Now is the Best Time to Buy a Home

   Even though inventory is down there are over 200 homes for sale in Chisago County. About half of those have recent price reductions. The median list price is currently $242,500 and the median marketing time is 86 days. The median selling price for December, reported so far, is $200,000.

  This week I received a call from a seller who had her home listed with another broker. She asked me to tell her why her home wasn’t selling. After reviewing the listing, I saw that she had unnecessarily done 5 price reductions over the past several weeks. In addition to this being a slower time of year in real estate, the photos showed the worst of the property and the remarks made the property sound like it had been destroyed by renters. The house has some great features, and the needed repairs had been made but the listing hadn’t been updated. This is a 4 bedroom 2 bath home for less than $145,000, which is a good deal!

  Buyers have been conditioned to look for new listings and avoid “stale” listings. They depend heavily on photos and remarks. My advice is to look at the aged inventory as there are amazing values there, especially in January before the market heats up. There have been many times when I have showed a “stale” listing and found an additional bedroom or bathroom that wasn’t listed on the MLS, or there was a den that could be converted to a bedroom for less than $3,000. I have also found the mechanicals had been updated along with a new roof, and none of that was mentioned on the MLS. Sellers are also much more likely to negotiate a lower price right now, as they are anxious to move on.

  Now that interest rates have started to rise, waiting to buy will cost you money. For example, if you want your monthly principle and interest payment to be about $1,000, you can afford to buy a home for $209,400 at 4.1% interest. If the interest rates go to 5.1% your purchase price will be reduced to $186,200. Rising rates, can greatly impact the buying power of first time home buyers and new construction.

  For my clients that don’t have to sell, I recommend removing the listings from the market in December rather than doing price reductions and increasing the market time, when less people are looking. There are currently 20 homes in Chisago County that are temporarily not available for showings. Most of these will be coming back on the market soon.

  An experienced real estate agent can help you find hidden values and can recommend a lender to provide actual monthly payments based on your finances.

Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.

Equity is Part of Financial Plan

Last week I received a call from a homeowner “Tom”, after he met with his financial planner. The financial planner asked Tom about his home equity. Tom didn’t understand what his house had to do with financial planning; after all he had a 401k, and a savings account.

The financial planner explained that the difference between what Tom owed on the house and what he could sell it for, minus selling expenses, is the equity; which is like money in the bank, and for most homeowners it is a substantial part of their retirement plan. 

Tom got excited about the prospect of finding “hidden money” in his home and thought he would like to borrow against it. He bought the house in 2007 for $330,000 and made wonderful improvements. He contacted his bank, and hired an appraiser to find out the current value. He was shocked to see the house appraised for $330,000 which was the same price he paid for it 9 years earlier. 

Tom was referred to me, by a mutual friend and wanted my advice. He showed me the new swimming pool, landscaping, fence ($50,000) the new kitchen ($45,000) the new wood floors, paint and new ceilings ($20,000). The improvements were beautiful and they loved their pool.

This was the oldest house on the block with a 1 car garage, gravel driveway, old siding, windows, and mechanicals, near a busy road. 

I reviewed the appraisal with them and explained that the appraiser selected 6 comparable properties within a one mile radius that sold recently, and he added and subtracted values from the sales prices for individual features; i.e. one home sold for $350,000 but he deducted $20,000 for its lake view. Another one sold for $340,000 and he deducted $10,000 for a 2nd stall garage. There was added value of $10,000 for Tom’s kitchen remodel and $10,000 for the pool. After all the adjustments, the appraiser determined Tom’s current value at $330,000.

Tom said, he watches home improvement and flipping TV shows, and he had the impression he would make money if he improved the house. I explained the cost vs. value of the different types of improvement projects, and the importance of getting a market analysis before improving a home. In this case Tom spent $115,000 and was given $20,000 in value for those improvements. Tom purchased the home 1 year before the market crash of 2008, and he bought the most expensive house on the block.

If your home is part of your financial plan, contact an experienced real estate agent for a market analysis before remodeling to estimate the current value and post remodeling valuation.

Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.

Sellers Must Disclose if Permits Weren’t Pulled

 Last week I was involved in two transactions where sellers remodeled a home and permits were required but weren’t pulled. One was a home that my buyer purchased that had a couple of additions put on by the owners, the other was my sellers that gutted and remodeled two bathrooms, and the kitchen with updated electrical, plumbing, and venting.

 MN Statutes require that sellers disclose all material facts that could adversely and significantly affect a buyers use and enjoyment of the property. The Seller’s Property Disclosure Statement specifically asks “Are you aware of any work performed on the property for which appropriate permits were not obtained?”

 The sellers that did the additions without the appropriate permits, did disclose to the buyer that permits were not pulled. The buyer had the property inspected and found several safety hazards and the sellers agreed to have the work corrected by licensed contractors, pull the appropriate permits, and have the work inspected by the county inspector.

 In the other case my sellers did not disclose to me or the buyers that required permits were not pulled and instead of completing the Seller’s Property Disclosure Statement, they completed a Seller’s Disclosure Alternative form. This form is commonly used for bank owned, probate, and investment, properties, or if a seller hasn’t lived in a property for an extended period of time. Both the buyers and the sellers must agree to the use of the Seller’s Disclosure Alternative, however, the seller is still obligated to disclose any material facts they are aware of that could impact the buyer’s use and enjoyment of the property.  My sellers are now required to pull the appropriate permits and open the walls to show the inspectors the work that was done behind the walls.

 In most cases home owners are allowed to perform work on their homes and they can pull their own permits. There are permit fees charged to the homeowners, and property taxes can increase based on the property value increase, but not pulling a permit can cost more money if you decide to sell your home. If you remodel your home without a permit and you do not disclose this fact to the buyers and something happens after they own it, like a fire or structure failure, you could be held liable for their damages.

 An experienced real estate agent can provide you the Disclosure Forms applicable for the sale of your home, but you must complete them yourselves.

Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.

Limit Spending When Selling Your Home

Limit Spending When Selling Your Home

 Sellers often ask how much they should they spend to improve their home to get top dollar when they sell. In most cases, my response is, as little as possible. I am all for cosmetic updates, like painting, cleaning, flooring, staging, and deferred maintenance items, but not major remodeling. This week I met a seller that did just the opposite, based on the advice of a stager and contractor. Of course it was in the stager and contractor’s best interest to do the remodeling for the seller.

 Before you do any remodeling you need to know what your home would sell for “as is”. In this case, it was easy to determine, as it was a rambler with 3 bedrooms, 2 baths, and a 1 car garage. There were 4 identical homes that sold in the neighborhood in the past few months. They ranged in price from $210,000-$217,000 and they were all in similar condition to the subject property. The average sale price of the 4 homes was $216,000 so I would assume the subject property is worth at least $216,000.

 The seller spent $28,000 on the kitchen, 2 bathrooms, painting, and flooring. It took 3 months to complete the work and the seller did a lot of the labor himself, which is not reflected in the $25,000. They bought furniture to stage it, and the property looked great!

 To break even they needed to sell it for $244,000. They put it on the market for $249,900 and sold quickly for $249,900 with the seller agreeing to pay 3% towards the buyer’s closing costs, which means the net sale price to the seller is $242,403, less the seller’s closing costs.

 The seller felt really good about getting such a high price, and didn’t understand that he actually lost, $1597 plus his own labor. Another problem is the appraisal. The property has to appraise for the purchase price of $249,900 in order for the buyer to get financing. No doubt the appraiser will give some credit for the beautiful remodeling, but probably not $34,000 more than the average price of the comparable sold properties, which means the seller will end up losing even more, as he will have to drop the price to match the appraisal price in order for the buyer to get the loan.

  An experienced agent can provide you with staging and remodeling advice to help you get the highest return for your home.

Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.

10 Tips to Get Top Dollar for Your Home

  Sellers are always asking for advice on what to do their homes to get top dollar. Of course you can hire a stager to come in and do a makeover, but many times a stager isn’t needed or a seller doesn’t want to pay for staging.

  Here are 10 tips that I recommend to my sellers: 

  1. Start packing. Start with everything that is visible that you can live without; like photos, books, collections, and miscellaneous clutter.
  2. Organize the closets and cupboards. This is a good time to donate all of the things you haven’t worn or used in the past year.
  3. Remove anything attached to the house that you want to take with you, as attachments are normally transferred to the buyer. If you are taking something, like a light fixture, you will need to replace it with another one.
  4. Remove excess furniture so you have at least a 3’ walk way through-out the house. You want your rooms to feel inviting and as large as possible. Arrange your furniture to take advantage of any focal point like a fireplace or nice view.
  5. Paint and repair any damaged items, replace the furnace filter and old light bulbs. You want your home to be neutral and bright. Most buyers hire a home inspector so you might as well make any known repairs now so the inspection goes smoothly. If you have a well and/or septic system, you should have a current water test, and septic inspection.
  6. Clean everything, inside and out, including the appliances and flooring so buyers feel your home is move in ready.
  7. Hide any trash or recycling cans that are sitting out and find a place for the pet food and kitty litter that isn’t visible as you walk through the house.
  8. Check your curb appeal. This is the buyer’s first impression of your home and it may attract buyers who see the for sale sign as they drive by. Hide the trash and recycling, pick up the toys and tools, plant some flowers, trim trees, mow the lawn, paint the front door, fix broken steps or railings, etc.
  9. Make sure your home smells fresh. Before showings take out the trash, look for pet accidents, hide the dirty laundry, vacuum, open a window-weather permitting, use air-freshener as long as it is not overpowering.
  10. Walk through the house one more time, as if you were a buyer and see if there’s anything you missed.

  An experienced Real Estate Agent can provide specific tips to help you get top dollar for your home.

  Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.

Should I Remodel Before I Sell?

  The best advice is to remodel for yourself and not a potential buyer. Try to keep up with maintenance issues as they arise, instead of pushing them off until it is time sell. If you wait, you will miss out on enjoying the improvements that you have to pay for. If you don’t make the improvements, you will most likely be paying for them anyway, in the form of a price reduction when you sell.

  The simpler, lower-cost projects usually have a greater return. Focus on the buyer’s first impression as they arrive at your home, starting with your landscaping, and exterior. Remodeling Magazine’s Cost vs. Value Report states that a new front door ranks highest on the payback scale, followed by a new garage door. Midrange window replacements and a minor kitchen remodel have an average pay back of about 80% of the cost. So don’t expect to make money on most remodeling projects.

  I advise my sellers to clean everything from top to bottom, pack up everything you can live without, clean or replace old carpet, and then paint where needed. It is amazing the impact a freshly painted basement has on buyers. Take care of leaky plumbing fixtures, old light fixtures, and appliances that don’t work. You don’t need to purchase high end replacement items, just make sure they match your décor. 

  If your furnace, air-conditioner, or water heater haven’t been cleaned or inspected in a few years, I recommend having that done before the buyer’s inspection. If you have a well or septic system, the buyer will most likely ask for you to pay for those inspections, so you might as well do it upfront to reduce the amount of time needed for the inspection contingency.

  If your roof is at the end of its life expectancy, or if you have peeling paint, or safety issues, a buyer may not be able to get financing, which can limit your buyer pool, and that typically means a lower selling price.

  Every situation is different, and not all sellers can afford to make improvements, so sometimes we need to sell your home “as is”. If you are thinking of selling in the near future, now is the time to talk with an experienced real estate agent for advice on repairs or updates that will help you get the highest price.

Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.