Rochester MN Real Estate Market Blog » Real Estate Articles

Get a Fresh Outlook with a Fresh Coat of Paint

admin — Tue, 17 Aug 2010 14:18:19 +0000

Fall is approaching, so it’s time to start thinking about doing those projects around the house that have taken back seat to summer plans. Your home is most likely one of your biggest investments, and it is well worth the time and money to keep it in the best condition possible. Regardless of whether you plan on selling any time in the near (or not so near) future, it is much easier to keep your home in great shape than to try to catch up all at once.

When the weather gets cooler it’s a great time to spruce up your walls with a fresh coat of paint. Painting your whole house, or even just one room, not only makes your home feel clean and bright, it also gives you the opportunity to declutter, reorganize, and refresh your space. This allows you to enjoy your home even more, plus it makes it that much easier to sell when the time comes.

Before you start, be sure to clean the walls and also do your homework to figure out the best kind of paint for the job. There are many great resources on the internet with tips for prepping and painting. Keep in mind that cheapest isn’t always best. For example, one coat paint may cost a little more per gallon, but you need less so you’ll save money, plus you’ll finish in half the time. However, how washable the paint is can be a much more important consideration. The ability to wipe off fingerprints and scuffmarks is definitely worth a few dollars now, rather than having to repaint in a short amount of time.

Using the same color paint in multiple rooms can reduce the number of gallons you need. If you choose to do that, it’s a good idea to use a fairly neutral color to give you more flexibility in how you decorate each room. With neutral walls you can easily change the feel of the room simply by swapping out wall hangings and window treatments, which is especially useful when you sell your home. If you are considering selling your home anytime soon, it’s a good idea to consult with your Realtor about the colors you’ve chosen. Neutrals are not always a must when selling your home, and not all neutrals are created equal. The right colors or neutrals can really make your home shine.

Investing in the right supplies is worth it as well. Pretaped drop cloths are not inexpensive, but they make prep and cleanup a breeze. Good brushes and rollers will make the job go more quickly, and disposable paint tray liners let you easily change from one color to another. Do take a shopping list to the store so you don’t end up with unnecessary items undoing all of your savings.

Another great benefit to painting is that you have to clean and declutter before you paint. When you put the room back together, take the time to edit furniture and accessories. Donate, recycle or pitch items you no longer need. Even if you just take one room at a time, eventually your home will be cleaner and less cluttered (and everyone has at least a little clutter), with a sparkling paint job that welcomes people into your home. You deserve to enjoy your home while you’re living in it, plus it makes it will be even more desirable to potential buyers when it comes time to sell.

Getting Your Home Sold in a Tougher Economy

admin — Mon, 12 Jul 2010 11:45:29 +0000

With interest rates at a 50+ year low and high levels of housing inventory for sale, it certainly should be a buyer’s market. Rising unemployment rates and increasingly tighter requirements to get financing are keeping the buyer pool in check, especially as the home buyer tax credit becomes a distant memory. As more homes compete for fewer buyers’ attention, buyers can afford to be more choosy and take longer to make their decisions.

Home sellers in today’s market need to focus on three important factors: condition, price and time.

Condition reigns supreme over anything else. Buyers have so many choices right now that anything that looks like it needs work can be enough to kill your chances of selling. People prefer move-in condition, so if your property isn’t, you probably need to do what it takes to make it that way. It is worth the money to remove old wallpaper, paint, replace carpet, and replace the roof if it’s almost at the end of its life. Offering an allowance doesn’t work in these market conditions because buyers tend to overinflate the costs of these improvements, anticipating double or triple what it will actually cost you. Plus, with the number of homes for sale, if yours is the one that needs to be painted, chances are it’s also the one that won’t sell. There are exceptions, such as homes that need a complete overhaul, so it’s a good idea to discuss your home and your plans with your listing agent before getting started.

A word about home improvements – consider improvements as solidifying your home’s value rather than increasing it when deciding on a price range. The kitchen you recently renovated or the room you added may help your home sell more quickly than the one down the street because it’s in better condition, but it won’t necessarily increase your home’s value. If you’re not looking to sell your home right now, spending the money on upkeep and maintenance now can help you avoid needing to spend a lot all at once when it is time to sell.

The second factor is price. You want to have the best price on the market. That doesn’t necessarily mean the lowest price, it means value. It’s a good idea to price your home aggressively because there are so many options available. If there are 40 homes for sale in your price range, you want your home to stand out as the best home for the money.

Misperception or misunderstanding of the current market conditions can lead to improper pricing, which in turn can lead to excessive market time or even no sale at all. What you paid for your home or what your neighbors sold their home for last year are irrelevant when deciding on your asking price. Factors you and your Realtor should consider are your home’s current condition, the condition of other homes for sale in your price range, the asking price of homes similar to yours, and which homes are selling and which are not. Accurate pricing from the outset increases the likelihood that your home will find the right buyer quickly. The first three weeks on the market are the most important – that’s when people are excited to see the new kid on the block. A strategy of starting on the high end and then lowering it over time is rarely successful in a normalizing market. By the time the house is where it should be, interest has peaked and buyers have moved on.

Finally, accept that it still takes time. There are only so many buyers out there and they have a lot of choices. Average market times have been three to four months, so your goal is to reduce the selling time by carefully preparing your home and improving its condition plus adopting an aggressive pricing strategy. Then you just need patience and faith that the right buyer will see your home and decide that’s the home for them.

Everyone’s situation is different, so be sure to discuss your situation with your Realtor and decide on the best strategy for your needs. Today it takes twice as much work to be the best value in your neighborhood. Hard work and diligence can pay off.

Timing the Market: To Sell or Not to Sell in a Down Market

admin — Mon, 07 Jun 2010 13:56:45 +0000

Every book I have read on trying to time the stock market says don’t. Most financial advisors recommend getting in and staying in with the proper asset allocation for your particular risk tolerance. When the market is up you’re in good shape, and when it goes down you have some protection built in through your allocations.

While that’s all fine and good in the financial markets, what is the advice when it comes to the real estate market? Should you sell in a down market? Should you wait for the market to improve?

I always advise my clients to consider what they are going to be doing with their proceeds after the sale. If they are getting out of the real estate market altogether and the proceeds are going to the bank or some other investment vehicle then there is nothing wrong with waiting to list until the market changes, unless of course they think they can make up their losses with their new asset allocation.

If they want to downsize in the real estate market it may also make sense to wait, assuming the move is optional and waiting doesn’t cramp their lifestyle.

However, if you’re thinking of moving up in a down real estate market it can make a lot of sense to sell rather than wait. There is never a better time to make a move up in real estate than when the market as a whole is down. True, you will probably not come out as well with the sale of your house, but you will more than make up for it when it comes to buying on the other end.

For example, assume you own a $150,000 house and you’re ready for a $300,000 house. If the market is down 5% then unfortunately your current house is really only worth about $142,500. It’s tough to ask much more than that and still be successful. However, if you are willing to sell for a bit of a discount here’s what’s waiting for you. Assuming that $300,000 house is also down 5%, then you’re buying that house for $285,000! You accept a $7,500 loss when you sell, but you make $15,000 when you buy! It can get even better depending on the price ranges in which you are buying and selling. Every market has its “hot spot” and its “not-so-hot spot,” meaning price ranges where things are selling well and where things are not selling well at all. If you happen to be selling in the hot spot and are buying at an overly saturated price point there may be even greater savings on the buy side and not as much of a loss on the sale side. Typically the higher priced homes are the ones not selling as quickly, which is why moving up in a down market can work for you.

Current interest rates are another important consideration. If rates are favorable then you are able to make up for your losses when you sell by securing a good interest rate on your purchase. A 1% increase in interest on a $200,000 mortgage will cost you over $47,000 over the life of a 30 year loan. With interest rates currently near record lows it’s something to consider.

Another common question is whether to sell in the fall or wait until spring. The answer follows my advice as a whole in selling in a down market. It is harder to sell in the fall because there are fewer buyers in the marketplace, but if you’re willing to take a slight discount and you do actually sell your home, you will be in a great position as a buyer. In March, the seller who just listed is less willing to deal – their home has very little market time and the busiest market lies ahead of them. That same seller, having toughed it out for many months and facing the prospect of still having their property over the winter, will be very happy to see you in the fall. This can, again, mean a very good price for the late-season buyer.

To summarize, in most situations it can make a lot of sense to sell when you are ready and willing and not to worry so much about timing the market. If you really look at the big picture, it’s not so costly after all.

The Value of Having Someone in Your Corner: Why You Want a Buyer’s Agent

admin — Mon, 10 May 2010 12:26:56 +0000

Some buyers balk at working with a buyer’s agent because they are concerned it will cost them money. This is understandable since it is customary to sign an agreement with the buyer’s agent defining their compensation as a percentage of the sale price.

Rather than see this as a cost, see it as a protection for both parties – the buyer’s agent has agreed to work for you and to represent your interests to the best of their ability. You in turn agree to be sure he or she is fairly compensated for their work. In almost all cases, their commission will be paid by the seller.

There is a common misconception that one can “avoid the middleman” by going directly to the listing agent. Some buyers will do this to avoid adding another agent to the transaction because they want to deal directly with the listing agent. In that case make sure you know how you are being represented. Unless you agree up front that the agent will be working on behalf of you and the seller as a dual agent the agent will only be working for the seller.

Another reason a buyer goes straight to the listing agent is to theoretically reduce the amount of commission and the ultimate sales price. However, the listing agreement defines the commissions to be paid to both the listing agent and the agent bringing the buyer to the table. Even if the buyer doesn’t have an agent, the commission will be paid — to the listing agent. What a buyer fails to realize is there still needs to be someone there to do the duties of a buyer’s agent — duties such as showing the house, writing the contract, handling pre-closing issues and paperwork, attending the home inspection, final walkthrough etc. This is agreed upon at the time of listing, so the absence of a buyer’s agent does not reduce the commissions paid. Any price reduction has to come off of the actual price as negotiated between buyer and seller.

Also, the buyer should be aware that while the listing agent may provide assistance in preparing the paperwork for the offer, unless a dual agency agreement is signed, the listing agent’s accountability is only to the seller. In a transaction of this magnitude, you want someone working for you, with your best interests as their priority.

Having a buyer’s agent is even more important in a For Sale By Owner situation. An attorney can draw up the paperwork, but is not knowledgeable about the value of the property and valuation questions or advice , resale issues, issues that can arise from a home inspection, final walkthrough issues, and how to structure an agreement favorable to buyers. A buyer’s agent has the outside perspective needed to help you determine an offer strategy and to protect your interests, potentially saving you time and money. Plus, the sellers often will still pay the buyer’s agent commission – it’s all part of the negotiation process.

Here’s the bottom line: a buyer’s agent represents you in a real estate transaction. Their experience and skill at negotiating and in understanding the state laws and local customs can save you time and money. As your representative, your buyer’s agent can navigate the entire process from home searching to preparing the offer to the inspection to renegotiations to the final walk-through. If you are seriously looking for a home, working exclusively with a buyer’s agent increases the likelihood that you will find the home you are looking for without paying too much. Their knowledge of the entire process is invaluable in ensuring the sale goes as smoothly as possible.

Paying for a Pre-inspection Can Save You Money

admin — Thu, 08 Apr 2010 22:18:22 +0000

For years now, we’ve been recommending that home sellers pay for a professional home inspection when they list their home for sale so that both parties know the home’s strengths and weaknesses before an offer is ever made. Savvy home sellers understand that paying for a professional home inspection can help them better position their home within the current market.

The large inventory of homes currently for sale provides buyers with more options, and buyers tend to prefer homes that are in move-in condition. A professional home inspection is one more tool that a seller can use to determine how close their home is to move-in condition and to prioritize improvements and upgrades to best compete with the other homes for sale.

The home inspector evaluates the home’s major systems and provides a report identifying areas of concern. The inspector’s job is to point out both the good and the bad about a property. Then it is up to the home seller, with advice from their Realtor, to identify a strategy for improvements and positioning. A copy of the home inspector’s report, along with copies of receipts for any improvements and upgrades, can be made accessible to potential buyers.

A thorough home inspection often uncovers problems unknown to the sellers. By having an inspection up front, the seller has an opportunity to address minor problems that might seem major once a contract has been signed. Plus, the home will show at its best.

Buyers may be more interested in a pre-inspected home because there shouldn’t be any big surprises after the contract is negotiated. An uninspected home may have the buyer coming back within a week or two (following their own inspection) requesting upgrades, allowances, or price reductions, all of which are a hassle and inconvenience to both parties.

The buyer still has the option of obtaining their own professional home inspection, but there is less likelihood of unexpected surprises and a greater chance the sale will go through as originally negotiated.

How Not to Sell Your Neighbor’s Home

admin — Wed, 10 Mar 2010 14:50:04 +0000

Sellers typically focus on what list price will sell their home quickly and for top dollar. But when your home isn’t the only one in the neighborhood for sale, your asking price can actually result in selling your neighbor’s home instead.

How? If your home is priced too high, it can make your neighbor’s home seem like a bargain. Inaccurate pricing can result in extended market time which leads buyers to wonder what is wrong with your property, again shifting interest toward other properties in the area which are newer to the market.

This effect is even greater in a down market: higher inventories of homes for sale mean even greater competition for the buyer pool amid already increased average market times. Multiple homes for sale in one neighborhood further intensify the competition for buyer attention.

To increase the likelihood that your home will sell faster than average and for a better price, you need to be sure your initial asking price is appropriate for current market conditions and is competitive with neighboring listings.

Price is one of the first details potential buyers learn about a property, and it strongly influences which homes they preview and consider. Prospective buyers will be comparing your home to the other homes in that price range and in the neighborhood.

Therefore, you need to make similar comparisons when you set your price, identifying the pros and cons of your home with respect to others in the area. The risk of not doing this is overpricing your home with respect to the competition.

Pricing your home right in the first place requires knowing the market and knowing your home’s competition. A Realtor who knows your neighborhood and understands the current market trends can help you determine a range for your initial asking price.

Your Realtor should compare your home to similar homes that have sold recently in your neighborhood, making adjustments for the differences between them. The market analysis should then consider how your home measures up to homes currently listed for sale.

It can pay to be aggressive. Pricing your home competitively can increase the chances that yours is the home that will sell quickly and for top dollar.

The First Offer is Usually the Best — Why Initial Pricing is Critical

admin — Wed, 17 Feb 2010 15:43:51 +0000

There’s an old real estate adage that the first offer you receive is usually the best one, and my experience in 20+ years as a Realtor supports this. I’ve encountered several listings where the seller received an offer early on, made a stiff counteroffer back to the buyer and the buyer headed for the hills. In some cases, as much as 24 months and several price reductions later, another offer finally came in only to be significantly lower than the first buyer’s offer. While your first offer may not be what you were hoping for, it is a good idea to consider several things when choosing how to respond to that offer.

Length of time on the market, time of year, initial asking price compared to the price recommended by your agent, and current competition should all be taken into account when determining whether to accept, reject or counter the first offer you receive.

It may be tempting to hold out for a better price, especially in the first few weeks that your home is on the market when there is a high volume of showing activity. However, that activity typically wanes after about three weeks, at which point the buyers who have been waiting for “just the right house” will have already considered your property. Buyers rush to see new listings, and if it’s the best thing they have seen they will probably make an offer. Most of these buyers have been at it for a long time and know the values very well, in some cases understanding market realities in their price range even better than realtors who have been tracking a broad market. Therefore, an offer received in the first few weeks on the market is probably appropriate to current conditions and worth serious consideration. Comparing the offer to your realtor’s initial price recommendations can help you decide what action to take.

It is especially important to price your home accurately from the outset given the current market conditions. The homes that are selling quickly are capturing prices within an average of 3% or less of the asking price. The longer the home is on the market, the larger the gap between original asking price and sales price.

After the first several weeks, the activity that remains is buyers just entering the market. Since they are at the beginning of their house hunting, they generally have more time to look and are less motivated to act quickly. They are less educated about the market than those who have been shopping for a long time and will err on the side of caution when making their offers, especially in a buyer’s market. Consequently, offers will more likely be lower than early on.

Time on the market erodes value as well. The longer a house is listed for sale, the less interested buyers and Realtors are in the property. People will begin to wonder what is wrong with the property, and even if they like it will offer a lower price so they won’t lose money if they end up having to sell.

Be sure to consider the opportunity costs. While your first offer may be lower than you had hoped, every month you keep the property is another month you must pay mortgage, taxes, utilities, and insurance for a home you are hoping to leave. These costs can add up quickly and end up costing you more in the long run.
Time of year is another factor that can affect the offer. Your offer in March or April will most likely be much higher than in September or October. Sellers who were optimistic in the spring will be lowering their prices quickly to try and sell.

When a house sells quickly, there can be the temptation to second-guess whether the home was priced appropriately to begin with or whether a higher price was possible. However, if the proper price range is targeted when the house is first listed, the actual selling price is likely to be higher. Longer market times typically mean price reductions. Current market conditions have homes selling at within approximately 3% of the asking price, and the longer the market time the larger the difference between sales price and original asking price. This means there’s a very small margin for error in pricing the house from the outset.

The bottom line is that you are never in a better position to get the best price for your home than when it is fresh on the market. Even if the offer and subsequent negotiations are less than you are hoping for, don’t kick yourself months or even years later wishing you had taken the offer. That real estate rule of thumb stays true: your first offer is usually your best.

Rochester Area Market Conditions – February 2010

admin — Wed, 17 Feb 2010 15:13:33 +0000

It’s February so it’s not too soon for crocuses and “for sale” signs to start popping up in front yards all over town. New listings were on the upswing in the first month of the year, heralding the beginning of the spring market.

The number of total active listings in January, 2010 was up 44% over January, 2009. The number of homes going under contract and homes that closed were down 15% and 16% respectively, and the median sales price was down to $149,000 from $153,400 for the same time period last year. Average market time to pending increased in January to 140 days, just over 2 weeks longer than the last month of 2009 and 3 weeks longer than last January.

The supply/demand ratio reached its highest level since last January with just over 15-1/2 months inventory, a normal occurrence this time of year as more homes come on the market in anticipation of the spring selling season.

For the latest in all the local real estate stats make sure to check out http://www.shawnburyska.com/real-estate-statistics.php

Shawn Buryska ABR, CRS, GRI
Coldwell Banker Burnet Realty
507-252-6745
www.ShawnBuryska.com

Foreclosure Sales – Worth the Extra Effort

admin — Tue, 09 Jun 2009 23:54:54 +0000

In the current economic climate, foreclosure sales are increasingly common. Frequently these properties are appealing because they are priced to sell, often well below market value. However, there are several obstacles and pitfalls that a buyer can expect to encounter. The savvy buyer knows that forewarned is forearmed and approaches the purchase of a foreclosure property accordingly.

In a foreclosure purchase, the buyer is dealing with a financial institution rather than one or two individuals. The inherent bureaucratic (chain of command) and pragmatic (maximizing return and minimizing loss) differences typically result in longer turnaround times for the initial purchase agreement, subsequent changes and processing of final papers. The home buyer should not be surprised if it takes as long as a week or two for a response to their initial offer as their offer must go through several layers of approval at the financial institution. During this time it is not uncommon for the bank to contact other interested parties in an effort to start a bidding war. Buyers should be prepared for this process to take time.

Again, since the seller is a financial institution, foreclosure properties are almost always sold “as is,” meaning there will not be allowances for upgrades or improvements nor are adjustments likely for any structural or safety issues that may be uncovered during a home inspection. Nevertheless, the buyer should pay for a professional home inspection and be present during the inspection to ask questions and understand what exactly they will be looking at cost-wise. Chances are a foreclosed property has not been well-maintained for quite some time. It may still be a wise investment, but the buyer will need to take the home’s condition into consideration when determining their offer.

The buyer will need to pay for the home inspection and may also need to arrange (and pay for) having the utilities connected and disconnected for the inspection. Financing can be affected by the inspection findings. FHA loans, for example, have strict requirements about the conditions of the purchased property including, among others, the home must be free of mold, peeling paint and broken windows; railings must be tight; electricity to code; and the roof must have at least three years’ wear left. Any relevant issues must be fixed prior to closing for FHA to approve the loan, but there are risks to a buyer making improvements to a property they do not own.

Again, since the sale will be “as is,” there are no guarantees or warranty on the property. The buyer can consider purchasing a home protection plan for peace of mind. There are exceptions and exclusions, however, so the buyer should read the fine print before enrolling.

The inherent complexities of the foreclosure sale also increase the likelihood that the closing will be delayed given the amount of paperwork, number of people involved, and the increased signatures required to sign off. Buyers should anticipate a delayed closing and be aware of the daily cost incurred by the buyer if they are responsible for the delay. Sellers typically have no penalty for delaying closing and therefore less of an incentive to close on time. While this doesn’t mean a delay is inevitable, it behooves the buyer to insure they have everything in order for a timely closing as well as setting a realistic closing date from the beginning. Buyers should plan on retaining their current residence for at least a week or two past the planned closing date in the event of a delayed closing.

Despite the additional complexities involved in purchasing a foreclosure, the possibility of getting a great deal on the home of your dreams makes it worth the extra effort. Working with a Realtor experienced with foreclosure purchases can help the process go smoothly from offer to closing.

Tax Credit Available for First Time Home Buyers

admin — Thu, 18 Dec 2008 01:52:17 +0000

Amid the economic upheaval, there is good news for first-time home buyers – a tax credit of up to $7,500. Even better – the definition of first-time home buyers includes those who have not owned a principal residence in the three year period prior to purchasing a qualifying home.

The tax credit, established through the Housing and Economic Recovery Act of 2008, is available only to first-time home buyers and only for homes purchased on or before April 9, 2008 and before July 1, 2009. Any home that will be used as a principal residence qualifies, including single family detached homes, townhomes, condominiums, mobile homes, and houseboats. New construction is also eligible, as long as possession or occupancy occurs within the parameters defined by the law.

For the purposes of this law, a first-time home buyer is defined as someone who has not owned a principal residence during the three years prior to the purchase of the qualified property. For married taxpayers, neither individual may have owned a principal residence in the previous years. A buyer will not be disqualified from the tax credit if they own a vacation home or rental property not used as their principal residence.

Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit. Eligibility is determined based on modified adjusted gross income. Partial credit may be available for those with higher incomes; however, individuals with a modified adjusted gross income exceeding $95,000, (or $170,000 for married couples filing jointly), will be ineligible for the tax credit.

The tax credit is equal to 10% of the qualified home purchase price, but is capped at $7,500; for homes purchased for less than $75,000, the credit will be 10% of the purchase price.

There are no special forms to fill out and no pre-approval necessary. The credit is easily claimed on the federal income tax return. Plus, the credit can be claimed on the 2008 return for a home purchased in 2009. If the tax credit exceeds the taxpayer’s outstanding liability for the year, the taxpayer will receive a check from the government.

The credit is like an interest-free loan, and it must be repaid to the government over a 15-year period. Payments do not have to begin until two years after the credit is claimed. If the home is sold before the credit is repaid, the outstanding amount will be paid from profits on the sale. If there is insufficient profit to repay the credit, the remaining amount will be forgiven.

For first-time home buyers (those who are truly new to the market and those who have not owned a principal residence in at least three years), this tax credit can make it easier to transition into home ownership. Combined with housing inventories increasing, prices decreasing, and mortgage rates dropping even lower, this tax credit may just make the difference in making home ownership a reality.

Source: federalhousingtaxcredit.com

This article is informative only, based on information available at time of publication, and is not intended to provide tax or legal advice. Please be sure to consult with a tax advisor or legal professional about your particular situation prior to making any decisions or taking any action.