From the category archives:

Food for Thought

Comparing Market Value with Assessed Value in the Twin Cities

I think the answer to this post on comparing Market Value vs. Assessed Value can be summed up in four simple words, “Just Don’t Do It“. In the past few months I have seen an increased objection voiced by some buyers over home prices. When I ask them to justify their reasoning, I am quickly told something along the lines of “Well, the home is only assessed for X. Why should I pay more than that?”

To make it simple, Market Value in Minnesota is what a buyer is willing to pay for a home, where Assessed Value is a valued placed on a property by a governemnt tax assessor for the purposes of taxation. The two are not the same. Every state is different in how they calculate property assessments, and Minnesota uses a system that is different from any state I have lived in.

Take for instance Dakota County.The current 2011 tax statements that were sent out this year are not based on current home prices. Instead, they are taken from home sales that occured between Oct. 1, 2009 and Sept. 30, 2010, data that no home appraiser would be able to use under financial guidelines as the sales are too far into the past. So if I were to buy a home towards the end of 2011, the “values” used by the county assessor could be off by two years!

Now look at homes currently for sale on the open market. The most important job of a real estate agent is determining what the Fair Market Value of a property is by comparing it to other properties that have recently sold in the area. This “market snapshot” is a more accurate, not to mention more up-to-date, representation of a home’s value. If buyer’s are willing to pay “X” for a similar home down the street, then there is a good chance another buyer is willing to pay around the same amount for your home.

While homes that are priced in lower tax brackets tend to show assessed values and market values closer together, homes in the upper-bracket real estate market, especially waterfront properties and historic homes, tend to be further apart when comparing the two values. County tax assessors generally have poor to no knowledge of what the true value of an expensive home might be, as they rarely have direct access to the interior of homes. Take for instance a large historic home I sold in Minneapolis. It was a truly unique home with nothing remotely like it on that side of town. The historic elements inside the home were priceless and would be near impossible to duplicate, but according to the tax assessor, the home was assessed well below its true market value. When a buyer did come in with an offer, they had it priced at the assessed value. I literally laughed when I saw the exact number and had to do the buyer’s agent’s job for her by showing where proper comparable home’s would come from (she was an out of town agent). After some negotiating, the seller and buyer were able to come to an agreed to price, which was up considerably from the assessed value first proposed by the buyer.

So please, when you are shopping for a home, do not use the assessed value of a home as the basis for an offer. Instead, look at what other comparable homes in the area have sold for and go from there!

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How to Buy a Luxury Home in Minneapolis

Minneapolis Chain of Lakes Luxury Real Estate Listings

Minneapolis Luxury Homes for Sale

So you’ve decided that your next home will be in Minneapolis and now you have to find somewhere to live. Minneapolis is a pretty big city, so where do you begin? While the task might seem daunting, luxury homes in Minneapolis are quite easy to find as most of them are located in the Chain of Lakes region southwest of downtown, as seen in the listing snapshot showing current luxury homes for sale in Minneapolis.

Probably the most important decision to make is how much you want to spend on your new home as it will determine on which lake you can afford to buy and of course how close to one of the lakes you can live. The most expensive and prominent area of the Chain of Lakes is around Lake of the Isles and just northeast of this area – calledLowry Hill. Some of the premier mansions were built in this area by prominent architects and are in wonderful condition. Others are in need of repair and updating so you will want to take that into consideration as well, but no matter what condition they are in, prices for these homes can range from $2 Million- $7 Million.

Surrounding Lake Calhoun and Lake Harrietare old historic and luxury homes nestled along beautiful landscaped streets that are a little more affordable when compared to Lake of the Isles – by affordable, prices start at $800,000 and go up to $2 Million. No homes sit directly on the lakeshore, but are located starting a block away. One of the biggest draws to the area are the trails surrounding the lakes, which accommodate cyclists, joggers, walkers, and rollerbladers.

Now that you have thought about the price tag of your new Minneapolis luxury home, it’s time to drive around the area and see which lake you like the best. While all three are close together, each lake along the Chain of Lakes as its own atmosphere. Lake Calhoun has a younger vibe, with families and young entrepreneurs, not to mention the close proximity to Uptown which features shops, restaurants, and a local bar scene. Lake of the Isles has a more upscale feel with the more expensive homes, featuring neighborhoods that twist and turn along winding streets and a hilly landscape. The southern most lake, Lake Harriet, is more structured with cottage style homes and gardens, not to mention a fantastic park on the northern shore. Residents can enjoy concerts at the bandstand, ride the trolley, or enjoy swimming or boating on the lake.

Purchasing a luxury home in Minneapolis is a big decision, but one that can easily be helped by talking to a real estate agent. Many times I find that the home is what buyer’s fall in love with, not necessarily the lake it sits near. If you are ready to start shopping, you can begin your real estate search here, or give me a call – I’d love to help!

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Insuring the Million Dollar Home

Probably one of the last things a luxury buyer thinks about when shopping for a new home is how he is going to insure it and how much is it going to cost. One of the hardest things to figure out is WHO is going to insure it. Luxury homes are not insured by every insurance company out there, and most likely, buyers will have to choose from a small pool of companies.

For instance, Minneapolis and St. Paul have an extensive inventory of historic homes with many showcasing architectural elements that would cost a fortune to reproduce today. Sorry, but Allstate just won’t do.  Buyers and home owners can’t just pick any insurance company to cover these beautiful and rare items; therefore, the best way to protect your home is to choose an insurance company that has a specific policy covering old homes.  Placing a value on items can be tricky, so agents can come to your home and evaluate original stain glass windows, rare woodwork, imported tile, expensive wall coverings, stone carvings…you name it, they have the expertise to value your home’s special attributes.

The initial appraisal and inventory of your home is crucial. Agents will take photos and detailed notes of everything in your home, so that should a disaster strike, your home can be reconstructed as best as possible to its original state. Most of these special insurance companies will go above and beyond the policy to make sure your home is returned to you better than before, even updating your home to current code at no additional expense to the home owner.

 Some companies that you might look into for insuring your luxury home include:

  •  HUB International – can quote from the Top 5 upscale insurance companies
  • Fireman’s Fund
  • Chubb 
  • AIG/Chartis
  • ACE
  • PURE

Many of these companies offer increased coverage for Wine Collections, Jewelry, multiple properties, flood insurance, Kidnap and Ransom, Fine Art, etc.

Home Owners, you aren’t left out of this conversation either.

 Over the years, million dollar mansions are updated and improved, but many homeowners neglect to call up their insurer and inform them of the improvements, leaving their home undervalued. When disaster strikes, homeowners could find themselves in a tough place when they don’t get the correct dollar value to replace their home and personal items. It is suggested that homeowners update their policy every year to make sure they are fully covered.

And don’t let the declining real estate market, which might state the value of your home has decreased, affect the insured value of your home. Home values have little to do with how much it will cost to rebuild and replace everything lost, so don’t get caught in that trap.

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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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New Plans for High Income Earners in Minnesota

Our Lovely Governor’s Plan

In case you haven’t heard, our new democratic governor has unveiled his budget proposal for Minnesota.  The Governor’s proposal focuses largely on liberal, revenue-raising measures that unfairly target one group of people – those he considers RICH. 

  • His plan calls for creating a fourth tier income tax bracket at 10.95% (why  not just make it 11?) for joint filers earning over $150,000 and head-of-household filers earning $130,000. (By the way, when did spouses making $150K become rich?)
  •  He also wants to create a “temporary” income surtax of 3% on filers earning more than $500,000 annually. Of course we all know that any tax that is touted as being only “temporary” always becomes a permanent tax.
  • And probably the most ridiculous is imposing a statewide property tax on homes valued over $1 million. 

It shouldn’t be any surprise to my readers that I oppose all three of these proposals. I am not rich, but I aspire to be some day through hard work. Why then should I, or anyone else who has worked hard to be successful, be punished for earning more? I constantly hear about how one class deserves more than the other, and frankly I don’t get the whole “spread the wealth” thing. I grew up lower middle class, and through hard work, my father raised us up some. He never asked for a handout, and he raised me to believe that the only one looking out for myself is me. I could never ask someone that is wealthy to give me a piece of their pie just because I don’t have any – I prefer to make my own.

So when I hear Dayton say he wants to tax the rich more because “they can afford it”, I get a little mad. At 11%, Minnesota will be one of the states with the highest tax bracket. I see luxury home property taxes all the time, and trust me, they aren’t cheap. So also increasing the property taxes on million dollar homes just pushes the knife in further for high income wage earners. With the plethora of million dollar homes available in the Twin Cities, especially around Lake Minnetonka, I can help but think that these proposals will keep the wealthy from moving to Minnesota, therefore making it harder for local home owners to sell.

I guess we will just have to wait and see what happens. The Minnesota Association of Realtors “opposes the imposition of a statewide property tax for several reasons.  First, property taxes should remain a source of local government revenues and should not be expanded at a state level.  Second, expanding the residential property tax to the state poses an opportunity for future expansion to other, lower-valued properties.  Finally, it is the wrong time to add additional burdens to an already ailing housing market”.

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That’s Not the First Time a Buyer has Seen Your Home

Contrary to what you might think, when you get the call from your listing agent that a buyer wants to look at your home for sale, the buyer already knows what your home looks like. They have toured it, peeked in the windows, driven by it at night, walked through your bedroom – you name it, they’ve done it. Surprised?

Today’s real estate market is shopped by buyers from the convenience of their living room couch, from their office, or on their lunch break. In fact over 45% of Minnesota buyers, according to a survey conducted by the Minnesota Association of Realtors, found their home on the Internet. Buyers are touring your home before they even make the call, so in this case, don’t you think it best to put your best foot forward from the very beginning?

I recently wrote about the old saying, “You never get a second chance to make a good first impression”, which was in relation to how you have a buyer enter your home. This can also hold true for photography. So many times I see photos like the one below of a multi-million dollar home ( in the photo below, the home is listed for sale at $2.9 Million) where the lazy real estate agent has gone in with a point and shoot camera and done the work themselves. Sadly, high-end buyers are going to pass this home up when they are searching online because it doesn’t grab their attention. Instead of seeing the beautiful architectural and historical details of the home, they see a lop-sided photo of some wood and a partial table.

bad luxury minneapolis home mls photo

Example of a bad MLS photo of home currently for sale in the Twin Cities

 As a seller, you would think you would be pretty upset to find out your agent is marketing your property in this manner. But believe it or not, I find that in most instances where I ask a seller whose home has not sold, to take a look at the photos in MLS, the first thing they say is that they have never seen the photos of their home. What?  A good real estate agent should be showing a seller their marketing pieces, and as a million dollar listing, a good real estate agent should be having a professional photograph the home. Sellers have only one chance to grab a buyers attention, so proper angles and lighting are extremely important to highlight every detail of the listing.

When it comes time to sell your home, please make sure you choose an agent who specializes in luxury home marketing. It’s not about selling your home, it’s about marketing your home. Any agent can try and sell a home, but it takes a true professional to market it correctly.

So, when is your first showing? As soon as the buyer clicks the mouse. Do you want that buyer to click on through to the next home, or stay on yours for a while and enjoy the view?

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A Home’s Entry Point Can Make or Break a Showing

Twin Cities Luxury Home EntrywayMost retail businesses have their customers enter through a main entrance. This entrance is attractive, easy to enter, and immediately lets the customer know what the store represents. They want you to feel at ease and like what you are about to see because as the old saying goes, “You only get one chance to make a good first impression”. Businesses know that if you walked in through the back door, you would most likely would turn around and walk right back out. Simple concept, right?

So why do I see so many home owners not thinking about the importance of a buyer’s first impression? I can’t tell you how many times I have walked into a home via a backdoor or garage. Trust me, it doesn’t start the showing off with a bang as usually the first thing the buyer sees is a basement door, mudroom, or kitchen.  You don’t want them seeing your muddy shoes or kids backpack – you want them to see the beautiful foyer, grand staircase, or open floor plan. Even if you don’t use your front door, it is extremely important to have any potential buyer’s enter through it.

Buyers are pickyer than they have ever been, and they will quickly write off a home with just one small negative. Do yourself a favor, spruce up your front entrance and make the “window of your home” more presentable. It will give a better first impression to a buyer, and give you, the seller, a better chance of getting that offer you have been waiting for.

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New Luxury Real Estate Boutique Opens in the Twin Cities

Some of you might be wondering where I have been the past month. While I hate to be away from the blog so much, it happens sometimes that other parts of the business take me away from writing. I have to say that the reason this time is a good one, as I have just done something I have been dreaming of doing ever since I entered real estate – opening my own real estate brokerage.

The company is small to start out with, but that’s the way I like it. Too many real estate brokerages spend tons of money of what I call “Go Big, Go Large”. Their money goes to expensive offices that no one visits, nor any agents actually work from. Overhead eats them up, and their agents suffer. The old way of running a real estate company is dying. I plan on being a part of the new way.

Kirby Fine Homes Luxury Real Estate Brokerage 

My boutique firm sells real estate in the Twin Cities, including Minneapolis, Saint Paul, Lake Minnetonka, and the surrounding Metro areas/counties. While we cater to all price ranges, special emphasis is given to luxury properties, historic homes, and waterfront/lakefront real estate. By keeping the firm small, we will be able to better serve our client’s needs with personal attention. Clients will not be lost in a shuffle of a big box firm where no one knows their name.  While our goal is to be the best, it is not to be the biggest. Think “Jerry McGuire” if you will.

Being as I have just opened Kirby Fine Homes, it will take time to get everything in place. This year a new website will be developed for the brokerage, and knowing me, an Internet presence will quickly be established. I am very excited about this new venture, and can’t wait to see what 2011 brings for the local real estate market!

“Kirby Fine Homes – Opening Doors to the Most Exceptional Homes in the Twin Cities”

 

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Water Always Adds $$ to a Home’s Value

Today I am in Austin, TX for a luxury home conference and had the opportunity to tour some beautiful homes currently for sale. While the Texas climate is completely different than Minnesota, I did find one thing that Austin and Minneapolis – St. Paul have in common… a river runs through them.

As most rivers do, they shape the future of any city. Without the Mississippi River, the Twin Cities as we know it might not exist –  lumber and flour barons would never have come to the region to make their fortunes. I am sure the same goes for Austin and the Colorado River (not the one you are thinking of, this one is all Texas).

So, it should be no surprise that some of the highest priced real estate involves water. In Austin, million dollar luxury homes sit on top of limestone bluffs over-looking various man-made reservoir lakes on the river. With sweeping views of the landscape, how could you not love gazing out at this every morning?

Austin Blufftop Panoramic Water View

Of course the really expensive homes must sit on the water. I am told by the agents here that waterfront homes double the price of the home, which is not too different than the Twin Cities. Homes on the Mississippi River, or any of our large lakes like Lake Minnetonka can result in millions of dollars more in a home’s price.  The home below had stone steps literally taking you down into the river (really cool!) not to mention a nice breeze coming off the water.

Austin Waterfront Luxury Home

Many times I find that not-so- luxury homes are still pretty expensive if they sit on the water. The current trend is to tear these houses down, and build a big luxury mansion in its spot. However the economy is slowing tear-downs in Minneapolis and the Metro area, with property owners rethinking the amount of money they want to sink into a large project.

Just remember, waterfront homes come with a heavy price tag so be prepared when its time to go shopping! Don’t suffer from sticker shock!

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