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Buyers

Required Sprinkler Systems in Minnesota Homes

Mandatory Sprinkler Systems in Your Home

I have to admit, I have insider information, so I’ve seen this coming for years. I even wrote a blog post about it back in 2007, listing some benefits to having a home sprinkler system installed, especially in a million dollar home. I don’t have a problem with them, after all, my husband project manages for Summit Fire Protection in St. Paul and oversees daily the installation of fire suppression systems in Minnesota buildings.

What I do have a problem with is the government making it mandatory for all newly constructed homes to have a sprinkler system installed. You most likely haven’t heard that the International Code Council added in 2009 to its International Residential Code that fire sprinkler systems be a required standard feature in new home construction. The National Association of Home Builders tried to have the measure repealed, but was unsuccessful, so the new requirement will be included in the 2012 IRC edition.

What does this mean to you?

So far, there are only a few states, California being the first, to adopt the 2009 IRC requirements. But I am sure there are many other state and city governments that will jump on the bandwagon, all in the name of public safety. Currently there is an effort in Minnesota, championed by the Builders Association of Minnesota, to prohibit the State Building Code, State Fire Code, etc to require the installation of sprinkler systems in residential homes (H.F. 460 and S. F. 297). Now this doesn’t mean you can’t have one installed, but it does keep you from having to pay for one when you don’t want it.

I’ll keep a close eye on this one. While the cost of sprinkler installation is fairly low, about $3000 for a $300,00o home, in today’s market, people are watching the dollars they spend very carefully, and one might just rather have granite counter tops over a fire suppression system.

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Do Your Homework when Building a New Construction Home

In light of recent experiences I have encountered with local Twin Cities home builders, I make it a point to tell buyers that they should thouroghly research any builder they might contract to build their new home. Some builders are barely keeping their business above water, and others are slowly sinking, but if you spoke with these builders, most likely they would tell you they are doing” a lot” of business. Don’t believe them. Here are some tips to consider when building a new home:

  • Ask the builder how long they have been in business under the current company name.If it is a short period of time, ask them if they, or anyone involved with company, has been a builder/contractor under a different name. Believe it or not, there are some fairly sizable builders in the Twin Cities who have declared bankruptcy, gotten in trouble with the state, etc, and closed their doors, only to open up under a brand new entity name. Of course, they don’t disclose this to potential buyers.
  • Ask the builder if their company name is the same as their legal corporation name. Sometimes builders “Do Business As” (DBA) a different name. You can research both names with the Minnesota Secretary of State and find out if they are in good standing.
  • Ask for the Builder’s License Number. They should be able to give it to you on the spot. If they don’t, consider this a red flag. Once you have the number, research the builder with the Department of Labor and make sure their license number corresponds with what you were given. Believe it or not, some builders have been using another builders license number to pull permits, illegally of course.
  • Find out who owns the company. Go to the Judicial website and see if there are any active judgments against the owner and/or the company. Pending cases brought against the builder by clients or trade professions could be a red flag.
  • Ask for References. Don’t just get the good, but also ask to speak with someone who was not happy to see how the builder resolved the issue. It could give you a clue on how the builder professionally handles complaints.
  • Don’t just take the builder’s word for it. I can’t tell you how many times I have been lied to by a builder as an agent, and it just makes me more mad when I meet buyers who were lied to as well. If you have contracted with a builder, make sure all permits are pulled for the work being done. Once again, some builders are doing work without a permit, and when the city finds out, and the project shuts down, the buyer is the one left in limbo. Don’t be afraid to call the city and ask them if proper permits were pulled.
  • Find out who holds the escrow money. I don’t like the escrow money being held by the builder. If a builder cannot finance the permit on his own, then I question their financial standing. I have run into buyers who have had problems with builders and had to cancel the contract, only to find out the builder has spent the escrow money and doesn’t have the funds to pay the buyers back. It just turns into an awful mess. See if the money can be held by a title company.
  • Don’t go with a builder just because they have a great lot. The worst thing you can do is fall in love with a lot that is owned by a builder that you are not excited about. Trust me, it is the kiss of death! I know two buyers currently (not my clients) who went with a builder because of the lot and the homes are falling apart. They were warned about the builder, but they said they would take their chances because they were so blinded by the lot.
  • Don’t be afraid to ask questions. Ask everything you can think of, and don’t hold back even on the things that seem minor. 

These are just a few things to think about. “Google” the builder, too, and see what pops up. For instance, a  recent article in the Star Tribune highlights how some local builders have lost their license recently or been fined in the past few months.

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Luxury Home Financing Update for the Twin Cities

A few months ago I reported that financing for the upper bracket home market in Minneapolis and St. Paul was having some difficulties. Banks were being very cautious for million dollar loan requests, and the new norm for down payment was at least 30%.  The word of the day was “documentation”, and banks required a ton of it. Now it looks like banks might be easing up on luxury home buyers…well, maybe just a little bit.

According to Lisa Wells of Residential Mortgage Group, the luxury real estate market is getting a little easier to finance, but still remains cautious. She says, “Loan amounts for 1 million or less are pretty decent for interest rates and the underwriting process, but buyers still need 2 years of solid income and at least a 700 credit score rating.” It appears that a down payment of 20% is also OK, but if you want a better interest rate, than banks would like to see at least 25% down.

If you require a loan amount of over $ 1 Million, things will be a little bit different. Now two appraisals are required by the bank, with the lower of the two used for the loan.  The borrower must have at least 12 months of payments in the bank in a liquid reserve and ideally more, and of course a high credit score.  Ms. Wells says she has found that final loan approval in the million dollar plus market, even if the buyer meets all the requirements and guidelines, “is still left to the discretion of the Underwriter, and that she should have a very, very strong borrower with 35%-40% down.  The thought out there is the upper bracket market still might have some downward pressure, and therefore, anything with loan amounts of $1.5 Million or more is just hard”.

Home owners looking to sell this year should realize that there is a real obstacle with million dollar home financing, as buyers must be able to come up with the dough. Price is not always the reason for why your luxury home hasn’t sold – it could be the lack of qualified buyers. With the tougher rules in place for loan approval, sellers should require that all buyers be pre-approved. In this way, Twin Cities home owners can have a little bit of comfort that a financial capable borrower is knocking on their door.

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How to Buy a Home on Lake Minnetonka

Lake Minnetonka Sailboats

Sailboats on Lake Minnetonka

If you are looking for the premier place to live in the Twin Cities, then look no further than Lake Minnetonka. Located just 8 miles west of Minneapolis, or 20 -30 minutes depending on traffic, residents have access to numerous highways to get them around town and enjoy the best of both worlds – quiet lake living combined with all the local big city amenities.

Buying a Lake Minnetonka home can be a little overwhelming at first due to the shear size of the lake. With over 140 miles of shoreline and numerous bays, real estate options are endless. Some buyers narrow down their choices by choosing the town on the lake they wish to live in– Wayzata, Shorewood, Deephaven, and Excelsior are the most popular Lake Minnetonka eastern towns, with Orono, Spring Park, and Tonka Bay covering the center of Lake Minnetonka, and Mound, Minnetrista, rounding out the western side.

Some buyers look to the house as the number one determining factor on where they will be living. Most of the waterfront homes cost $1 Million and more so be prepared to spend some money on your home. Home styles differ greatly around Lake Minnetonka– Cape Cod, Victorian, Cottage, Modern, Cabin, Lodge, just to name a few. Most of the lakefront homes have their own docks, but some neighborhoods have deeded access to a bay, giving home owners the same opportunity for boat storage on community docks. With boating, fishing, skiiing, and all the fun lake living has to offer, docks are a major “must have” for life on Lake Minnetonka.

Exposure could be important to finding the perfect Lake Minnetonka home. Do you like sunrises or sunsets best?Want both? Then figuring out which way your future home faces could help the home purchasing decision. Lake Minnetonka waterfront homes have fantastic views, especially in the fall when leaves change color, and if you like to garden, consider the amount of tree coverage on the lot, as that will greatly affect what types of plants you will be able to grow.

But the number one action to take when buying Lake Minnetonka waterfront property is to search the current homes available for sale. Make notes on what you like and don’t like and start narrowing down the choices. Before you know it, you will have a handful to see and soon will be on your way to owning your own piece of lake paradise. Happy shopping!

Search Lake Minnetonka Homes for Sale

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Not All Negotiations are Nice

In Minnesota, the term “Minnesota Nice” is thrown around alot to describe just how great the people here are. But when it comes to negotiating deals in real estate, that nice attitude can sometimes be shed, especially when two parties have a hard time agreeing to terms.

Recently I had a transaction in which from the beginning, there was conflict. This happens sometimes when a buyer presents an extremely low offer which in turn greatly offends the seller. In this case, the seller stuck to his guns and refused to give into the buyer’s demands. Frustrated, but really wanting the property, the buyer gave in and agreed to the sellers terms. From that point on, there was hostility from the buyer during the inspection period, during those negotiations, and up to the end. Of course, they pointed the finger at the seller saying he was being difficult, and the buyer’s agent was wonderful to tell me what she really thought of my client.

But the point is this, not every deal is peaches and cream, and not every buyer or seller walks away from a sale feeling it was a win-win situation. Such is life. Negotiating a real estate sale can be down right unpleasant due to so many emotions getting in the way, however if you can keep the emotions out of it, you have a better chance of creating a pleasant atmosphere which will bring the “nice” back into the transaction.

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Luxury Home Short Sales

Working with Luxury Short Sales in the Twin Cities

While high end homes don’t go into distress too often, the current market is causing some home owners to pursue the short sale route when selling their home. With home prices dropping in expensive neighborhoods, and seeing as many were artificially inflated due to the real estate market a few years ago, luxury homes are now seeing a much needed market correction.

Unfortunately, there are not as many buyers out there who can afford an expensive home (not to mention the high property taxes that come with million dollar homes). Currently the most concentrated area in the Twin Cities Metro area for short sales is in and around Lake Minnetonka, including areas like Chanhassen and Medina. But you can find a luxury short sale here and there throughout the Metro area.

Having worked with high-end short sales, I can say that they are quite different than the normal sale. The ones I have worked have almost always involved a higher up…not the average remedial negotiator who could give a rats butt, but someone who understands the potential huge financial loss that a million dollar home would create on their books. A $1.5 million dollar foreclosure is so much worse than writing off a few hundred grand in a short sale.

Case in point, a luxury short sale listing I successfully sold this spring became a success because I got the ear of the Vice President of the bank. He agreed that a $400,000 loss was much better than a $1.4 Million loss. Granted I am sure they would have gotten some money back if sold as a foreclosure, but it would have been much less than that of a short sale, not to mention the court and lawyer fees that would have been tacked on to the net. Working like a team to reach a common goal, the bank and I were able to negotiate very well together, creating a deal that helped the home owner out of a jam, and got the buyer a super deal in an expensive neighborhood.

If I had to give one piece of advice for a home owner looking to sell their expensive real estate as a short sale, than I would recommend finding an agent that not only specializes in luxury homes, but also has experience in short sales. (There are very few of us that do.) For the short sale million dollar homes currently for sale, most of them have an agent that has little to no experience in either. Sadly, this really only hurts the home owner as they don’t get what they really need – the successful sale of their home and avoiding foreclosure.

If you have any questions regarding the short sale of your home, please feel free to contact me anytime!

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The Per Diem Charge and What it Means to a Transaction

Probably the second number that a home owner looks at when they receive an offer on their home for sale is the Closing Date. It can mean the difference between a quick close or extended close. The accepted average number for closing a transaction is 30 days, but sometimes a luxury home buyer will be using jumbo loan financing, and it is not uncommon to request 45 days or more to close.

As it sometimes happens, the lender is not able to get their underwriting process in line with the contract closing date. Both buyers and sellers are left wondering what they should do. Technically, if the transaction does not close by the agreed to date, than the party at fault is in breach of the contract. Let me make this clear…the contract is NOT “null and void” as some agents will falsely tell their clients, but is instead “in breach of”, and of course, there is a remedy.

What can a seller do?

  • Well, first off, you want to let the buyer know you are willing to wait for their lender to get their act together, and thus extend the closing.
  • Next, utilize the “Per Diem” charge for each calendar day they do not close from the original contract close date. Since sellers are now incurring daily charges via mortgage payments, taxes, etc, that they had not initially accounted for when calculating their bottom line, it is in their right to make the buyer pay for these expenses.

Case in point, a luxury home listing of mine which closed recently utilized the Per Diem charge. When the buyer’s lender failed to get the documents processed and through underwriting by the closing date, we told the buyers they would be responsible for this daily charge. Considering it took another four calendar days to close, this added up to a decent sum of money. While the buyers were angry at the lender for this charge, the sellers were fairly compensated for the buyer’s breach of the contract.

There are obviously many ways to structure a Per Diem charge in a closing, and as always, many ways to negotiate the fee. Charging a Per Diem amount not only helps the seller escape additional expenses created at no fault of their own, it gets a fire lit under the buyers to pressure the lender to get their act together.

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Should a Seller Reduce His Home Price Just because it hasn’t Sold Yet?

Many agents will tell you that the answer is simply “Yes”. Keep reducing the home until a buyer comes along and puts in an offer. This works for the most part in the lower priced market (they have a larger pool of buyers available to them), but for higher end homes, especially those priced above a million, reducing the home does not always sell it.

Expensive homes have always taken longer to sell. In fact the housing supply in the Twin Cities for homes priced above $1 Million is 40 months. For homes priced between $500,000-$1 Million it is 20 months. Are these sellers freaking out and reducing their homes to drastic levels just in order to sell. The answer is “No”. If anything, they take it off the market for a short period and give it a rest.

Now don’t get me wrong, there are times that price reductions are warranted. Some sellers are unrealistic about the market and overprice their homes. Then they refuse to reduce them, or negotiate when an offer comes in. They quickly become frustrated and take their homes off the market. Sometimes they blame the agent. But the truth is, the pool of buyers is much, much less in the luxury home market, so it naturally takes longer for a home to sell.

There are many buyers out there right now looking to buy a million dollar luxury home for nothing. They want to live the life, but not pay the price. Many sellers see right through them, and refuse to reduce their home’s price, or except a low ball offer. Even agents fail to understand how the upper bracket home system works. For that reason, make sure you work with a luxury specialist when buying or selling a home.

As a buyer, don’t rush to judge a high end home based on its market time. For the most part, market time doesn’t mean that much.

As a seller, don’t get discouraged about the market time for your home. If you can, stick to your guns and wait, a buyer will come along to buy your home!

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Yes Virginia, There Really are Multiple Offers

I know many of you won’t believe this, but the dirty little secret that the local media isn’t reporting is that homes in the lower price range are flying off the racks. Yep…just like a bridal store having a super cheap sale on gowns with women knocking each other out of the way as they try to snatch up the latest deal, so too are investors and first time home buyers trying their best to win that little cottage home, out doing each other with above list price offers.

Like I said, you don’t believe me, do you?
Last month I experienced this phenomenon first hand with a duplex I listed. With-in five days, I had five offers, all above asking price. There must have been some telepathy in the air because almost all of them were around the same price. I actually had to tell them to resubmit their “highest and best” offer. Who ever did the best, gets the house. Let me tell you, it was competitive bidding and I was truly surprised at how high some of the offers got.

Even better, I know an investor couple who are snatching up dilapidated foreclosures and rehabbing them to flip. Not only do they have to bid against other offers each time they find a home, but when it comes time to sell the property, they have to deal with multiple offers from first time home buyers. (They do fantastic rehab work by the way!)

So yes Virginia, there are some segments of the real estate market that are doing quite well. Multiple offers do exist and are getting more common.

It makes is hard to explain to a buyer why they need to offer above listing price if they want to get a home, especially when all they hear about is how cheap homes are. But if you want to purchase a home in decent shape and at a great price, be prepared to pay for it because in this market you’ll be just like those brides you see on television…pushing and yelling your way to that perfect find.

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Being All Things to All People

The one thing I have learned from my time in real estate is that to be a true professional, you cannot be all things to all people. What I mean is that I truly believe that in order to be successful and give your clients your best, you have to be a specialist in a certain market area. Now an agent’s market area can literally be an area/city, or it can be a type of real estate. I know agents who specialize in Saint Paul, downtown Minneapolis condos, South of the River real estate, etc. But there are those of us that approach things a little differently.

As you can probably tell, the niche markets I have chosen consist of luxury real estate and historic homes, including waterfront/lakefront properties. I don’t really concentrate by city, instead choosing to specialize in properties on various lakes, and historic home districts in the Twin Cities. By limiting the markets I concentrate on, I am able to keep better track of market trends and homes for sale. If I was like most agents out there, who do anything they can get their hands on, my head would be spinning.

For sellers and buyers, it is important to select an agent who specializes in what you are looking for, especially if you are in the market for a home that is not an average home. For historic homes, go with an agent that knows about historic home construction and the costs that come along with an older home. For expensive homes, go with an agent that understands the luxury market, the types of loans that go with it, and the marketing funds to support such a listing. There are many agents who would love to list high end homes, but just don’t have the ability to sustain them.

While I do list and sell homes out side my niche, I don’t actively seek them out. People find me from my website, blogs, and past clients, and ask me to help them out. I’m all for selling homes, no matter the type, but choose to concentrate overall on a type of real estate. Next time you are looking for an agent, don’t forget to find out if that agent has a real estate speciality.

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