Changes to the Real Estate Industry in August 2024: NAR Settlement Terms Explained

If you are in the market to buy or sell and have not yet heard about changes coming to the real estate industry later this summer, you will. Hopefully this post will get you started. 

Background

In March 2024, the National Association of Realtors (NAR) agreed to settlement terms• which will modify home buying and selling practices for many consumers across the county, including in Minnesota. This post summarizes two key terms from the settlement that will go into effect starting August 15th in the Twin Cities MLS region (no later than August 17th nationwide).

How have real estate agents typically gotten paid for their services?

sellers

Most sellers’ agents do commission-based work with the commission being a percentage of the final sale price. (Other models such as flat-rate exist but for the purpose of this post I’ll use the commission model.) The final payment for services happens at closing. Then, if sellers have agreed, their agent pays a portion of that commission to their buyer’s agent.

buyers

In Minnesota, buyers wishing to be represented sign a Buyer Representation Agreement with an agent detailing services and associated fees (we’ve been using buyer agreements since 1993.) Through the traditional model, most buyer’s agents receive payment for their services via the commission split described above, if the seller agrees. If a seller does not agree to pay the buyer’s agent fees, the buyer would pay the amount they negotiated with their agent in the Buyer Rep. Agreement.

The commission and offers of compensation to buyers’ agents have always been negotiable terms in Minnesota’s representation contracts, and still will be.

The amount a seller agrees to offer a buyer’s agent has historically been visible to other agents in our Multiple Listing Service (MLS). Starting August 15, 2024 it will no longer be.

Two Big Changes Affecting Buyers and Sellers

First Change: Offers of Compensation

“Compensation offers moved off MLS: NAR has agreed to put in place a new rule prohibiting offers of compensation on an MLS. Offers of compensation could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals. And sellers can offer buyer concessions on an MLS (for example—concessions for buyer closing costs). This change will go into effect August 17, 2024.” -NAR website

What does this mean?

Offers of compensation to buyers’ agents will still be allowed in Minnesota but they may no longer be advertised on the MLS or any MLS-related aggregator. Listing agents can, however, advertise them off-MLS via individual marketing materials — signs, flyers, individual websites, etc.

Concessions

Buyers have always been able to ask sellers for various types of concessions when making an offer. For example, a buyer might ask a seller for an allowance to buy new carpeting, pay part of their closing costs, or give credit for a new roof. Compensation to pay the buyer’s broker for real estate services may be presented as another type of concession in the offer.

Sellers have always been allowed to offer concessions as incentives to buyers, and still will be able to. The new rule specifically regulates visibility of any offer of compensation to a buyer’s agent for real estate services — it will be prohibited on the MLS. Concessions, such as those listed above, will still be allowed on the MLS.

This change will likely add an extra layer of negotiation, particularly around how agent compensation is handled. There may be bumps in the road but with clear communication and transparency, the process should smooth out to benefit both buyers and sellers.

Second Change: Buyer Representation Agreements

“Written agreements for MLS Participants acting for buyers: While NAR has been advocating for the use of written agreements for years, in this settlement we have agreed to require MLS Participants working with buyers to enter into written agreements with their buyers before touring a home. This change will go into effect August 17, 2024.” -NAR website

What does this mean?

If buyers wish to tour a home with an agent they must first enter into some type of written agreement. In Minnesota we’ve had Buyer Representation Agreements in use for decades. Requiring a signed agreement prior to touring a home, however, will be a new practice starting August 15. New types of touring agreements may come into play which could include various tour fees for buyers.

The new regulation applies to both in-person and virtual visits, but not to open houses. Home shoppers will not need a signed written agreement when visiting open houses or asking host agents about their services.

Differences Among States

NAR as a national trade group includes members from every state. Each state has varying practices and/or legislation that determine how its industry functions; some states may be more affected by the settlement changes, some less. 

Learn More

Real estate professionals in Minnesota have been busy working out a new normal and preparing for August 15th. Both the state and national associations of REALTORS® have published helpful resources for consumers wanting to understand more about the settlement and how changes may affect them. Click here to learn more from our state association or check out NAR’s resources for both buyers and sellers. As the changes get underway don’t hesitate to reach out. I’ll gladly talk through “what if” questions and clarify any new information as it becomes available.

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*The settlement is still subject to final court approval. A hearing on final approval of the settlement to be held in November 2024. 

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes to inform buyers and sellers on variety of topics including market conditions, tips for selling and buying, homeownership trends, and more. Reach her at heidi@lyndenrealty.com or 651-503-1540. 

Thriving in a Seller's Market: Tactical Tips for Homebuyers

The Twin Cities’ spring market is now tipped in favor of sellers. Appropriately priced, tuned-up properties in popular locations are moving quickly with buyers lining up to compete in multiples. If you are a home buyer navigating this fast-paced seller's market, you might feel overwhelmed. With limited inventory and fierce competition, it’s easy to find yourself engaged in bidding wars ending in heartbreak. This post is for you dear buyers — with strategies, flexibility, and professional guidance you can turn the odds in your favor and secure your just-right home. 

Tip #1: Get Your Finances in Order

Before you even start your home search, it's crucial to get pre-approved for a mortgage. This not only signals to sellers that you're a serious buyer but also gives you a clear understanding of your budget and what you can afford. It also strengthens your negotiating position and also allows you to act quickly when the perfect property comes along. Keep in mind, most sellers won’t even look at offers without a lender’s pre-approval.

If you are paying in all cash, be prepared to provide proof of funds in lieu of a pre-approval. A bank statement or letter from your banker showing the full amount should suffice. If not cleared state, I always check with the seller’s agent to confirm the preferred documentation.

Do know the seller’s agent may call your lender to verify your relationship and financial position. When representing sellers, I typically reach out to lenders for this confirmation before my clients sign anything. Assume the seller’s agent will do the same.

Tip #2: Work with an Experienced Real Estate Agent

Partnering with a seasoned real estate agent is crucial in the current seller’s market. Your agent should have insider knowledge of the local market, understanding of current trends for successful offers, and negotiation skills to help you secure the best deal. Lean on their expertise to navigate the competitive landscape and present an offer with winning price and terms. 

A knowledgeable agent will also have an in-depth knowledge of contracts to help you understand the plethora of paperwork needed for a successful transaction. I always recommend reading forms before signing anything, and ask your agent when in doubt. All questions are good ones! 

Tip #3: Be Prepared to Act Fast

In a competitive market, time is of the essence. Hesitation could cost you your dream home. When you find a property that checks all the boxes, don't wait – act swiftly and decisively. Schedule a showing as soon as possible (day one on market), and if you're truly interested, submit an offer soon after, if need be. When you’re ready to act, your agent should be connecting with that seller’s agent immediately to establish a relationship, learn seller preferences and gauge any competition. In a multiple offer situation, there will typically be an offer date/time deadline of which you'll need to be aware. Communication among agents is often the only way to learn how a seller plans to proceed. But be aware, ultimately it’s the sellers’ decision and they may be pleased enough with the first offer to just sign it and move on, forgoing the opportunity to generate multiples. Either way, be ready to act when you find “the one”. 

Tip #4: Make a Strong and Compelling Offer

When competing in a seller’s market, it's essential to come in strong. Work with your agent to establish a strong offer price using comparable homes and buyer trends. Then check in with your lender to stay within your budget and confirm what they can accomplish within the offer timeline. I typically loop in my clients’ lenders early on in the process to ensure clear and quick communication in the event we need to pivot or act quickly. Also consider including terms that are favorable to the seller, such as a quick close, appraisal gap coverage or inspection contingency waiver (if you're comfortable doing so). 

A Word on Love Letters to the Seller

Buyers often ask if they should write a letter to the seller when submitting an offer. Depending on the letter content, doing so could set the seller up for a potential fair housing violation. For example, sellers could unconsciously (or consciously) choose a buyer based on race, religion, familial status, etc. So, I recommend either avoiding the letter altogether, or including only what you love about the home — no personal information or photos. Occasionally when asked, or when stated in the agent’s notes, a seller may request that buyers omit love letters. Consult with your agent before spending time composing. 

Tip #5: Stay Flexible and Keep an Open Mind

Flexibility is key in a competitive market. Be prepared to compromise on certain preferences, such as style or amenities, in order to secure a home in your desired area, for example. Also, keep an open mind during your search – you may be surprised by properties that initially fall outside your criteria but end up being the perfect fit. Finally, be realistic about price. If you continue to lose out to offers well over list price and cannot afford to compete, consider searching for less expensive homes. Give yourself some wiggle room to offer more by bidding on homes that cost less. 

Thriving in a seller's market requires a combination of preparation, strategy, and flexibility. By getting your finances in order, working with a seasoned agent, acting swiftly, making strong offers, and staying flexible, you can increase your chances of securing the perfect property despite the competition.

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes to inform buyers and sellers on variety of topics including market conditions, tips for selling and buying, homeownership trends, and more. Reach her at heidi@lyndenrealty.com or 651-503-1540. 

Open Houses 101 for Homebuyers

If you’re searching for a home, you’ve most likely checked out an open house or two. Along with private showings, open houses are a common way to get inside and can be an insightful next step after searching online. Here’s some food for thought for buyers venturing out on the weekends (or sometimes week nights), from an agent’s perspective. 

Why go?

I hold open houses often so I get to meet a variety of people. Though I sometimes meet passersby, most often I meet visitors who have already scoped out the property, poured over details and studied the photos. Though online pictures and virtual tours are helpful, there’s nothing like stepping into a home to test out other senses – How does it feel? Or smell?? Getting inside answers questions about space, scale and other unknowns like flow, basement storage, closet configuration, ceiling height, and more.

If you as a buyer are already working with a real estate agent, your agent may send you to an open house ahead of a private showing. If they’re out of town or tied up with other clients during your free time, why not stop in for a preliminary peek? In a seller’s market, waiting too long to see a property may cost you, so better to tour sooner than later.

If you’ve already had a first showing with your agent, sometimes an open house is a good opportunity for a second glance, or a chance to bring through family members, contractors, or even inspectors.

Getting a Feel for the Market

Going to open houses can also be a good opportunity to get a jump on the spring market. Start doing your research and taking notes to get ahead of the game. I often meet prospective homebuyers who are planning to buy in the spring but are getting a feel for the market starting late fall.

Condo or Single-family?

If you are not sure what type of property you want to buy, open houses create an opportunity for checking out a variety of home types and/or developments. For example, you may be debating condo life but have never actually been in one. Or you may want to compare amenities in a small association versus a larger high rise. Or you might visit and compare different townhouse developments. Talking to a variety of agents about these Common Interest Communities (CICs) can be insightful — How are they managed? What’s included in the monthly HOA fee? (More questions to ask when buying a condo or townhouse here.)

Finding a Realtor

If you aren’t currently under contract with a buyer’s agent, open houses can be one way to meet your future agent. Chatting with agents at open houses gives you a good sense of their market knowledge, years of experience, personality, and compatibility in general. Reading online reviews, websites and blog posts are some ways to research, but there’s nothing like meeting face-to-face to get a vibe. Don’t be afraid to chat and ask questions! 

The Seller’s Agent

Keep in mind that the agent hosting the open house will be representing the seller, not you, and will have the seller’s best interest in mind. Sometimes the listing agent will host, other times another agent from their brokerage (or another brokerage) will. Either way, the seller will be represented. Be aware of agent/client relationships and what you reveal to the seller’s side about your price, terms and motivation. If you are also represented (under contract) I recommend letting the seller’s agent know right away. I often tell my buyer clients to share my name with any open house agent. 

Follow-up

If you have further interest after visiting a home follow up with your Realtor, if you have one. Schedule a private showing, obtain any disclosures or supplements, etc. If you are not working with someone and end up calling the listing agent for more information, do you know they will be representing the seller. If that agent ends up representing you it would be considered “dual agency”. To avoid dual agency, however, I recommend finding a buyer’s agent to help you. (More on Minnesota’s agency disclosure requirements here.)

As we approach holiday seasons, the number of new homes entering the market drops considerably. Know that come “spring” market, usually early January, the number of listings will increase, but so will the competition. Late fall and early winter are great times to get ahead of the pack and visiting open houses can be a helpful first step.

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes to inform buyers and sellers on variety of topics including market conditions, tips for selling and buying, homeownership trends, and more. Reach her at heidi@lyndenrealty.com or 651-503-1540. 

Home Buying 101: What are closing costs?

When buying a home, your closing costs will typically consist of a variety of fees and expenses to pay for services associated with the transaction. These fees must be paid in full at closing and cannot be rolled into your mortgage. While the specific costs can vary depending on factors such as the property value, location, and mortgage lender, here are some common components of a buyer’s closing costs in Minnesota:

Loan-related Fees

These fees are associated with the mortgage loan and can include:

a. Origination Fee/Admin fee/Processing Fee: This fee covers the lender's administrative costs for processing the loan.

b. Discount Points: Buyers may have the option to pay discount points upfront to reduce the interest rate on the mortgage.

c. Appraisal Fee: This covers the cost of assessing the property's value.

d. Credit Report Fee: Lenders typically charge a fee for obtaining and reviewing the buyer's credit report.

e. Loan Application Fee: Some lenders may require an application fee for processing the mortgage application.

f. Underwriting Fee: This fee covers the lender's cost of evaluating and approving the loan.

g. Mortgage Insurance: If the down payment is less than 20%, the buyer may need to pay mortgage insurance premiums.

h. Title Insurance: The purchase of lender’s title insurance premium to protect against any title issues.

Title-related Fees

These fees are associated with ensuring a clear title and conducting the necessary searches. They can include:

a. Title Exam/Services: The cost of searching public records to verify the property's ownership history

b. Title Insurance: The purchase of owner’s title insurance premium to protect against any title issues. This is separate from the lender’s policy.

c. Closing fee: Payment to title company for providing closing service

c. Recording Fees: Fees charged by the county for recording the deed and other relevant documents.

d. Survey Fee: If a survey is required or desired, the buyer may need to cover the cost of a professional surveyor.

Government Fees

These fees are typically required by the state or local government and can include:

a. Mortgage Registration Tax (MRT): Minnesota imposes a mortgage registration tax on the principal amount of the mortgage. MRT is paid when recording a mortgage. The rate is 0.0023 of the mortgage amount. Hennepin and Ramsey Counties add an additional .0001 for an environmental response fund (ERF) per Minnesota Statute 383A.80.

b. Property Taxes: May need to be pre-paid at closing.

c. Transfer Taxes: Taxes imposed by the state or local government on the transfer of real estate ownership. In Minnesota, state deed tax is most often paid by sellers, however.

Prepaid Expenses

Buyers may need to prepay certain expenses at closing, such as property taxes, special assessments, homeowners insurance premiums, and mortgage interest for the remaining days of the month.

If you’re buying into a Common Interest Community (condo or townhouse) you’ll have Homeowners Association (HOA) dues which sometimes need to be paid in advance.

Miscellaneous Fees

Buyers may incur additional fees such as courier fees, wire transfer fees, conservation fees, attorney fees (if applicable), and other costs associated with the transaction.

Realtor Fees

If you are working with a real estate agent to find a home you most likely signed a contract at some point in the process. The most common type is a Buyer Representation Contract with an exclusive right to represent. Most brokerages in and around the Twin Cities charge buyers a retainer fee for their service, with a dollar amount written into this contract.

And, depending on what is agreed upon in your Buyer Representation contract, you might also pay your broker/agent for the service they provide.

What are seller-paids?

In a buyer’s market it is not uncommon to ask sellers to pay part or all of your closing costs, often referred to as seller-paids. You would simply write in a dollar amount or percentage of the price on the purchase agreement at the time of making the offer. Unfortunately for buyers, this hasn’t been the norm for a while. In a fiercely competitive market, asking for seller-paid closing costs puts buyers at a disadvantage if it lowers the seller’s net proceeds compared to competing offers.

It's important to note that the specific closing costs can vary, and buyers should receive a Loan Estimate and Closing Disclosure from the lender, outlining the estimated costs prior to closing. Working closely with a real estate agent and mortgage lender can help you understand the closing costs specific to your situation and ensure you are adequately prepared for the expenses associated with purchasing a home in Minnesota.

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Banner photo by Georgie Cobbs on Unsplash

Women and Homeownership

Who are typical home buyers? In the U.S. married couples make up the majority. Single women, however, are next. Since the National Association of Realtors® began recording home buyer profiles back in 1981, single females have made up the second most common demographic. The trend is holding steady. While the majority of 2019 home buyers were married couples (61%), single women represented the next largest group (18%), ahead of single men who made up just 9%.

In 2003 I was one of those women. I knew exactly why I wanted to buy a home (build equity, have freedom to make it my own) and have never regretted my decision. I suspected others in my position may have felt the same, but wanted to hear their two cents. So I asked friends and past clients three simple questions: Why did you buy a home? What do you like about owning? What advice would you give others who are thinking about buying. Read the Q&A below!

Characteristics of Homebuyers | 1981-2019*

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Elizabeth

What's the main reason you decided to buy a home?

I wanted to build equity, avoid "throwing my money away" on apartment rent, have the pride of owning my first home in my mid-20s, and put roots down after moving back home to MN.

What do you like about owning your own home?

With a condo, I love not having to worry about the yard work/shoveling/etc. that comes with buying a single family home. I have loved learning new skills such as fixing a dripping faucet and transforming the space into my own.

What advice would give others who are thinking about buying a home?

I would tell others not to settle. It was a sellers’ market when I purchased my home, and I saw a lot of properties before getting my offer accepted. I'm glad I stuck with the process, because I wouldn't have been happy settling on some of the other properties I looked at.

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S.J.

What's the main reason you decided to buy a home?

So I could adopt a super sweet dog. :) I also wanted to invest in myself. I yearned for a small morsel of land where I could grow flowers/veggies and a space where I always felt comfort and safe. I wanted the flexibility to express myself creatively and to expand my knowledge/skills through the process of remodeling a fixer-upper. Joining a supportive neighborhood community was also an important reason I decided to buy a home.

What did you like about owning your own home?

I enjoyed coming home to a quiet, cozy space that I had created. I loved the freedom. I could do my laundry whenever I wanted, let my dog roam freely in the fenced in backyard and even walk around naked! It felt empowering to fix the toilet, leaky faucets, loose door handles and to learn as I went along. I grew close to my neighbors and felt like I was part of a meaningful community. I was able to walk to the river and neighboring businesses which had an added environmental bonus.

What advice would give others who are thinking about buying a home?

It’s a leap worth taking! Do your homework to know how much you can afford, factoring in a buffer for unexpected expenses. Know that something will always need your attention and any dream-worthy remodel will always take longer than expected. Don’t rush it. Live in a 50’s style kitchen for a year to form a clear vision. If the flowers die or the vegetable garden struggles, no worries! You can always try again next year. Enjoy the process. Find a good realtor to help guide you along the way. Oh, and adopt a dog.

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Jessica

What's the main reason you decided to buy a home?

I had thought about owning my own home for a few years since I'd had bad experiences with renting. I was becoming more financially independent and progressing more in my career. My budgeting had become much better over the years and I had learned enough about mortgages to be confident that it was the right time to make a leap.

What do you like about owning your own home?

I love decorating my space and learning more about my house and how to take care of it. I started gardening a few years ago and I'm really excited that spring is around the corner so that I can start making outdoor plans. I have long-term projects for the house as well and I look forward to accomplishing those goals.

What advice would give others who are thinking about buying a home?

I was nervous about finding the right house for just me but there are so many options out there. Just keep your mind open, stay positive and be sure you have a realtor that understands what you're looking for and can give you the pros and cons, which in my case, was an older home with some character. I wasn't looking for a fixer upper but I probably couldn't afford a pristine home and it was important to have someone who could give me honest feedback about the sort of projects and maintenance a prospective house would need.

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Tammy

What's the main reason you decided to buy a home?

Truth be told I did not want my son at the time, 2 years of age, to grow up in an apartment. I wanted to raise him in a home with a yard and place we called ours. I never once thought I could not do this. I wanted to give my son the same upbringing I had — a home with a yard!

What do you like about owning your own home?

When you own your home you can make it a place where your family and friends are always welcome with your own style. The best part of owning a home is you are building equity — like putting money in the bank that one day will be paid off and then you own your home free and clear!!

What advice would give others who are thinking about buying a home?

I highly recommend buying a home verses renting, it’s a smart investment and you will never lose on it!!

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Thank you

Sincere thanks to Elizabeth, S.J., Jessica and Tammy for taking time to respond, sharing your wisdom and inspiring others!

Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on variety of topics including buying and selling, market conditions, homeownership trends, local events and more. Reach her at heidi@lyndenrealty.com or 651-503-1540. 

*Source: National Association of REALTORS® 2019 “Profile of Home Buyers and Sellers”

What does “Coming Soon” mean in the Twin Cities?

{Spring 2021 Update: At the time of initial publication regional Northstar MLS “Coming Soon” properties were not synched to IDX (Internet Data Exchange) sites like Zillow. Agreements between Northstar and those sites have since changed — all Coming Soons are now shared and visible.}

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Spring 2019 marked the first home-selling season with the regional Northstar MLS’s “Coming Soon” status in play. The parameters for listing a property as “Coming Soon” are well defined by our MLS and many agents have started strategic use of this option. There may be some confusion for consumers, however. Here’s what home buyers and sellers need to know when they see a home listed as “Coming Soon”.

It’s not Zillow

It’s not the same as Zillow’s “Coming Soon”. In fact, unlike Active, Pending and Sold MLS listings, “Comings Soon” properties are not even visible on Zillow. Northstar MLS has not (yet) contracted with Zillow or similar synched-up sites like Trulia to allow access. Zillow has rights to display homes with other listing categories, but not this one.

This MLS option should not be confused with a similar feature on Zillow that allows home owners and “Premier Agents” (Realtors paying to advertise) to create separate Zillow Coming Soon listings. The two are not the same. Our MLS “Coming Soon” properties can only be viewed by MLS subscribers (agents, brokers and real estate professionals) and are typically emailed directly to clients via the MLS database.

Coming soon…how soon?

A property can be “Coming Soon” in the MLS for a maximum of 21 days. With home seller approval, the agent/broker manually sets an activation date when creating the listing. When that date hits, the status automatically switches to “Active” and goes live on major search sites. If the sellers aren’t ready to show by that date they have a couple of options: cancel altogether or switch it to TNAS (Temporarily Not Available for Showing) — a common short-term delay maneuver used for a variety of reasons (unexpected repairs, houses guests, etc).

Can I tour a “Coming Soon” listing?

Strict rules set up to create fair play prevent listing agents from showing a home when its status is “Coming Soon”. In fact, an agent could be fined $1000 for doing so. Once a home is “Active” in the MLS sellers should be ready to allow showings, but not before.

Buyers’ agents can, however, request showings for anytime after the “Active” date, even if it’s 3 weeks out. So if you want to be the first one in a property once it’s live/active, get a showing appointment request in asap. Planning ahead to be the first one to view a home is a smart move in a tight seller’s market.

Why no photos?

“Coming Soons” require a minimum of one photo to be listed. Some agents are adding more now but I still see many with just one or two exterior shots. This can be a source of frustration for buyers whose interests are piqued by location, price and curb appeal but still want to see the inside. If you’re not seeing the full set of photos right away do check back. The listing agent will likely add the rest on or near the “Active” date.

Buyer advantage

In this fast-paced seller’s market the “Coming Soon” option may give buyers some room to breathe as well as the luxury of lead time for making a sound decision. If enough information is revealed in a “Coming Soon” listing (full set of photos for example) buyers may be able to decide yea or nay before it goes active. If the home is of interest, shoppers can use the interim to mentally prepare their offer price and terms, jockey schedules for a fast future showing and connect with their lender for an updated pre-approval. It may enable them to act swiftly with a competitive offer when the time comes.

Seller strategy

If you’re contemplating selling your home, you should seriously consider your options for a successful entrance into the market. Creating an effective “Coming Soon” listing is one strategy but it might not be right for your situation. A poorly planned entrance can easily backfire, even in a hot seller’s market.

Create a course of action that makes sense with current buyer activity and your target market — of course I recommend working with a real estate professional when doing so. A good agent who stays on top of local trends (what’s working and what’s not) will be an invaluable resource in helping you take advantage of the seller’s market now in full swing around the Twin Cities.

If you want to know more or need some advice I’m happy to talk through selling (or buying) strategies. If you want to keep watch for “Coming Soon” listings in particular neighborhoods or cities, I can set those up as well.

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on variety of topics including buying and selling, market conditions, homeownership trends, local events and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

No. 1 Thing Home Buyers Should Do (Before Shopping)

If you’re gearing up to buy soon you’ve probably been perusing new listings and hitting a few weekend open houses. Smart moves. The faster-paced Minnesota spring market will be here before we know it so it’s good to get a sense of what’s out there.

Looking at houses the fun part (for most!) If you find your dream home though, and haven’t done this one critical first step (unless you’re paying cash) there’s a good chance you’ll miss out. What’s the number one move? Getting pre-approved for a loan.

Low inventory throughout the Twin Cities has increased competition among buyers, especially for those looking in the lower price ranges. Sales with multiple offers were typical last spring and summer, and the 2020 selling seasons will most likely be repeats. If you want to compete in the spring market start working with a lender asap, if you haven’t already. Buyers who cannot demonstrate their ability to finance a purchase with not be taken seriously. If you’re in position to buy soon, get a pre-approval letter in hand (or in email) before you set your sights on a home. Sellers will not want to view your offer without one.

GET HELP

A trusted loan officer ought to be a valuable support in the potentially daunting process, so should a good Realtor. The agency relationship you establish as a home-buying client in Minnesota is meant to benefit and protect you. Serious home buyers would be wise to put this additional important step at the top of their lists.

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on variety of topics including buying and selling, market conditions, homeownership trends, local events and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

Photo by Tierra Mallorca on Unsplash

What Sellers (and Buyers) Should Know About Minnesota Property Disclosure

If you’re buying or selling a home in Minnesota you’ll need to get familiar with the state’s required disclosure laws. Sellers of single-family properties (including condos, townhomes and co-ops) are legally required to disclose in writing any known information that may adversely and significantly affect a buyer’s use or enjoyment of their property (MN Statutes 513.52 through 513.60).

Minnesota homeowners planning to sell should be aware of this requirement prior to listing. They should also understand the liability involved in such a disclosure. (They can be held liable for up to two years for intentionally omitting or misrepresenting information.*)

Home buyers in Minnesota need to know where and how to access this information, what to look for and what alternatives sellers may use in lieu of the standard form.

The Minnesota Seller’s Property Disclosure

The Minnesota Association of Realtors (MAR) uses a standard Seller’s Property Disclosure form to satisfy the statute requirements. Sellers fill out this 10-page form to the best of their ability, sign and make it available to prospective buyers during the listing period. Typically, the listing agent will upload a copy to the MLS where buyers’ agents can view, download and share with interested clients. Hard copies may also be left at the property for viewing during open houses and private showings. A buyer making an offer will need to sign the Seller’s Disclosure and present it along with the purchase agreement.

Filling it out

Homeowners should make a good faith effort to disclose all material facts to “the best of the seller’s knowledge at the time of the disclosure.” They must complete it themselves (Realtors cannot contribute) and should check any previous disclosures or past inspections for additional information.

Updating as needed

If anything changes from the date the Disclosure is completed and signed through the day of closing, sellers must notify the buyers in writing with a signed amendment disclosing any new information. Your real estate agent can provide a blank amendment.

The Minnesota Disclosure Alternatives Form

Sellers may choose one of two alternatives to the full Seller’s Disclosure — either a third-party inspection or a waiver. To satisfy one of these two options MAR uses a second “Seller Disclosure Alternatives” form which is also shared with prospective buyers. A seller checks one of two options, signs and makes available to buyers along with any corresponding inspection reports.

Third Party Inspection

One alternative is to provide a “qualified third party” inspection report. A qualifying party would be any “federal, state, or local government agency, or any person whom the seller, or prospective buyer, reasonably believed has the expertise necessary to meet the industry standards of practice” for preparing such a report. This option will most likely cost the seller and isn’t often used. When this report is provided, sellers and their agents are still obligated to disclose any known material facts that contradict the report or that are omitted from it.

Waiver

If buyers and sellers agree, the Sellers Disclosure may be waived. The “Waiver” box is then checked on the Alternatives form and both parties sign off on it. Why might a seller choose a waiver? Reasons vary but it’s sometimes due to simple lack of information. For example, if adult children sell their parents’ home having never lived there, they may choose a waiver. Or if an investor sells a home that was occupied solely by renters, a waiver might make sense. Seeing a waiver can make buyers nervous, however, so I typically recommend that home sellers share as much information as possible using the full Disclosure form.

Common Red Flags for Buyers

If you’ve found a house that fits and are thinking it’s the one, you should examine all disclosures. Your real estate agent should provide them. If not, ask.

What do buyers commonly look for when reviewing the Seller’s Disclosure? Big ticket items like age of the roof (if known) and details relating to any past damage to foundation, windows, walls, siding and roofs of all structures should be noted. Water seepage and sewer back ups can also be red flags, though basement moisture is not uncommon in older Minnesota homes. A previous sewer back-up could signal a future problem unless properly remedied. Getting a sewer scope during your inspection period can be money well spent if you suspect an issue. Checking for a past problem on the Disclosure is a good place to start.

Past work done on the property must also be disclosed along with any work done without appropriate permits. You’ll also want to check for any easements, encroachments, restrictions, etc. These items, often found through title searching, aren’t always visible but may affect your use and enjoyment. Buyers can also check the working order and presence of all appliances and systems including heating, electrical, plumbing and mechanical.

Disclosures NOT Required by Sellers

• Ghosts, paranormal activity

• Natural death or suicide

• HIV-infected owner or occupant

• Proximity to adult residential facilities

If you suspect your house is haunted, you’re not legally obligated to share. In addition to paranormal activity, sites of suicide, natural or accidental deaths need not be disclosed (murder on site is required.)

Disclosure of homes currently or previously “occupied by an owner or occupant who is or was suspected to be infected with human immunodeficiency virus [HIV] or diagnosed with acquired immunodeficiency syndrome” is not required.

Sellers also are not legally obligated to disclose whether the neighborhood has an “adult family home, community-based residential facility, or nursing home.”

Read the full statute section here.

Selling? Plan Ahead

If you’re planning to list soon you should get familiar with this form, begin formulating your response and start digging up past disclosures and paperwork that might be useful. Do you remember purchasing title insurance, for example? Your old closing documents may have the answer. Can you recall years when you did major repairs? Look for old receipts to confirm when and what work was done. If work was extensive, start making a list of everything, it can be attached to the Disclosure saving you time when you’ll most likely need it. Read through the form carefully and highlight unknown terms. Your agent should be able to clarify or at least point you in the right direction when filling out this form.

If you would like to learn more about our state (and city) disclosure requirements feel free to connect. heidi@lyndenrealty.com

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on variety of topics including buying and selling, market conditions, homeownership trends, local events and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

*Consult with legal professional for advice if needed

Image by WikimediaImages from Pixabay

What does "off market" mean in the Twin Cities?

If you’ve been shopping for homes on sites like Zillow and Trulia you may have noticed several previously listed homes suddenly going “off market”. Why is this happening? Does it mean they’re no longer available? Maybe, maybe not. A closer, more accurate look into our MLS database often reveals a switch in status — from “Active” to “Temporally Not Available for Showing” or TNAS. Since third party sites like Zillow don’t display TNAS, this change can be confusing. So what does TNAS mean?

Temporarily Not Available for Showing (TNAS)

When an active listing will be unavailable for showing appointments for more than 24 hours, the listing should be switched to TNAS, according to the rules of our local MLS. This could happen for any number of reasons — a needed repair, repainting, a light remodeling project, etc. A common reason this time of year is holiday activity. A home seller may be entertaining house guests over a long weekend and wishing not to be displaced for showings. Or, they may be traveling for an extended period and prefer not to have strangers in their home while away.

Another reason for TNAS might be response to a slowing winter market. Cold weather and holidays reduce market activity as people’s priorities shift. Some sellers would rather wait out these weeks or months by stopping showings temporarily, then switching to “Active” again once holidays pass. Doing so also stops the clock counting the number of days on market, so the days in TNAS won’t affect the overall time on market, as publicly displayed.

Third party sites like Zillow translate TNAS to “off market”, which can be puzzling. The best way to get accurate status updates on past or current listings is to ask a real estate agent who has access to the local MLS. A status look-up is a quick first step in getting up-to-date info on a home. If additional notes in the listing don’t explain more, a call to the listing agent usually solves the mystery. I do this often for clients who are searching online.

TNAS status isn’t the only data gap in sites like Zillow. Properties listed as “Coming Soon” in our MLS currently do not get displayed on Zillow and its affiliates. “Coming Soon” is a fairly new option for sellers in our region and is still gaining traction. Read details on it here.

Pocket Listings

The “off market” status for TNAS listings should not be confused with properties being actively marketed by agents before going live on the MLS. These types of listings have a variety of names including “pocket listings”, quiet listings", “pre-MLS”, “non-MLS”, and “off market”. The practice of marketing selectively, before officially entering the listing into a universally shared network, has been debated nationwide and will be banned by the National Association of Realtors beginning Jan. 1, 2020, with full implementation expected by May 1. Once in effect, the rule will require brokerages to submit listing information to their MLSs within one business day of any public marketing. The new policy is intended to level the playing field and maintain the industry’s focus on cooperation and broker reciprocity, ultimately benefitting both buyers and sellers.

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on variety of topics including buying, selling, market conditions, homeownership trends, local events and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

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Banner photo by Eugene Zhyvchik on Unsplash

Screenshots taken 11/27/19: TNAS listings and 2196 St. Clair on Zillow (not listed with Lynden Realty)

When is the best time to buy a home In Minnesota?

Should I buy now or wait until spring? I’ve been asked this question a lot lately. Everyone has a different story so my first response is often a question…When would work best for you? It often depends on your life situation. Are you renting and need to wait out your lease? Or can you end the lease without penalty? Do you need to sell a home first before buying? Or can you afford to buy first and sell later? Would you like your kids to finish out the year before switching schools? Maybe you’re moving into town and want to get settled before starting a new job. Or you may be living with parents or family with maximum moving flexibility.

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Spring: more choices, more competition

If you’re not bound by leases, job transfers or school schedules, consider our seasonal market trends along with the larger economic picture. In Minnesota spring is typically the hottest season for real estate. Historically, more homes get listed in the spring and summer months, so as a buyer you’ll have more to choose from. You’ll also have more competition. Warm weather coupled with an expanding inventory attracts more home shoppers. The last few spring markets have been highly competitive with multiple offers and overbidding as the norm in the most desirable homes and neighborhoods. Low inventory has been a major factor, especially at the starter-home price point.

Seasonal trend | New Listings

Winter: price drops & low inventory

Winter months, especially around major holidays, tend to slow market activity. As a buyer, you may be in a better position to negotiate a lower price during these months. The slower pace may give you more time to process, decide and present your offer. Anxious sellers might be more willing to consider price drops during colder months as they rack up days on market. But don’t expect an automatic deal. Some sellers are more than willing to wait out the slower months in hopes of a strong offer come spring. They may even decide to temporarily pull their house from the market over the holidays then pop it back on once the weather warms.

Seasonal trend | Median sales price

Get ready

My best advice is to be prepared. Get your finances ready with a pre-approval in hand, watch for new listings and get out there. Visit as many houses as you can so you know exactly what you want and don’t want. Walking through a house is very different from clicking through pictures, so take the time to tour! Open houses are one way of course but private showings are even better (do it on your time without the seller’s agent hovering.) If you find your dream home in the slower winter months, perfect! Make your move. If not, hold tight, there’ll be more to come as spring approaches.

If you’re seeing houses online and what to know more, give me a call or email to set up a private tour or get details on particular listing. 651-503-1540 | heidi@lyndenrealty.com

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on variety of topics including buying and selling, market conditions, homeownership trends, local events and more. Reach her at heidi@lyndenrealty.com or 651-503-1540. 

Minnesota Home Shopper? Avoid 3 Common Mistakes

If you’re gearing up to buy a home consider these potential missteps buyers can make, and work to avoid them if possible!

#1 Looking at Homes Before Getting Pre-approved

Unless you’re paying cash, you’ll need to borrow money to buy your home, most likely from a bank. Working with a lender to secure a home loan is a process that takes time so get started as soon as possible. You can do the preliminary part early on and get what’s called a “pre-approval” letter— a document prepared by your loan officer after getting an accurate picture of your finances and creditworthiness. When you make an offer on a house, you (actually your agent) will submit this pre-approval letter with offer. You will not be taken seriously as a buyer without it, so get the financing ball rolling if you’re determined to get your dream home.

I recommend getting pre-approved before you even start looking at homes. There’s nothing more frustrating than finding the perfect home then losing it to another buyer because you weren’t prepared. Sure, it’s smart to get out there and get a feel for the market in your price point — look online, stop by open houses, etc. But when you start dialing in and scheduling private showings with your agent, be prepared! Have a pre-approval in hand or your loan officer on the line ready to write.

#2 Not Seeing Past the Furniture and Decor

Do not let a good staging job fool you. It’s easy and common to react emotionally to decor and furnishings. If it’s the stager’s style or seller’s impeccable taste you love, don’t equate that with love for the home. The giddy feeling of having found the perfect home can be of value — it might reassure you it’s “the one” and boost your motivating for making it happen, and it’s fun to get excited about such a big life purchase. But just make sure you look past the furniture to other aspects of the home like condition, location, minimum features needed or wanted, etc.

On the flip side, don’t let bad furniture and decor deter you. You might hate the curtains, outdated sofa and dusty knick-knacks, but don’t let those prevent you from seeing through to the home and its potential. Just remember, those furnishings will be long gone on closing day. Unless negotiated, anything that doesn’t require a tool to be removed, will need to be cleared away for the new owners.

#3 Not Working with a Realtor

Reasons for working with an agent to buy your home are many. In a nut shell, you have a professional on your side. The seller has one so why shouldn’t you? Realtor are experts in the process, have necessary resources at their fingertips and can share insight on the market to maneuver and negotiate successfully. And the list goes on!

As a buyer working with a Realtor you will most likely be asked to sign a Buyer Representation Contract but do not fear, signing this type of contract secures your relationship as a client rather than a customer. It means your Realtor legally owes you much more than Confidentiality, the sole fiduciary duty owed to customers. As a client under contract your agent owes you not only Confidentiality but Loyalty, Obedience, Disclosure, Reasonable Care and Accounting as well. Check the Agency Relationship Disclosure to learn more about these duties, client relationships and your rights under contract with an agent.

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*Many brokerages around the Twin Cities now charge a “Broker Admin” or “Retainer” fee to both buyers and sellers. In these cases, a buyer would pay for service (I’ve seen fees range from $400-$600.) Lynden Realty, however, does not!

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on variety of topics including buying and selling, market conditions, homeownership trends, local events and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

Beginning Steps for Twin Cities Home Buyers

Once you have made the decision to buy — whether you're down-sizing, upgrading, relocating, or becoming first-time homeowners — you'll want to take some initial steps to smooth out the process: choose a realtor, get pre-approved, refine your search and start touring homes!

Choose a Realtor

Real estate agents advocate on behalf of their clients while guiding them through all steps of the home buying process. They can also be valuable resources for finding other licensed professionals including loan officers, inspectors, closers, contractors, and more. Realtors get paid for their services via commission which is typically a percentage of the final sale price, most often paid buy the seller upon closing (though this may change as the industry changes.) A seller-paid commission usually gets split among all agents and brokers assisting in the sale of the home.

Many brokerages charge buyers retainer fees (though we at Lynden Realty do not.) This is a flat fee written into the buyer contract paid regardless of a sale, typically between $200-$800. When signing contracts for representation be mindful of negotiable items, admin fees included, and don’t be afraid to ask questions.

How do you choose a Realtor? Start by asking trusted friends and family. Most often people get connected through referrals. If your friend or family member had a good experience working with someone, you might too. Depending on your process, you may be spending a lot of time with your agent, so choose someone you like and trust. Communication is also key. Your agent should be conscientious about communicating and skilled at using multiple means for connecting with you and other professionals involved in the transaction.

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Get Pre-approved

If you want to make an offer on a house (and plan on financing it) you will need to get a pre-approval letter, at the very least. Getting pre-approved differs from being pre-qualified in that it requires more than simply applying for the loan. Pre-approval involves an in-depth analysis of your financial background including credit history, employment verification, assets, etc. The process will provide you with a more realistic picture of what your interest rate and payments might be, and will help determine in advance how much house you can afford.

Sellers will favor pre-approved buyers who demonstrate their ability and intent for successfully getting the loan. Most won’t entertain offers without this bank letter, especially in a seller’s market. A strong pre-approval from a reputable lender is an important piece that will put you at an advantage over competing buyers. It's best to get it done ahead of time to avoid a delay when submitting an offer and possibly losing out to other qualified, and more prepared, buyers.

Refine Your Search

An infinite number of factors can help determine your needs and wants when buying a home. Common considerations include things like schools, commute time, space, walkability, neighborhood preferences and of course price. You may also be deciding between a single-family home or condo/townhouse. Make a list of what you're looking for — decide what you can't live without, what might be a deal breaker, and what won’t.

Once you've narrowed your focus and established parameters, you can more efficiently make use of online tools to help with your search. Realtors subscribe to the local MLS database (the most up-to-date resource for finding properties) and can easily create automated searches using your criteria which enable you to receive email notifications of new MLS listings as soon as they become active. Searching on your own can be fun, but the MLS auto emails are an easy and more accurate way to stay up-to-date (I’ve seen Zillow take 4 days to update changes in my listings!) Your search criteria can be easily tweaked at any time if your preferences change. You can also tag properties you love or want to know more about, and direct message your agent with questions directly through the interface we call “The Portal”.

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Tour Homes

Finding a home often begins with browsing online and driving through neighborhoods to get a feel for what you want and what's out there. The next important step involves actually getting into a home. You can do that a couple of ways — through open houses and private showings.

Open Houses

If you tour a home at an open house it's important to understand that the agent holding the open will be representing the seller (or working on behalf of the seller's agent) so be careful about revealing too much if you’re seriously interested in the home. That agent will most likely pass along your comments directly to the seller. If you end up making an offer later, the revealed information could become detrimental in negotiations. Your price, terms and motivations should only be shared with an agent representing you as a client. (More on agent representation here.)

Also, you may be asked to sign in at an open house. In general, it's a good idea to just tell the seller's agent you're already working with another agent, if that's the case. (If you are working with me to find a home and are required to sign in, feel free to indicate your representation by including my name, phone number or email on the sign-in sheet.)

Private Showings

Another great way to see homes is through private showings with your real estate agent. You can set up single showings or multi-home showing tours to fit your schedule. Occasionally a 24-hour notice may be required to view a home, but I have often gotten clients in that day, or very close. If a home is vacant, a showing request might be automatically approved, requiring no prior notice. “Buyer tours” can also be created when you want to view several houses at once. Setting aside a few hours to tour a half dozen houses is efficient and can be especially helpful for making comparisons among similar properties.

Once is often not enough. Second and third showings of homes are not at all uncommon. Clients sometimes want to return with family, friends or contractors to get second opinions, cost estimates on projects, feedback, etc. If there's time to do so (with no known competing buyers), it's a good idea to take another look, just to be sure.

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on variety of topics including buying and selling, market conditions, homeownership trends, local events and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

Should I hire a Realtor? What type of representation is available in Minnesota?

If you are buying or selling real estate in Minnesota you should know what type of agency representation is available to you as a consumer. Realtors® in Minnesota are required to talk about this with potential clients early on in any communications. If you start talking about your price, terms, or motivation with an agent, expect to be presented with a written disclosure and explanation about different ways agents can represent their clients. This is for your benefit and agents are required to share it. Feel relieved rather than pressured when getting the form — it’s a disclosure, not a contract and will equip you with valuable information to help in your process. If an agent does not present it when you think they should, ask. A good agent will be adhering to ethical standards and this initial interaction may give you insight into future communications and relationships.

To help home buyers and sellers better understand Minnesota’s agency disclosure requirement, the St. Paul Area Association of Realtors® created this quick video. Check it out to learn more!

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on a variety of real estate related topics including buying and selling, market conditions, homeownership trends and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

Questions to Ask When Buying a Condo or Townhouse

Condo living has definite advantages but it can also create unexpected, and potentially unpleasant, scenarios if you jump in without doing your research.  

If you're thinking about buying a condominium or townhouse but have not yet lived in a Common Interest Community, or CIC (condo, townhouse or co-op), ask these questions before finalizing any offer:

• What's the monthly association fee and what does it cover? Which utilities are shared? Which utilities are paid for by individual units?

• How is the water use metered? Does each unit pay for individual usage? Or is is split evenly?

• Can heat be controlled in each unit? Or, is their a central thermostat?

• Are pets allowed? If yes, which ones and how many? Are there weight, size or breed restrictions?

• Is the association self-managed? If yes, do the members get along? If not, who manages it and how reputable is the company?

• How much money is in the reserve account for future maintenance projects?

• What's the association's annual budget?

• Who is on the board? Try to talk to a board member directly.

• Do the other owners have the right of first refusal in the sale of other units?

• Is there additional storage for each unit? Where? Does it cost extra?

• Are there any pending building repair/improvement projects? If yes, what? How much is proposed? Are costs split evenly among units? What other future projects have been discussed?

• Is smoking prohibited? Do any of the residents smoke?

• How sound proof is the building? Can you hear noise in other units?

• Who lives in the other units? For how long? Are they owner-occupied?

• Are long-term rentals allowed? If yes, how many? What percentage can be rented at any one time?

• Are short-term rentals (like Airbnb) allowed? If yes, are any units currently being used as Airbnb rentals?

• Where is the common space? Who maintains it?

• If there's shared laundry, what's the system for using it?

• If there are unassigned off-street parking spaces, what's the system for using them?

• Can I make changes to my unit? What, if anything, is restricted?

You may not get answers to all of these questions but at least be mindful of your living space needs and aware of any restrictions that may affect them. 

Statutory Rescission Period

When making an offer on any CIC (Common Interest Community) governed by a Minnesota HOA (Home Owner Association) you have a 10-day period to view all association documents and cancel the offer without penalty. This recession period begins once the last of the docs* has been received (agents should be working diligently to get them delivered as quickly as possible.) Hiring an attorney to review the documents is always a good idea!

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* Minnesota requires sellers to provide the following HOA documents: 

• Declaration

• Articles of incorporation

• Bylaws

• Rules and regulations

• Amendments or supplemental declarations

• Organization and operating documents, including budgets and financials

• Resale disclosure certificate

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on a variety of real estate related topics including buying and selling, market conditions, homeownership trends and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

7 Strategies for Competing with Multiple Offers

Competing with multiple offers? Price matters, but so do terms

Low inventory of homes for sale can cause major frustration for home shoppers facing fierce competition in a seller’s market. Winning among multiple bidders may be challenging these days but not impossible. In a multiple-offer situation there are several moves buyers can make to come out on top. Money matters, but favorable terms do to. Consider the following when preparing your offer:

1. Price

The first and most obvious move for most people is increasing their offer price. The highest priced offer will definitely catch a home seller's attention.

If you're financing however, be aware of how much might be too much. Your bank will later appraise the property to determine its value before agreeing to make the loan. If their appraisal is lower than what you've offered to pay it could become a problem. Keep in mind what you're both willing and able to pay.

2. Financing Terms

Paying with all cash will most likely put you ahead of other comparable offers. It eliminates the loan process, including the bank appraisal.

However, if you need to finance (most people do), putting more down on the loan can also put you ahead of others. And, a conventional loan can be more favorable than an FHA loan. (FHA appraisers may come back with a list of repairs needed prior to closing.)

Another way to strengthen your offer is to promise written documentation of your secured financing a week or two (or more) in advance of the closing date. Ask your agent and lender about this option.

3. Seller-paid Closing Costs

Closing costs are various fees paid by both buyers and sellers on the day of closing. Each side has a separate set of obligations requiring cash for title, bank and broker services performed throughout the transaction. For buyers, costs are typically around 3% of the sale price. For sellers it can be a bit more depending on the broker commission.

Often home buyers use the bulk of their cash reserves on the downpayment, leaving little to cover costs to close. One option for buyers in this position is to ask the seller to pay the their closing fees. But if you’re a buyer facing multiple offers and have access to cash, don’t ask the seller to pay your closing costs. Paying your own way could give you an advantage over other buyers who may be asking sellers to help out.

4. Inspection Contingency

Making an offer contingent on the results of a buyer’s inspection is typical and advised. I always recommend it and sellers will expect it. It is, however, optional. A seller will favor an offer without the inspection contingency. Omitting this contingency is not a common practice however — it puts you at risk for buying the unknown. Think carefully before making this move!

If you do ask for an inspection contingency, shortening the time in which you complete it is favorable to sellers. For example, asking for 7 days to complete inspections is better than asking for 10. The sooner this contingency is lifted the better (for the seller) — another way to sweeten your offer.

5. Closing Date 

If you can be flexible with moving and closing dates make it known when submitting your offer. When your agent fills in the purchase agreement she or he will need to enter a specific closing date but can add wiggle room with words like "on or before". Having a flexible date may give you an advantage, especially if the sellers are also buying and trying to coordinate their own move with another set of sellers and buyers.

6. Letter to the Seller

Sometimes it's personal. Writing a heartfelt letter to the sellers and sharing a bit about yourself and all the reasons you love their home might work to your advantage. It can be especially powerful if the sellers share a similar sentiment and care about future ownership. Keep it short and sweet, a paragraph or two is fine.

7. Earnest Money

Earnest money is "good faith" money. It's cash you put down when you making an offer to show you’re serious and willing to take a risk. It's typically 1-2% of the offer price but can be any amount you choose, or none. If all goes well it will go toward the downpayment. If you cancel for reasons not outlined in your offer you could lose it altogether. Putting down more, if you have it, demonstrates your serious intent and financial capability.

When the offer is accepted, your earnest money will be put into a trust account within a few days, so make sure you’re prepared before committing.

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on a variety of real estate related topics including buying and selling, market conditions, homeownership trends and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

Buying your first home? Advice from a local mortgage advisor

It's easy to get overwhelmed when planning to buy your first home. Searching for the right house, in the right neighborhood with needed amenities at a price you can afford is often just half of it. Unless you're paying cash, the other major part involves navigating the process for financing it. Knowing what you should do ahead of time and shopping for the best loan can be confusing for anyone new to the world of home loans.

I recently sat down with a trusted mortgage professional to get answers to a few of the most common questions asked by those shopping for their first home. Chris Kvikstad, president of Kvikstad Mortgage Solutions, works often with first-time buyers. In this Q&A he offers practical advice for anyone curious about the first steps of home financing. 

Q: What should I do in advance?

A: The first thing is to look inward and think about why you want to purchase a home.  How long do you think you will be there, how stable is your income situation, and are you comfortable with taking on the responsibility of any repairs should they be required? 

Once you have determined that you are indeed ready to purchase, then think about your lifestyle and whether a condo, single family home, or townhome would be ideal.  Think about how much you could comfortably spend each month on the combined housing payment, and then we can proceed together from there, using the steps above, and begin working out the numbers to see what a comfortable price range might look like. 

If you have any bills that are past due, bring those current before we start the process, otherwise, that might delay the process as we work together to resolve those types of issues if they occur.

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Q: How do I know how much I can afford?

A: This is a good question and the one that comes up most frequently with my clients.  There are a few different ways we can approach this.  The first step is to ask, “What is a comfortable payment for you that would include all of your housing expenses?”  We can use that amount and then work backward to calculate a general home price range that would include various expenses, such as property taxes or homeowner’s insurance, monthly association fees for a condo or townhome, and so on. 

Monthly Expenses

Depending on whether you're looking for a single family home or a townhome or condo, the price range we calculate together can vary according to those different expenses.  We look at current income and monthly living expenses, such as car loans and student loans, and we also want to take into account any surprise expenses that can come up after purchasing the home, such as a new furnace or normal maintenance and repairs.  While this last part isn’t a requirement for financing, I like to broach that subject so that people are mentally planning ahead for surprises. 

Lessons learned

During the years leading up to the housing crisis, too many people put on their blinders and only wanted to focus on the absolute maximum amount they could be approved for.  Houses were appreciating in value very rapidly, often in the double digits per year, and the fear of “missing out” on a great deal was a very real emotional component.  That has all changed now, and I think everyone is taking a much more conservative and realistic approach when it comes to this very important piece of the puzzle.

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Verifying Employment

Self-employed vs. employee?

Hourly vs. salaried?

Base wage + incentive compensation?

Q: What information will I need when applying for a loan?

A: We'll need personal information and will need to know whether you currently rent or have owned a home in the past.  When it comes to verifying employment, the required documents will depend on the type of employment – self-employed versus employee, hourly rate versus salary, and whether there is incentive compensation in addition to a base wage.  Generally, a couple of recent, back-to-back pay stubs and the last two years of W-2s are sufficient to get the ball rolling for most people.  We need to verify assets, as well, so this generally means two months of bank statements plus the most recent statement for any other accounts, such as retirement or investment accounts.

Q: How much do I need for a down payment?

A: We have many excellent programs today that do not require substantial down payments.  In fact, both Fannie Mae and Freddie Mac have outstanding first-time buyer programs that only require 3% down, and FHA requires 3.5% down. Our military veterans have the ability to purchase with as little as zero down through the use of their VA eligibility for VA financing.  VA loans are a wonderful program and I really enjoy working with our veterans. In all of these cases, the down payment can come from a gift from a relative. 

Less than 20% down

Ask your lender about first-time home buyer programs, FHA, or VA loans that require low down payments.

These reduced down payment requirements really make it convenient and affordable for people to take that next step towards home ownership.  You can always put down more than the minimum requirement, of course, and the more you put down the lower the monthly payment will be.

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on a variety of real estate related topics including buying and selling, market conditions, homeownership trends and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

Learn the Lingo: Common Real Estate Terms Defined

In the real estate field, like others, industry-specific words can sometimes be confusing to an outsider. If you're planning on buying or selling, it's a good idea to get versed in the lingo, or at least familiar with some key terms. Below is a list of some of the most common words you'll likely encounter in your process, explained in plain English.

CMA (Comparative Market Analysis)

A side-by-side comparison of your home with similar homes that have recently sold, been listed or expired in your area. Created by a real estate agent to help determine an accurate listing price when you sell. Can also be done for buyers who are trying to determine a fair offer price. 

Purchase Agreement (aka PA)

The document (and all related contingencies) listing the price and terms of your offer. Once signed by both buyer and seller, the PA becomes a legally binding document.

Contingency

A provision in the Purchase Agreement stating that certain conditions must be met in order for the sale to be valid. Usually includes specific time periods for completion. Most common are contingencies fo buyer inspections and financing.

Addendum (singular) / Addenda (plural)

Documents added to the Purchase Agreement as supplements to the offer — add ons. Examples include counteroffers, purchasing “as is”, disclosures of lead-based paint, and buying a Common Interest Community (condo, townhouse, co-op).

Amendment

A document outlining any changes made to the final Purchase Agreement. Must be signed by both parties to be valid.

Mortgage

A “debt instrument” used to secure a loan on a home. The property is used as collateral for getting the loan money.

Closing Costs

Money paid at the closing to cover the costs of transferring ownership of a property. They can include a variety of fees to different service providers such as the title company, lender, broker, etc. Paid by both buyers and sellers.

Seller's Disclosure

A document filled out by sellers disclosing all known material facts and details about the home. Minnesota requires this (or a Seller's Disclosure Alternative form) be completed prior to selling. Must be made available to buyers and signed by them when submitting an offer.

MLS (Multiple Listing Service)

A database service real estate professionals subscribe to that stores up-to-date listing information including current properties for sale, homes sold, and listings cancelled or expired. Several MLSs operate around the country. The Twin Cities and Rochester regions use the “Northstar MLS.”

Earnest Money

Cash paid by buyers when making an offer as a show of "good faith". It's optional and can be any amount (1-2% of the sale price is typical.) Intended to go toward the downpayment if you end up buying the home.

Conventional Loan

A home loan not backed by the government. 

FHA Loan

A home loan backed by the government (Federal Housing Administration). Downpayment requirements are usually lower than those of conventional loans, however, purchasing mortgage insurance is usually required.

PMI (Private Mortgage Insurance)

Insurance you pay when you put down less than 20% on a conventional loan.

MIP (Mortgage Insurance Premium)

Insurance you must pay when financing with an FHA loan.

Title Insurance

Insurance paid to protect against claims on the title of your property. Lenders require it for their own protection. Buyers can also choose it for self protection. Ask your title company about costs of coverage.

Arbitration Agreement

A document that allows buyers and sellers to agree to settle disputes about the property outside of court. Optional for all involved in the transaction including buyers, sellers and their agents. Must be signed by both buyer and seller to be valid.

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on a variety of real estate related topics including buying and selling, market conditions, homeownership trends and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

Let's make an offer!

Once you've found a home you want to buy you'll need to figure out how much you're willing and able to pay, then submit an offer to the sellers. Using a standard Purchase Agreement along with necessary addenda, your agent will help you through the entire offer writing and presenting process.

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Determine Your Price

Before writing your offer you will need to decide on a purchase price. I typically do a CMA (Comparative Market Analysis) to help buyers zero in on a fair price for a home. Comparing properties sold or listed within the past six months, of similar style, size and location, is helpful for making comparisons, when available. Of course other factors will also come into play — the amount you can afford, current inventory, your emotional connection to the house, multiple offers being submitted, etc.

The Purchase Agreement

The Purchase Agreement, or PA, is the main contract used when buying a home. It's a fill-in-the-blank, multiple-page document made available by the Minnesota Association of Realtors (the Minnesota State Bar Association form may also be used.) Your agent has access to the PA and all other documents and can fill in the details for you, with your direction. These days, all can be done electronically on a computer or mobile device, including signatures. Getting the PA signed and accepted by the seller legally binds you to the purchase of the home, so it's important to read and understand it before you sign and your agent submits it to the seller!

The Purchase Agreement may also include various addenda for contingencies like inspection, financing, sale of another property, and more. Be aware that some contingencies allow a seller to continue marketing their home throughout the period in which yours is being met. For example, if your accepted offer was contingent on the sale of your current home and the seller receives another offer while waiting for your home to sell, you may be asked to lift the contingency (within an agreed upon amount of time) or risk losing the new home.

Once your offer has been accepted and signed by the seller, the clock starts ticking for the most common contingency — the inspection. In the days immediately following acceptance you will need to schedule a buyer's inspection with a reputable professional. Typically, buyers ask for around 10 calendar days in which to do the inspection and negotiate repairs or price based on the results. Inspections are usually paid by the buyer. Your agent should be able to provide a list of trusted inspectors and help facilitate the process.

Strengthen Your Offer

In a multiple-buyer situation it's unknown what other buyers are up to, so it's important to make your best offer while being mindful of your personal or financial limitations. If a home is in high demand, with several buyers making offers, it's not uncommon to submit an offer at or even above the listing price. In fact, this has been common lately with current seller's market.

Besides raising price, you can also manipulate terms to favor a home seller and strengthen your position. Increasing earnest money deposit, paying your own closing costs, and removing contingencies are just few ways to sweeten your offer. Sometimes even a writing personal letter to the seller can set you apart from the competition.

Seller-paid Closing Costs

It's not uncommon for buyers to ask sellers to contribute to the buyer's closing costs when cash is needed to close. The amount can vary as a percentage of the price (usually 1-3%) or as flat amount written into the PA. Asking a seller to pay additional fees of course lowers their net gain from the sale of their home. If you have enough cash and are competing with other buyers, it's wise to consider paying your own costs, or at least as much as you can. 

Earnest Money:

"A deposit made to a seller showing the buyer's good faith in a transaction."
-Investopedia

Earnest Money

It's common practice to include a small percentage of cash, or earnest money, with your offer. Earnest money is a buyer's deposit on a property made at the time of offer. It's often 1-2% of the sale price, used to demonstrate your seriousness as a home buyer, and eventually contributes to the down payment or final costs to close. Earnest money deposits are not required, but including one and even increasing the amount can sometimes give you an advantage over other buyers who may be relying heavily on financing.

Contingencies

Having fewer contingencies may also help in a multiple offer situation. Contingencies are safety nets that enable you to back out of a sale if certain conditions are not met. At the minimum, you'll want an inspection contingency allowing you to check out the home before making a final decision. This is a common request for nearly all buyers — I always recommend it, and sellers will expect it. Of course you can always choose to waive the inspection at your own risk.

Unless you are paying cash for the home, you'll also need a financing contingency, which basically says you agree to buy the home as long as you can receive a loan under the conditions outlined in the Purchase Agreement. This contingency should be accompanied by an pre-approval letter from your lender. Working with a reputable lender who is available to answer the seller's questions and concerns will also give you an advantage. If you pay in cash, even better. Cash offers, made without a financing contingency, are less common but will usually be favored by sellers.

Another common contingency involves the sale of an existing home. You can make an offer contingent on the sale of your home before even listing it, but the closer you are to actually selling yours, the better.

Counter offer + Final Acceptance

A seller may be interested in your offer but choose to counter with more desirable terms or price. This can be done verbally between agents representing each side but will eventually be written into a final amendment and signed by both parties. Once signed, returned and accepted...congratulations, the offer is binding and next steps begin!

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on a variety of real estate related topics including buying and selling, market conditions, homeownership trends and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

What do all those listing terms mean?

Like any industry, Real Estate maintains a language of its own, with shorthand jargon and specialized terms used daily by those in the biz. But lingo used by housing professionals can sometimes be confusing when you're shopping for homes. This list might help. Common terms found in home listings, explained in everyday English:

A (Active)

This means the property is on the market, available, and open for offers. Sellers may have received an offer but have not yet accepted it.

A,i (Active, Inspection)

Sellers have accepted an offer contingent on a buyer's inspection of their property. Depending on what's written in the offer, the whole process of inspecting and negotiating based on the results takes about 7-10 days.

A, r (Active, Subject to Statutory Rescission)

The sellers of a condo, townhouse or co-op have accepted an offer which is contingent on the buyers reviewing all association governing documents and financials. After receiving the final document, buyers have 10 days to review them. They can cancel the offer at anytime during this period, for any reason.

A, s (Active, Sale of Another Property)

The sellers have accepted an offer from people who need to sell a home in order to buy a new one. Their buyers are most likely not financially able to own two homes at once. Or, they are but have chosen not to. The listing is still on the market and open for other offers. Depending on what’s written in the offer, the first buyers will have a short time during which to make good on their offer, if they can.

A, o (Active, other)

A, o  means the sellers have accepted an offer with a contingency that could be anything other than Inspection or Statutory Rescission. For example, if it's a vacant lot and buyers want to get building plans approved by the city before committing, they would submit their offer contingent on the city approval.

P (Pending)

The sellers have accepted an offer and are set to close. This usually means the inspection period has passed and all other contingencies (except Financing) have been lifted.

T (TNAS)

This stands for Temporarily Not Available for Showing. It typically means the listing is active but sellers wish to make the property unavailable for private showings, for whatever reason. Maybe they have company staying with them or are making repairs or remodeling. It might also mean they've accepted an offer and are getting a buyer's inspection. In this case, agents are required to add an “i” after the TNAS signaling the inspection contingency.

If you are curious about a home with this status, ask your agent to contact the listing agent directly to get more information. Keep in mind sites like Zillow currently do not display property with TNAS status. These homes are only visible in the MLS database, accessible to subscribing real estate agents. 

Coming Soon

The Northstar MLS recently added a “Coming Soon” status for new listings. During this period at least one photo must be displayed, and homes cannot be shown (a hefty fine for agents who do.) Properties can remain in this status for up to 21 days after which they will automatically become “Active” and available for showings, as permitted by the sellers. The Active date should be visible next to the status bar.

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This list represents terminology from one of Minnesota's regional MLSs (Multiple Listing Services). Other MLS databases across the state and country may have similar terms with slight variations. 

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on a variety of real estate related topics including buying and selling, market conditions, homeownership trends and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

Can we take a look at that house? Open houses + private showings

Finding a home often begins with browsing online and driving through neighborhoods to get a feel for what you want and what's out there. The next important step involves actually getting into a home. You can do that a couple of ways — through open houses and private showings.

Open Houses

If you tour a home at an open house it's important to understand that the agent holding the open will be representing the seller (or working on behalf of the seller's agent) so be careful about revealing too much if you’re seriously interested in the home. That agent will most likely pass along your comments directly to the seller. If you end up making an offer later, the revealed information could become detrimental in negotiations. Your price, terms and motivations should only be shared with an agent representing you as a client. (More on agent representation here.)

Also, you may be asked to sign in at an open house. In general, it's a good idea to just tell the seller's agent you're already working with another agent, if that's the case. (If you are working with me to find a home and are required to sign in, feel free to indicate your representation by including my name, phone number or email on the sign-in sheet.)

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PRIVATE SHOWINGS

Another great way to see homes is through private showings with your real estate agent. You can set up single showings or multi-home showing tours to fit your schedule. Occasionally a 24-hour notice may be required to view a home, but I have often gotten clients in that day, or very close. If a home is vacant, a showing request might be automatically approved, requiring no prior notice. Showing tours can also be created when you want to view several houses at once. Setting aside a few hours to tour a half dozen houses is efficient and can be especially helpful for making comparisons among similar properties.

Once is often not enough. Second and third showings of homes are not at all uncommon. Clients sometimes want to return with family, friends or contractors to get second opinions, cost estimates on projects, feedback, etc. If there's time to do so (with no known competing buyers), it's a good idea to take a second look, just to be sure.

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on a variety of real estate related topics including buying and selling, market conditions, homeownership trends and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.