Minnesota Homebuyer Blog: December 2010

Tuesday, December 28, 2010

First Time Homebuyer’s Real Estate Word for Today is Equity

Last week a friend mentioned a new company had opened in the Minneapolis/St. Paul area but later realized it was just Fair Isaac had changed its name to FICO. Most people living in the Twin Cities north metro are aware the business analytics company, Fair Isaac Corporation, has been located in Shoreview for decades. But I hadn't realized that few outside the real estate and mortgage industry have made the leap that FICO is an acronym for the Fair Isaac Corporation. Once again, I was a bit surprised that such a simple term I use everyday as a REALTOR® would be unknown to others. But then it got me thinking of all the times a glazed look came over a buyer’s eyes when I talked about escrow or earnest money. These can easily be confused with other real estate and mortgage terms like down payment or cash to close. It is totally understandable because most homebuyers do not buy houses everyday.

There are so many terms that could possibly confuse a First Time Homebuyer that I thought an online glossary of real estate terms might be helpful. So over the next few weeks I am going to have a series of posts for the first time homebuyer with explanations of the most often used (and sometimes confusing) real estate terms. This way you can skip buying that big “how to buy a house” book or attending that First Time Homebuyer Class and have a quick resource at your fingertips. Today’s Real Estate Term is:

EQUITY—The amount of ownership one has in a property is the equity. This means if a home is appraised at $200,000 and the homeowner owes the bank $150,000, he would have $50,000 in equity.

An FHA buyer initially has very little equity because of the very low down payment required for the loan (usually 3.5%). Whereas a conventional buyer, who puts down 20% or more on the home, will have a greater percentage of equity.

It is important for a first time buyer to understand this term because it can be used in property descriptions. A home that is in a “negative equity" position is a short sale. This means the homeowner owes more to the bank than the home is worth in the current real estate market.

Other real estate ads will describe homes as an “equity builder”. This is where a buyer can build equity in the home faster by making improvements like finishing a basement so the home increases in value more quickly than if nothing is done on the home.

Another term used by REALTORS® in advertisements is “sweat equity”. This is similar to an equity builder but often describes a home that could need significant work to bring the property to its full value.

Additional Real Estate Glossary Term Posts:
ESCROW
EARNEST MONEY

If you are buying, selling or relocating to Minnesota and need help from a professional REALTOR®, give me a call or visit my website for a FREE Relocation Packet , Homebuyers Success Packet or sign up for Listingbook Twin Cities Home Search. I specialize in

acreage and lakeshore properties in the north and east Twin Cities metro area including Ham Lake, Lino Lakes and all communities in the Forest Lake School District! Serving Anoka, Chisago, Ramsey and Washington Counties in Minnesota.

Buying a Home? Check out my HOME BUYER'S BLOG!

Copyright 2010 Teri Eckholm http://www.terieckholm.com/

Wednesday, December 22, 2010

First Time Homebuyer’s Real Estate Word for Today is Earnest Money

In a recent episode of the Emmy award winning television show, Cash Cab, several people with stumped by the acronym, FSBO. This is a often term often used in the real estate world to describe a person selling their home by owner (For Sale By Owner). As a REALTOR® I was a bit surprised that such a simple term I use everyday would be unknown to so many. But then it got me thinking of all the times a glazed look came over a buyer’s eyes when I talked about escrow or earnest money. These can easily be confused with other real estate and mortgage terms like down payment or cash to close. It is totally understandable because most homebuyers do not buy houses everyday.

There are so many terms that could possibly confuse a First Time Homebuyer that I thought an online glossary of real estate terms might be helpful. So over the next few weeks I am going to have a series of posts for the first time homebuyer with explanations of the most often used (and sometimes confusing) real estate terms. This way you can skip buying that big “how to buy a house” book or attending that First Time Homebuyer Class and have a quick resource at your fingertips. Today’s Real Estate Term is:

Earnest money The funds that a buyer submits with their offer or purchase agreement to demonstrate to the seller their seriousness about buying the property. It should be an amount sufficient enough to indicate to the seller that the buyer will not walk away from the deal without good reason. It is not the same as a down payment. If your offer on the home is accepted, the earnest money check will be cashed and placed into a broker’s trust account. The funds will go toward the purchase price of the home.

First Time Buyer Question—Is a Home Still a Good Investment?

Since the economy, in a word, tanked a few years ago and the values of homes in some areas plummeted, I often get asked the question, “Is buying a home really a good investment?" It was for decades considered one of the safest investments a person could make; the epitome of the American Dream. A few years ago, skyrocketing values seemed to put home ownership out of reach for many but with the market downturn many would be first time homebuyers are confused. Does owning a home make sense as a financial investment?

In my opinion, YES, buying a home is a wise investment and not just because I am a REALTOR®, but because I, too, am a homeowner. The key is treating your home like the investment that it truly is. It takes discipline and time for your investment to grow. And like any other investment, if you have to sell when the market is down, there is a chance that you will not realize as much profit as you may have expected.

So what are some of the key points that must be considered when investing in your first home?

Buy Smart

**Price **Interest Rate **Type of Mortgage **Resale Potential **Equity Builder?

Maintain and Protect Your Investment

**Home maintenance **Insurance

Don’t Put in Your Asset in Jeopardy

The best way to have a healthy balance sheet when you decide to sell your home is to Buy Smart in the first place. Buying smart is not just about getting the home at a low price though that is a very important piece to the puzzle. With many homes at rock bottom prices, it is a good time to consider buying a first home. But buying smart also means getting a mortgage that you can afford and that is safe, preferably at a fixed rate rather than an adjustable rate that can fluctuate into something that you cannot afford. Interest rates are at record-breaking low rates. Talking to a knowledgable loan officer is a great way to get started in the home buying process and find out what options are available to first time buyers now.

But buying smart goes beyond the price paid and the loan used to finance a first home. It is also buying with resale in mind. Many, who purchased homes in the price climbing frenzy of a few years ago, snatched up any home they could after submitting multiple purchase agreements on several homes. They didn’t worry about the perfect floor plan or that the home was on a busy road or next railroad tracks or if it had a weird small room that could not be used for anything. Now, if they are faced with trying to relocate, they are frustrated that buyers refuse to compromise on aspects that they overlooked.

As a REALTOR® who works often with first time buyers, I spend time helping my them to understand the positives and negatives of the location of each property they view. I point out how something quirky like having no basement or having a hot tub built in to a bedroom could affect the resale value by limiting potential buyers. Paint and wallpaper can be easily changed but foundation, plumbing and property location are much more expensive to deal with. Oddities it a home can drastically affect value when it is time to sell.

Lastly, buy smart by determining whether equity can be built with good old fashioned hard work! If the home hasn’t been updated, a good sprucing up could raise its value. A house that has an unfinished basement, could build equity if it can be done at a reasonable cost. Don’t take shortcuts and avoid permitting because that can be costly if you go to sell. Is landscaping your forte’? Look for a home with a yard that can be upgraded over the years. Just be frugal and realistic in what your resale will be in the end.

Beyond a smart buy, maintenance is essential as is proper insurance to be certain a home owner can afford the required repairs should the unexpected happen. Time after time I have to bear the bad news when presenting a market analysis at a home where the interior and/or exterior has not been repaired or replaced in decades. These homes are not worth what a neighboring, updated home is worth. Doing several projects over time allows a homeowner to enjoy the improvements while retaining the property value. Likewise, not insuring a home properly can be a huge risk. Worse yet, are the homeowners that make a home insurance claim and receiving payment for a repair but opt to use the money for something else.

Finally, it is important for a homebuyer to not put their investment in jeopardy. Many of the people who lost their homes in the market downturn put their homes in jeopardy but taking risky loans against the equity. Some people took home equity loans at reasonable rates but didn’t use the funds to improve their home. Some of these loans were at very high adjustable rates and as the payment rose, the homeowners just couldn’t make the payment. When I was growing up, I remember learning to never take a risk with anything you couldn’t afford to lose. I think a home falls into this category.

Like any investment, a home’s value will fluctuate. But a house is unique as an investment because it serves a dual purpose: It is a your place to live as well as a way to increase your net worth. By using the money that would be paid for rent and putting it toward a house you can afford with a plan to protect and maintain your property, a home purchase is still a good investment.

Wednesday, December 8, 2010

A New Home for Tuffy—How an Older Dog Transitions to a Townhome

When I was contacted a few months ago by senior clients, Ang and Donna, about downsizing from their family home on a half acre lot in Anoka County to a townhome, I knew it would mean bring lots of changes. Downsizing can relieve a lot of stress for a senior couple. No more mowing or raking the huge lawn. No more snow blowing the driveway or shoveling off the steps. Sure there would be less space to store all the treasure and mementos of life…but then less to dust too.

Yes, downsizing was a good option for this couple, but finding a new home for Tuffy was paramount. Tuffy was their little gray wire-haired, terrier-type dog who had the run of the place, if you know what I mean. Every townhome we looked at had to allow dogs in the association by-laws. Since Tuffy was not a large sized canine, breed restrictions were not going to be an issue. But this little guy was a pretty spoiled dog who darted out the door and ran right up to me on every visit barking and jumping. He was a good dog, as he didn’t leave his half acre, but now Tuffy wasn’t going to be able to leave his patio. Running up and barking at neighbors is a big no-no in a condo association.

My clients found their perfect new home in quick order and, better yet, their beautiful Anoka County home sold in just three weeks. Huge changes were going to take place in a matter of weeks, not the months they had anticipated.

It didn’t take long to get the association documents into my clients' hands. Included was a list of rules that Tuffy must obey in order to be a good townhome canine. His owners had to submit a mug shot of his cute black and gray face, so the association could tell which pets belong in the area and which did not. He was going to have to be on a leash or tie-out at all times. And he would have to have copies of his license and documentation that his shots were up to date on file.

Now that leash thing was going to be a problem. Tuffy, like his owners, fell into the senior citizen category. It was time to teach an old dog some new tricks…or remind him who was boss of the family (and it was no longer Tuffy) so that he could make a good impression on all his new neighbors. Fortunately, Tuffy had been trained previously and though his manners were a bit rusty, Ang and Donna started working with him several weeks before the move. Tuffy had to start wearing his training collar at all times but they didn’t use it often. A reward system of treats helped the little dog remember all his new rules.

Tuffy, along with Ang and Donna, are now happy in their new home. It was a bit of a transition but made much easier since Tuffy’s owners chose to start preparing their spoiled little dog early for the new rules. This made the move as stress-free as possible for both dog and owners. Finding and unpacking all of Tuffy’s little dog toys should be the only worry now!

OldDogPaws offers 7 helpful tips to ease your senior dog’s stress and help him make a smooth, stress-free transition to the condo-lifestyle

1. Start Training Early
Don’t think of this as a way to punish Fido. A training collar is all about keeping your older pet safe in his new environment. Pull out that training collar and let him know that you mean business. He has to relearn to walk on a leash and not bark at everything and everyone.

2. Practice, Practice, Practice
At least a month before the move, start your daily walk with the leash being attached before exiting the house. Make sure Fido knows that darting out the door will no longer be tolerated.

3. Tied out Trials
Every time you sit on the deck or patio, first hook up Fido to his tie-out so he can get used to being tied-up. Many people don’t use these in fenced yards but most condo associations will have this restriction.

4. Reward Good Behavior
As Fido learns the rules, the training collar can come off and the treats or reward system can begin.
5. Keep License Up-to-Date
Most associations will require all pets to have to have all shots and local licensing up to date and of file.

6. Snap a Good Photo
Not quite a mug shot, but many associations will want a photo of all pets on file so they know which pet belongs to which association member.

7. Find Area Dog Parks
Research your new neighborhood to see if there is a leash-free dog park in the area where Fido can have a quick and safe run once in awhile to burn off all that pent up stress from being good in his new surroundings.

By taking the time to prepare Fido for the change to condo-living, your older dog will enjoy his new home and surroundings as much as you will.

Find more tips on taking care of your older dog at OldDogPaws.com or at the new olddogpaws blog.

Considering Downsizing to a Townhome? Let me be help you (and your spoiled dog) too!

White Bear Lake, MN Real Estate Market Statistics 3rd Quarter 2010

Just about everyone who grew up in the Twin Cities north and east metro is familiar with the White Bear Lake community. Whether your memories are of passing the iconic, gigantic, snow-white bear statue at Polar Chev, swimming at Bellaire beach or setting sail across White Bear Lake, everyone seems to know something about the community. But few know the legends that surround the lake and that Manitou Island is at the center of it all. The legend has been documented by several writers but the most notable was Mark Twain who wrote of the Indian warrior who killed the great monster of a polar bear to save himself and his lover in his book, “Life of the Mississippi”.

Legends aside, today the White Bear Lake community is a vibrant area that is continually growing while preserving its rich heritage. There is no doubt that the shores of White Bear Lake are the most well known as one of the largest lakes in the north metro as it spreads from Ramsey County into Washington County. But there are two other lakes in the City of White Bear Lake: Birch Lake and Goose Lake as well as Bald Eagle Lake in White Bear Township. This town is the home of the White Bear Lake School District #624 and Century College while encompassing 11 square miles of land. Real estate opportunities include both historic homes and recently constructed residences. First time buyers, executive home buyers, retiring downsizers and luxury lakeshore buyers have a wide variety of options if the choose to call White Bear Lake home.

Third Quarter 2010 Average Sales Price of all homes sold in White Bear Lake:

All Homes $ 172,581
Single Family Homes $ 184,108
Townhomes/Condos $ 114,950

Third Quarter Average Cumulative Days on Market in White Bear Lake:

All Homes 148
Single Family Homes 154
Townhomes/Condos 113

3rd Quarter 2010 White Bear Lake residential real estate statistics for single family homes:

Under $200,000~ 71 Active Listings, 13 Pending Listings, 27 Sold Listings, 125 CDOM

$200,000-300,000~36 Active Listings, 3 Pending Listings, 11 Sold Listings, 183 CDOM (Lakeshore Subgroup 2 Active, 1 Pending, 0 Sold)

$300,000-$400,000 ~ 8 Active Listings, 0 Pending Listings, 1 Sold Listings, 434 CDOM (Lakeshore Subgroup 0 Active, 0 Pending, 0 Sold)

$400,000-$500,000 ~ 6 Active Listings, 0 Pending Listings, 1 Sold Listings, 326 CDOM (Lakeshore Subgroup 3 Active, 0 Pending, 1 Sold, 326 CDOM)

$500,000-$1,000,000~ 5 Active Listings, 1 Pending Listings, 0 Sold Listings (Lakeshore Subgroup 4 Active, 1 Pending, 0 Sold)

$1,000,000 and Up ~ 4 Active Listings, 0 Pending Listings, 0 Sold Listings (Lakeshore Subgroup 4 Active, 0 Pending, 0 Sold)

3rd Quarter 2010 White Bear Lake residential real estate statistics for townhomes and condos:

Under $200,000~ 37 Active Listings, 4 Pending Listings, 6 Sold Listings, 113 CDOM

$200,000-300,000~ 19 Active Listings, 0 Pending Listings, 0 Sold Listings

$300,000-$400,000 ~ 6 Active Listings, 0 Pending Listings, 0 Sold Listings

$400,000-$500,000 ~ 1 Active Listings, 0 Pending Listings, 0 Sold Listings

$500,000-$1,000,000~ 6 Active Listings, 0 Pending Listings, 0 Sold Listings

$1,000,000 and Up ~ 1 Active Listings, 0 Pending Listings, 0 Sold Listings

Lakeshore available in the White Bear Lake area
13 Active Listings

White Bear Lake lakeshore price range: $224,900-$2,575,000

2 Homes on Birch Lake
4 Homes on Bald Eagle Lake
7 Homes on White Bear Lake

For additional information on any current White Bear Lake real estate listing or for additional information on buying a home in the White Bear Lake area contact Teri Eckholm directly at 651-336-7073.

**All Statistical information based on information from the REGIONAL MULTIPLE LISTING SERVICE of MINNESOTA, INC. for the period of 7/1/10 through 9/30/10.

Home Sales Statistics for other communities in the north metro:
Blaine, MN Real Estate Market Statistics 3rd Quarter 2010
Forest Lake MN Real Estate Market Statistics 3rd Quarter 2010
Ham Lake, MN Real Estate Market Statistics 3rd Quarter 2010
Oakdale, MN Real Estate Market Statistics 3rd Quarter 2010