisals, loan origination fees, name search fees, filing fees and more. As a
REALTOR® in the communties throughout Anoka County and the north metro Twin Cities, I see these closing costs will run anywhere from $6000-$8000 for a first time buyer. Couple this amount with a required down payment and few buyers have the funds to purchase a home. 

It's not just first time buyers that need the help either. Many move up buyers are getting out of their small starter homes that they purchased just before the housing market downturn. The market has recovered enough now that these families can break even at best. They don't have a huge down payment, but want to make the move up to a larger home so they often ask for closing cost assistance from the seller to make the deal work.

The bottom line is: homebuyers have the option of waiting and saving for additional closing costs or asking for seller assistance. In many cases a financial institution will allow a seller to assist a buyer by paying either points to reduce the interest rates and/or closing costs.

How does this work? Let’s say that a home is on the market for $200,000. The buyer writes their offer for $195,000 and their financial institution allows up to 3% seller’s assistance with fees and closing costs. They decide to ask the seller in their purchase agreement document for $5000, thus the net offer to the seller for the home is $190,000. 
If a seller does not want to pay the closing costs, the buyer in many cases will not be able to purchase the home. It the offer is accepted, the seller’s proceeds at closing would then be reduced by the $5000. Sellers do not have to come up with the funds in cash if there is sufficient equity in the home to cover both the buyer's and the seller's costs.

When an offer comes in on a home, it is sometimes confusing to sellers what the sale price versus net number is. In the case above, the $195,000 would be the sale’s price on the purchase agreement but by paying the $5000 in closing costs, the seller’s net number is really $190,000 less the seller's own closing costs including all fees and commission.

If as a seller you decide to counter on the original offer, you can counter on the sales price of the home or the amount of closing costs paid. When counter offers are involved, a seller needs to make certain that they understand what the net proceeds will be in each offer and counter offer.

This is where the assistance of an experienced, professional
REALTOR® comes into play. As a real estate agent, I provide my clients with a seller's net sheet that outlines all costs and fees that has been updated after receiving the offer. When counter offers start going back and forth, I reiterate at each step what my seller's net number to help eliminate the confusion.

Assisting a buyer with closing costs can be the ticket to getting your home even in a seller driven real estate market. Understanding the process is simple with the assistance of a knowledgable real estate agent!

Copyright 2013