Real Estate Snippets

Remodeling for Resale or to Enjoy

A funny thing happened on the way to the remodel, the house remodel, that is.  Just like a stew can be destroyed when too many cooks start messing with it, so can a remodeling project get derailed with too many decision makers. 

The house in question was about 660 square feet, one bedroom, one bathroom, and a tiny yard.  It didn't have enough room for a lot of people to have living space and it wouldn't be the kind of home millionaires were buying.  It was a great home for the right person.  It had been decided by the entire family that the home needed a remodel. 

A normal course for one family member was to research every item going into the home.  Not only would quality, price and function be considered by this family member, but also, what the latest trends in the market were.  It was discovered that oak was out and maple was in.  Laminate was out and granite was in.  Carpet was out and wood floors were in.  The list went on and on.  But, for resale . . . began the researcher's plea.  The problem was resale was not the goal.  The relative on the opposing side lobbied for the home's occupant to like what was put into the house.  Besides which, if high end, expensive choices went into the house, the house remodel would cost more than it was worth!

As I watched the debate, I thought of Jennifer Kirby's blog article, "Are Buyers Spoiled?"  Like Jennifer, I believed our years of prosperity have raised the bar on what buyers expect in a home.  This little St. Paul house  was an entry level home.  Someone would buy this as their first or starter home. 

My experience has been that first time buyers are so thrilled to get a house, they sometimes overlook the picky little details.  The ones who are starting small with hopes of moving up to a bigger house actually may prefer oak cabinets over maple!  They might like the clean laminate countertops.  They actually might like carpet on the floors!   Those buyers who are starting small are grateful for a clean well-kept roof over their heads.  Those who don't want to work their way up from a small beginning might reject a house because it didn't have the amenities.   That is one of the risks a remodeler makes, but it's only one of the risks.  Another risk is to make the house more expensive than the buyer can afford.  Or to not ask the occupant about their choices in the remodeling!

This particular project will be an interesting one to follow if for no other reason than to watch the family dynamics.

Dear Mr. Interested Buyer

Dear Mr. Interested Buyer:

Today you called my office phone number from one of my listing signs.  The office connected you with my cell phone.  I was thrilled to hear your interest in the vacant lot I have listed four blocks from Como Lake.  It's a nice piece of property with easy access to both Como Park's golf, walking and biking trails, as well as shopping and freeway access.  I desperately wanted to tell you this.  You were interested in the price, and I would happily have given you that information.

There is only one small problem.  You left your name with the comment, "You can get my number from your caller ID."  I am so disappointed.  My caller ID shows my office number because they were the ones who forwarded your call to me.  I looked your name up on the web and in the phone book.  There were no last names (I tried several spellings.) with your first name.  Despite all my effort, I couldn't return your call.

I do wish you had left your phone number in the message!

Sincerely,

Bonnie

Vacant Homes

Many homes that are currently for sale are vacant.  When buying a vacant home, it is important to remember a few things that you might not consider when buying a home that has been continuously occupied.

• If the home has been vacant for more than a few months, it may need a sewer clean out to make the drain system fully functional for regular use.  Since the slope on sewer drains in St. Paul is only 1" per foot, it is good to remember that anything that has stalled on its way to the street can possibly harden and cause a drain "stroke" or worse yet, allow things to grow!
• If the furnace and other appliances have been shut off for a length of time, it's good to have them checked for leaks or rust build up.  Moisture in a home normally is dried by the heat system, but without heat, the moisture does what moisture does, creates mold and/or rust.
• Unheated homes in the winter can experience all kinds of damage if the home has not been professionally winterized.  If it has been winterized, there still can be damage from lack of water in the pipes. 
• Sometimes critters like to call the vacant home, "Home!"
• Vacant, closed up houses can develop a smell that usually goes away with regular cleaning and airing.
• Dust falls on the occupied and unoccupied homes!  Don't be surprised if there's a fine film of dust on everything when you move in.
• Vacant homes are susceptible to vandalism and theft including copper pipes. 

Most homes that are listed by a foreclosure listing specialist have been winterized and have the heat kept at a minimum temperature needed to protect the home's integrity.  Many issues with a home's condition can be found by a buyer's inspection, but the utilities must be on in order for an inspector to check the functioning of the furnace and water.  Drains are not within the scope of a buyer's inspection nor are problems not visible to the naked eye.  Purchasing a foreclosed or vacant St. Paul home can still be an excellent bargain for home buyers, but it is wise to remember little things may occur that an occupied home normally does not have.  Setting aside a small sum to correct those unforeseen issues is wise.

Costs in Buying a House

First time home buyers are often anxious about the cost of buying a home.  Not only are they committing to a monthly payment for what seems the rest of their lives, but they also have to fork over a bunch of money the day they sign the papers.  As if signing all those papers isn't stressful enough, many of the documents are written in some kind of foreign language that is meaningless when read under pressure.

If you're thinking about buying a home in the St. Paul area, here is a list of common fees the buyer pays to buy a house.

1. Down payment:  The down payment is probably the single biggest dollar amount the buyer needs to buy a home.  During the feeding frenzy prior to 2005, it was common for first time home buyers in St. Paul to purchase a home with no down payment.  Now that mortgage qualifications are tightening, the market is returning to requiring a down payment.  The down payment can be as little as 3% of the mortgage if the buyer is getting an FHA mortgage. 
2. Mortgage origination fees:  The second largest item in the list of costs to buy a home.  Origination fees can be as little as 1% of the mortgage amount or as high as 5% or more.  Most mortgages for buyers with good credit are in the 1%-2% in the St. Paul area.
3. Discount points:  An optional fee used to buy down the interest rate on the mortgage.
4. Appraisal:  This fee is often paid before the closing and is given to the appraiser who determines that the home is worth the amount of the mortgage.  The fee is based on the size and value of the home.
5. Credit report:  The credit report is often paid at the time of application for the mortgage.
6. Private mortgage insurance or mortgage insurance premium:  If the down payment is less than 20% of the value of the home, the lender will require the buyer to pay for mortgage insurance to cover the lender's losses if the buyer doesn't pay their mortgage.   A one time fee is paid at the closing and a monthly fee is paid with the loan payment until the home has 20% equity.
7. An escrow account is usually set up at the closing with several month of taxes and homeowner's insurance placed in an account with the lender.
8. The first year's hazard (homeowner's) insurance is paid before the closing.
9. Fees for recording the deed, any affidavits, and the mortgage at the county.
10. Title insurance is required by the lender to cover any mistakes or omissions made in making sure the title to the home was clear.
11. The buyer's inspection is paid at the time it is done which is usually within 5 days of acceptance of the purchase agreement.  Any other inspections (radon, lead, furnace, etc.) done at that time are also paid by the buyer.
12. The buyer's portion of the property taxes if that is how the purchase agreement is written.
13. Set up fees for new utilities.

The amounts for each of these items vary based on the area and the cost of the home.  When a mortgage application is made a good faith estimate of the costs is supposed to be given to the mortgage applicant.  On that good faith estimate actual figures are used based on the amount the buyers can qualify for.  A rough guide used by my clients to figure the total needed is about 3.5-4% of the mortgage amount as the total amount for the closing costs (all costs but the down payment). 

When an offer to purchase is written, it is not unusual to ask the seller to help out with the closing costs.  Especially in today's market, when sellers are giving concessions in order to sell their homes, it is not unusual for sellers to pay a portion of the closing costs.    It's all part of the negotiating done on the buyers' behalf by their real estate agent.

Name Calling?

People who are older than dirt remember Art Linkletter's show "Kids Say the Darndest Things."  Segment after segment of Art's film clips showed kids being their natural selves. 

Well, I propose that real estate clients say the darndest things.  Last week was a blitz of showings.  Twenty St. Paul houses to one client in one day is grueling at best.  That kind of showing tour requires stamina and tenacity.  It also requires an experienced client that doesn't start to mush the houses together creating a totally fictitious combination of all of them.

The last St. Paul house, the last challenge, and then home to a warm bath was my thought.  With the lockbox combination in hand, I approached the door.  There was no lockbox.  I check the three garage doors to my left.  No lockbox.  I look around the stoop on which I'm standing.  No lockbox.  It must be on the front door.  Mrs. Buyer protests, "You're not going to walk to the front in those shoes are you?"  As I begin my snow breaking path to the front door, Mrs. Buyer proclaims, "She's a bulldozer, a veritable bulldozer!"

Now I've been called a lot of things in my life, but never a bulldozer, so I've got to know the basis for that comment.  It's a phrase her dad uses to describe someone determined to get the job done.  Someone who doesn't let barriers get in the way.  I guess I'll take that as a compliment.

The result of my "bulldozing"?  No lockbox on the front door either.  On my return to the back door, a different angle revealed the lockbox attached to an old milkcan with a tractor seat welded to the top.  From the stoop it was not visible.  From the front yard, it was.

Buyers Inspection

It was a fun couple of hours.  Inspections in vacant houses go more quickly and efficiently so we were out of there promptly after two hours.  Today's purchase was a St. Paul house being sold as part of a short sale.  Since the seller has no money to pay the mortgage, it can also be assumed s/he has no money to pay for defects found as a result of the buyers' inspection.

We found a bucket masquerading as a waste basket today.

The masquerade worked because in our first two showings the bucket had us convinced that it was a waste basket.  But in the inspection today, a leak was found just above this waste basket which we realized was masquerading as a bucket to catch the drips.

On a side note, I'm glad the copper thieves haven't found this St. Paul house.  Even the drain pipes were beautiful copper.  "They just don't make them like that anymore!"

Know Your Neighbors

We stood side by side at the dining room window, my clients and I.  This St. Paul house was an option, but there were a couple mysteries to solve.  The listing sheet said there was a two car garage, but the only possible garage is to the side of the house in the direction we are facing.  It appears to belong to this house since the electrical wire to that garage attaches to the house we're standing in.  The mystery is that there appears to be only one driveway for two garages that are side by side.  The garages are two different colors.  White matches the house we're in and brown matches the house we're looking at.  The driveway must be shared by the two garages.

We stand quietly perusing the view.  Sharing a driveway isn't always a bad option.  Occasionally it might work out.  The question depends on the neighbor and the level of cooperation between the two houses. 

My clients and I stare at the house.  What does that house tell us about the neighbors? 

1. The driveway is not shoveled.  Since the house we are in is vacant, the shoveling would be impossible for the absent owner.  Obviously, the neighbor doesn't place shoveling high on his/her priority list.
2. The house next door needs exterior maintenance.  The wood needs a finish coat.  Gutters are sagging.  The garage door is in disrepair.  The neighbors may not have the funds to maintain the driveway surface.
3. The yard is full of mystery hills of snow.  My clients are from the south where snow doesn't cover the sins of the neighbor's back yard, but I'm a Minnesotan and I know what frightening things may hide under those piles.  Were leaves left in heaps in the yard?  Are there sacks of garbage under the snow?  What mysteries would be revealed in the spring thaw?
4. Visible signs of debris add to the fear of garbage hidden.  On the bench lies an abandoned rake and a overturned pot.  A bicycle without a chain holds up the wood privacy fence.  A lost glove is frozen to the snow.  The deck sports patio furniture with its umbrella still open.  Parked at the front curb is a primed, not painted, muscle car with collector's plates.

We stand there, the three of us, each taking in the view.  What does that yard tell us about the neighbors?  Is it an abandoned mom with lots of kids who's overwhelmed with all the work?  Is it the Beverly Hillbillies, only messy?  As our thoughts are given voice, my clients decide the risk is too great.  That view . . . well, that view is what they'd see every night from their dining room table.  It didn't seem hopeful that their standards of driveway upkeep would be similar to the ones next door.  Nope, this St. Paul house wasn't going to be the one.

Unrepresented Home Buyers

Sometimes I wonder if home buyers realize how much they really don't know. 

A home buyer without a real estate agent was interested in a home that had an offer being negotiated but was still showing as active on the MLS.  As part of my marketing program, contact information for all calls on my St. Paul listings are kept in case something changes on the listing.  If a change occurs each of the interested buyers or their agents receive a call to notify them of the change.  This woman's response to my request for her information so I could make such a call was, "Why would I do that?"  The professional me explained the reason above.  The sarcastic me thought, "Well, duh.  Are you interested in the house if the sale falls though?  Do you want to know if it goes back on the market?  Or would you rather I call the dozen other interested parties and get an offer and you never know about it?"

This "do it yourself" home buyer didn't know what she didn't know.  She misunderstood what a REALTOR'S® job is. Her fear of using the services of a professional real estate agent was so great that she chose to possibly lose out on a very good house rather than let me know her contact info.  Her number was on my caller ID.  Did I write it down?  No.  It was obvious she thought she knew more about my job than I do and didn't want to deal with an agent.  She told me she would keep an eye on the house.  Now what good did that do her when there was no communication to the general public when the first buyer backed out and I called my list of contacts procuring a second buyer?  She watched the house all right, but she didn't really see what happened.  She lost the chance to be a contender for the house in the second go round probably because she mistrusted the real estate profession and didn't really understand what a REALTOR® does. 

Reasons Not to Buy a House

There are all kinds of reasons for not buying a house.  Traditionally it's because the house is too small, has too few bedrooms, is too expensive, is in bad shape, lacks a garage, etc.  All the reasons have to do with the structure and condition of the house.

Another reason for buying or not, is the location and neighborhood.  Real estate agents are not supposed to make a judgment call on the quality of the neighborhood.  If asked, most will suggest you call the police department or check for crime records on-line. 

A St. Paul home buyer, however, can make their own judgment about a neighborhood.  One such judgment caught me by surprise when my client and I were in the midst of our house tour.  My client looked up to the electrical wires where several pair of shoes were hanging.  The shoes weren't ratty looking, but were in fact practically brand new.  Her statement, "We don't need to look at this house." 

My quizzical look was answered by some St. Paul street training. My client had learned that shoes hanging in the trees or from electrical wires like this were a sign that drugs were available at that location.  Being a single mom, she had no interest in a neighborhood with that kind of "street" reputation.

Home Buyers Inspection

St. Paul home buyers often ask if they should get a private home inspection, especially if they are buying new construction.  Afterall, new construction is "perfect".  No one else has lived there to beat up the house so it can't have defects.  It looks shiny and clean.  It doesn't have dirty carpets.  It doesn't have holes in the walls.  Why is a buyers inspection necessary?

Here are a few examples of findings from a private home inspection on a new house.  Click on each picture to get an enlarged view.

Looks like there are a few missing shingles on that ridge cap.	The brand new shingles are overhanging the roof too much.  They need to be trimmed.	The sharp points on the underlying shingles are supposed to be trimmed like the red line shows so the water doesn't catch on them and go under the shingles.
This gas pipe is not protected from rubbing on the sharp metal hole.  Eventually the sharp metal could cause a breach in the pipe and a subsequent leak.	The structural beam is supposed to be supported by 3" of cement block instead of only 2".  That's one third less support of that beam.	Combustible plastic is contacting the pipe intended for the dryer vent.  This is a potential fire hazard.

Other new construction homes have found similar issues.  Some have improper finish grading so a pond forms in the back yard.  One had a large picture window installed with one corner one inch out from the frame.  The improper installation would have voided the manufacturer's warranty on the window in the event of future problems, not to mention the possibility of water and weather intrusion into the home.  Sometimes the discoveries are more minor like not securing the air conditioner electrical disconnect box which is usually on the side of the home.  An easy thing to fix, but not minor if your child is the one who opens the box and puts their hand inside.  In all cases the homes had passed the final city inspections.

When my previous buyer clients found defects like these in their inspections, It's pretty hard not to recommend having an inspection even when it's new construction!