Tuesday, January 28, 2014

Real Estate Word of the Day--Septic System

Buying a home is often a once or twice in a lifetime experience. There are often lots of things to learn. Buying a home on acreage has it's own set of unique terms that the average city-dweller might not have heard before. 
From time to time I am surprised that a simple term I use everyday as a REALTOR® is like a foreign language to some home buyers. It is not unusual to see a glazed look come into a buyer’s eyes when I talked about escrow or earnest money but also when I mention well water, septic systems and compliance tests. The confusion is totally understandable because most home buyers do not buy houses on acreage everyday.

There are so many terms that could possibly confuse a home buyer that I thought an online glossary of real estate terms might be helpful. So I am continuing my 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:

Septic System—If a home is not connected to a public sewer, there will be a private system that will hold and/or process the waste called a septic system. There are several types of systems. They can be a holding tank where all the waste must be pumped out or a tank that releases the waste water back into the environment via a drain field or mound. A private septic system can be owned by the individual property owner or shared by a number of homes. 

It is important to know what type of septic system is on a property. All systems will require maintenance but the type of system, indicates to a buyer how often the maintenance will have to take place and how much it will cost. Shared systems usually are part of an association where fees are collected on a periodic basis to pay for pumping out and maintaining the sewage system. 

It is also important to understand what can and cannot go into a private sewer system in order to keep it in the best condition possible. The cost to replace a private septic system can be in the tens of thousands of dollars. Proper maintenance and care can extend the life of the system by many years.  For additional information check out the University of Minnesota Extension Service's guide to Understanding Your Septic System.

Copyright 2014 www.terieckholm.com

Friday, January 24, 2014

Is Buying a Home a Good Investment in 2014?

How good of an investment is a home in 2014?" This question can be a tough one to answer in this slowly stabilizing economy. A couple of decades ago, the answer was a no-brainer. Buying a home had been regarded one of the safest  and most important investments a person could make. Owning a home was equated to realizing the American Dream. But now first time buyers can be confused even as home values and average sales prices have rebounded. Many potential homebuyers continue to wonder,  "Is home ownership a solid financial investment?
 The National Association of Home Builders posed that question in a 2012 survey and MOST AMERICANS answered a resounding, YES!   "74 percent said that despite the ups and downs in the housing market, owning a home is the best long-term investment they can make." That is 3 out of 4 voting Americans who still believe in the value of home ownership!

And I agree,  buying a home is a wise investment. I make this statement not just because I am a REALTOR®, but because I, too, am a homeowner. The key to successful home ownership is to treat your home like the investment it is. It takes discipline and time for any investment to grow in value. And like any other investment, whether it is a stock, bond, mutual fund or a home,if you have to sell in a down market,  you might not realize as much profit as you may have expected.

Key Points to Buying a Home as an Investment
There are several things to consider when investing in your first home. Don't buy just with your heart, buy with your head too.
  • Buy Smart
**Price **Interest Rate **Type of Mortgage **Resale Potential **Equity Builder?
  • Maintain and Protect Your Investment
**Home maintenance **Insurance
  • Don’t Put in Your Asset in Jeopardy
The best way to have a healthy balance sheet when you sell your home is to Buy Smart in the first place. Buying smart is not just about getting the home at an extremely low price. It also means getting a mortgage that you can afford. Consider a fixed rate loan rather than an adjustable rate, so it doesn't fluctuate into something that you cannot afford. Interest rates are still at very low rates. The first thing I recommend to my homebuyers is to talk to a knowledgeable loan officer and find out what options are available. There are hundreds of special programs out there and an experienced loan officer can help you find the best for your situation.

But buying smart goes beyond the price paid and the loan used to finance a first home. It is also buying with resale in mind. Many, who purchased homes in the price climbing frenzy of a few years ago, snatched up any home they could after submitting multiple purchase agreements on several homes. They often overlooked an unusual floor plan or that the home was railroad tracks with several trains passing by at all times of the day and night. They adjusted their needs to accept the power lines in the backyard or the noise from Interstate 35 just a few blocks away. But now if these same families are faced with trying to relocate, they are frustrated that buyers refuse to compromise on same aspects that they overlooked.

With the current low housing inventory in the lower price ranges, we are seeing multiple offers on homes once again. It is still important to keep calm and inspect a home thoroughly before purchasing. As a REALTOR® who loves to work with first time home buyers, I spend time helping my them to understand the positives and negatives of the location of each property we view. I point out how something quirky like having no basement or having a hot tub built in to a bedroom could affect the resale value by limiting potential buyers. Paint and wallpaper can be easily changed but foundation, plumbing and property location are much more expensive to deal with. Oddities it a home can drastically affect value when it is time to sell.

The final tip to buying smart is to determine whether equity can be increase with a little good old fashioned elbow grease! If the home hasn’t been updated, a good sprucing up could raise its value. A house that has an unfinished basement, could build equity if it can be done at a reasonable cost. Don’t take shortcuts and avoid required city permits. It will cost you  when you go to sell because that must be disclosed. Is gardening your hobby? Look for a home with a yard that can be upgraded over the years. Just be frugal and realistic in what your resale will be in the end.

Beyond a smart buy, maintenance is essential as is proper insurance to be certain a home owner can afford the required repairs should the unexpected happen. Time after time I have to bear the bad news when presenting a market analysis at a home where the interior and/or exterior has not been repaired or replaced in decades. It can be nearly 20% less, than the value of a well maintained home in the same area.  Doing several projects over time allows a homeowner to enjoy the improvements while retaining the property value. Likewise, not insuring a home properly can be a huge risk. Worse yet, are the homeowners that make a home insurance claim and receiving payment for a repair but opt to use the money for something else.

Finally, it is important for a homebuyer to not put their investment in jeopardy. Many of the people who lost their homes in the market downturn put their homes in jeopardy but taking risky loans against the equity. Some people took home equity loans at reasonable rates but didn’t use the funds to improve their home. Some of these loans were at very high adjustable rates and as the payment rose, the homeowners just couldn’t make the payment. When I was growing up, I remember learning to never take a risk with anything you couldn’t afford to lose. I think a home falls into this category.

Like any investment, a home’s value will fluctuate. But a house is unique as an investment because it serves a dual purpose: It is a your place to live as well as a way to increase your net worth. By using the money that would be paid for rent and putting it toward a house you can afford with a plan to protect and maintain your property, a home purchase is still a good investment. 

Copyright 2014 www.terieckholm.com

Wednesday, January 15, 2014

What Does AGENCY mean to the First Time Homebuyer?

So you are planning to buy a home soon. Maybe you have even stopped in at an open house or two. If you did, the hosting REALTOR® may have started talking about buyer's agents and seller's agents and possibly even a dual agent. But what does agency really mean? And why should you as a Minnesota homebuyer care? 

In Minnesota, real estate brokers and salespersons are required to disclose the type of working relationship they have with the parties in a real estate transaction.  As a homebuyer, there are different types of relationships available to you.  It is important to understand these before you sign a contract or purchase agreement for a home.  These relationships are called  “agency” relationships and carry with them legal, fiduciary duties and responsibilities for the broker as well as for the buyer and seller. 

The 3 most common agency agreements are the buyer's agent, seller's agent and dual agent.

Buyer’s Agent

A Buyer’s Agent acts solely on behalf of the buyer and owes duties to the buyer including the utmost good faith, loyalty, and fidelity.  The agent will negotiate on behalf of, and act as an advocate for, the buyer.  The buyer is legally responsible for the actions of the agent when that agent is acting within the scope of the agency.  The agent must disclose to sellers all adverse material facts concerning the buyer’s financial ability to perform the terms of the transaction and whether the buyer intends to occupy the property.  A separate written buyers’ agreement or contract is required which sets forth the duties and obligations of the parties.

Seller’s Agent

A Seller’s Agent acts solely on behalf of the seller and owes duties to the seller which includes the utmost good faith, loyalty, and fidelity.  The agent will negotiate on behalf of, and act as an advocate for; the seller.  The seller is legally responsible for the actions of the agent when that agent is acting within the scope of the agency.  The agent must disclose to buyers all adverse material facts about the property that are known by the broker.  A separate written listing agreement or contract is required which sets forth the duties and obligations of the parties.

In both buyer and seller agency, the following fiduciary duties are owed to the client: 






Reasonable Care


 DUAL Agent  

A dual agency is created when both the buyer and seller have signed representation agreements with the same broker. The parties may have two different salespersons or they may be the same person. All duties and obligations to the buyers and sellers remain the same in a dual agency.

Because it is impossible to disclose all information AND be confidential at the same time, dual agency must be disclosed and agreed to in writing.  All material facts regarding the property must be disclosed regardless of agency. 

Why is this so Important?

When you look for a home, every house listed on the MLS has some agreement between the seller and the listing broker. If a buyer does not sign a contract and attends an open house, the nice agent asking all the questions at the open house about your financial ability to purchase is under contract to share everything you say with their seller. 

But if a homebuyer signs a contract with a REALTOR® before viewing any homes, their private information stays private. AND the best part for MY buyers is that signing a contract does not cost anything. All fees are paid at the closing and the commission is paid for from the seller so there is NO OUT of POCKET cost to have a REALTOR® in your corner.

Copyright 2014 www.terieckholm.com

Wednesday, January 8, 2014

Should I Buy or Rent a Home in 2014?

January is a time for making resolutions, decisions and taking stock of one's life. It is a time when many resolve to make a change for the better or their future. It is no wonder there is an uptick in real estate activity the first week of any new year. Finances are one of the things many resolve to put in order and since housing expense is one of the biggest part of any budget, it follows suit that many consider the age old question, "Is it better to buy or rent a home?"

Why should anyone consider buying a home? It is hard to tell whether the economy is good, bad, improving or declining these days. Some media reports say things are improving while other indicate the immediate future is not so rosy. One statistic I recently read in REALTOR Magazine can put things into perspective for the individual. In an article written by Lawrence Yun he states, "On average, home owners have a median net worth of nearly $200,000 while renters are essentially living paycheck to paycheck, with only $4,000 in net worth on average". That is a HUGE difference. 

Location, Location, Location In determining whether it is best to rent or buy a home, location is a factor.  Real estate web search company Trulia, issued a full report last summer on the rent versus buy dilemma. One of the tools they shared is an interactive map of the US showing what metro areas are most affordable.Because length of time you plan to live in a home and tax bracket are key to the equation, these variables are included. The Minneapolis/St Paul metro area is a good place to buy in many circumstances. And, in my opinion based on the average price per square foot, buyers considering a purchase in the very affordable north & east metro, might consider it an excellent opportunity.
By the Numbers If indicators are good geographically, that provides only part of the answer. To determine whether to buying a home is the best option, price of the home, taxes and interest rate on the mortgage need to be considered. Another very helpful tool is a Rent Versus Buy calculator  It is simple to use: Enter your current rent, the price of the home you are considering, and a few other details to receive a detailed report. The calculator will provide an indication of where you will stand financially 6 years after purchasing a home if you have to sell. An interesting feature of the tool is the sliding scale that allows you to adjust the estimated property value increase (or decrease). 


Copyright 2014 www.terieckholm.com

Sunday, January 5, 2014

Resolution for 2014--Buy a First Home! (And a Class to Help You too!)

Did you make a new year's resolution? 

Maybe it was to workout more, eat healthier, be happy or spend more time with friends and family. Or maybe you resolved that 2014 is going to be the year to buy YOUR first home

What a great decision! Owning a home is still the American Dream and with housing affordability in the Minneapolis/St Paul area, this can be a very realistic aspiration. Home ownership is not just for older, wealthy Americans. People of all ages can afford to be homeowners in the Midwest. In fact, many young people are buying homes in today's market.

In 2013, I sold several starter homes to people just a few years out of high school. The homes these clients purchased were in all cases, move in ready, solid houses in the north and/or east metro. It is not unusual to find a nice home in a price range that makes owning a home as affordable as rent if you know where and how to look for them.

Intrigued? Wondering what is the first step to buying your DREAM home?  

Find a REALTOR® you can trust! 

As an agent, I help my first time buyers through the entire home buying process from pre-approval until closing day. But, it would be hard to trust someone without having met in person.  Give me a call and we can set up a meeting. I am very easy to talk to so call me anytime.

Copyright 2014 www.terieckholm.com