Area Real Estate News & Market Trends

You’ll find our blog to be a wealth of information, covering everything from local market statistics and home values to community happenings. That’s because we care about the community and want to help you find your place in it. Please reach out if you have any questions at all. We’d love to talk with you!

Dec. 3, 2020

Managing Expectations and Mental Health During The Holidays

Each year, event planning, gift shopping, and seeing extended family brings its own stressors and frustrations, but it’s all worth it when we get to spend time with our loved ones and take time off of work to rest at home. With most of us spending the majority of this year at home anyways and unable to see family, how will we protect our peace of mind and manage our mental health with the unfamiliar challenges of this year? 

Keep Your Traditions

Traditions may seem silly to a lot of people, but they are more important than you may think at first glance. Humans, as a diverse and cultural species, have been ritualizing important moments for centuries. It’s in our nature! Just because your traditions can’t be done with the people they are normally with, doesn’t mean you can't practice them. Cooking a staple dish, cookies, or performing an activity you normally do with others can still bring you a sense of comfort, even if you don’t get to be around your loved ones. 

You may consider joining your loved ones for these traditions virtually, or practice them on your own. 

Give to Others

Since we aren’t having our usual gift-giving gatherings, giving to others may slip your mind or feel unimportant. You can still give gifts. There may be people this year who really showed up for you that you haven’t gotten a gift for in the past. Maybe there’s someone you know who has had an especially hard year. Perhaps this year brought someone closer to the front of your mind that you don’t normally connect with. Consider giving to these people in addition to or in place of your normal round of gift-giving. 

This year has been difficult for many and brought people together in a way that is difficult to put into words. If gift giving doesn’t feel right for some of these, think about sending a card. You might be surprised how much it means to someone just to hear that you’re thinking of them. 

Manage Expectations

Before the holidays actually begin, think about your plan for how you’ll be spending your time. If you are often out and about, consider how you will adapt if you need to quarantine during your family’s intimate gathering. How would that make you feel? What can you do to make sure you still feel included? Should you orient yourself or your family members with Skype or Zoom beforehand? What if another family member gets exposed and can no longer make the gathering? How can you include them virtually or contact-free?

Although you may already have a plan in place for how you’ll spend your holidays, make sure you exercise your mind to other possibilities and how you will make those work in a way that makes you happy. 

Take Time for Yourself

It’s easy during the holidays to spend a lot of time interacting with and helping others, which is one of the greatest parts about this time of year. Don’t let that stand in the way of taking time to address your own needs. These times are tough and unprecedented. Let yourself adjust at your own pace. Try meditation, yoga, read a book you know you love, watch a comforting movie, or go for a walk. Give yourself space. 

 

Staying in touch with your feelings during this year’s holiday season will be important. Be prepared for plans to change, identify ways you can give yourself comfort, and consider how you can help others. All of these will contribute to a holiday season that is most enjoyable and safe for you and your loved ones.

Nov. 19, 2020

Tenant Opportunity to Purchase Act (TOPA)

In the first quarter of 2020, the Minneapolis City Council issued a request for proposals for policy guidelines on TOPA. Currently, considerations are being made to determine whether or not TOPA should be implemented in Minneapolis.

What is TOPA?

The Tenant Opportunity to Purchase Act is also referred to as the Opportunity to Purchase (OTP) by Minneapolis City Council members. The purpose of this act is to give tenants the first opportunity to buy when their landlord chooses to sell the property. This Act has been around for years and is currently implemented in Washington D.C., San Francisco and Berkeley, CA. The goal of TOPA is to create tenant ownership opportunities, prevent involuntary displacement, and preserve housing stability. 

Twin Cities LISC Presentation

When MPLS City Council requested proposals, the vendor they chose was Twin Cities LISC, who provided strategy options and know-how information to the city council to help guide them on policy. Twin Cities LISC proposed three options for Minneapolis to consider if they choose to implement TOPA. 

Option #1 focused on tenant’s rights and anti-displacement. This option provides residents with the greatest discretion in choosing development options and the future of their community. When a property is going to go up for sale, the tenant could assign or sell their right of refusal to a third party. In this option, the tenant (if property is single-family) and tenant organization (multi-unit properties) both have the right to exercise TOPA.

Option #2 focuses on the same priorities as Option #1, but also includes tenant protections, and rent stabilization. In this option, tenant organizations (multi-unit), tenants (single-unit), and qualified organizations have the right to exercise TOPA. In this option, tenants may assign or sell their right to a third party.

Option #3 focuses on anti-displacement, tenant protections, and rent stabilization. In this option, only qualified organizations that have met criteria for owning and managing affordable rental housing accommodations set by the City may exercise rights. Rights cannot be assigned or sold in this option. This option also minimizes the time needed to complete a transaction, which TOPA would drastically increase. 

Timeline for Transactions

TOPA would add more steps to the sale of a rental property. First, when the landlord wants to sell, they must inform tenants that they are intending to sell the property and notify them that they have the first right of refusal. The tenant then has 45 days to submit a statement of interest. After the statement of interest is received, the tenant and owner have 120 days to negotiate. Once negotiations are complete, there is 120 days to secure financing, plus 40 days if there is a lender letter. After that, it will be 15 days to closing. In option #2, in multi-unit properties, the tenants have the opportunity to form an LLC and run the building as a co-op or condo. This would require legal assistance and is supposed to be completed within the initial 45 days. Option #3 would only have 20 days for the registration of tenant interest, and 60 days for negotiations opposed to 120. You can see the detailed timeline below.

Considerations

Realtors from the Minneapolis Area Association of Realtors were consulted to give feedback on the Twin Cities LISC presentation. The consensus was that OTP has several drawbacks and unintended consequences. One of which being that this Act does not function as the giving of a new right to the tenants, but taking away the right of the sellers. Some agents worry that this Act would interfere with free transfer of real estate, which is fundamental to private property rights.

The timelines are too long. OTP would delay the sale of a property from 31 days (average) to 285 days.

The assignability/salability of the first right of refusal has already proven to be highly susceptible to exploitation. Options #1 and #2 both allowed for tenants to sell or assign their rights to others. This could put the tenant and owner at-risk to be taken advantage of by predators. 

Agents also worry that the application of OTP will restrict the supply of affordably priced rental housing by disincentivizing owners from offering rental properties. Because OTP adds more time to the sale and complicates the transfer of the property, landlords may choose not to rent out their property. 

OTP is unnecessary for single-family homes. In Minneapolis, 57% of all rental property inventory are single-family homes. The current home sale process easily facilitates and is the most effective means for tenant or non-tenant purchase. Tenants in single-family homes are already protected by state-law, if their dwelling is sold during their lease, the current lease period must be honored. Tenants already generally get notified early in the sale process, which affords them the option to submit an offer to purchase, often on a pre-market basis. 

There is no financial advantage when comparing OTP and the current home sales process. Both require the purchaser to be credit qualified when submitting an offer. 

 

Posted in Policy Updates
Nov. 12, 2020

What Realtors Wish You Knew

The real estate market can seem intimidating to a lot of people. In an effort to bridge the gap between Realtors and our clients, we want you to know what we know. Sharing our experiences and our education is an easy and effective way to make real estate more approachable. 

Get A Pre-Approval ASAP

There is nothing more disheartening than falling in love with a handful of homes only to find you’ve been looking outside of your price range. You can do the math online and find out how much house you can afford, but without tallying your debt, assets, income, and credit, you don’t know for sure what your lender will approve you for. It is better to know before you go. Also, you will need a pre-approval before submitting an offer on a home. If you see one you love, you want to be able to act fast and your agent will need a pre-approval letter to send with your offer.

Your Realtor is Your Representative

There should be little to no direct communication between buyer and seller without their Realtors present.In a real estate transaction, any change to the purchase agreement must be noted and signed by both parties. If a seller promises to you verbally that they will leave the appliances behind, but it doesn’t get put into the purchase agreement, they can legally take the appliances with them when they leave. Your Realtor is your representative and works in your best interest to advocate for you and stay in control of the transaction. Any undocumented conversations cannot be enforced.

 

Down Payments Are Not 20%

Almost everyone entering the real estate market believes they need a 20% down payment in order to buy a home. While a higher down payment will decrease your monthly payment, you do not need that cash on hand to finalize a purchase, nor does paying a smaller down payment make you financially irresponsible. It all depends on what you are comfortable with. Believe it or not, the average down payment is closer to 6% or less. If you need assistance choosing a mortgage loan, talk with an expert.

Turn-Key Homes: Are you sure?

We get it. Buying a home and knowing you will need to put work into it isn’t what everyone wants. However, turn-key homes that are ready and up to your standards on move-in day, come with a bigger price tag. If you feel that you can’t afford a home because homes with your chosen finishes, flooring, cabinets, appliances are out of your budget, consider doing renovations and upgrades on your own. It’s more likely that the cumulative cost of upgrades/renovations on a non-turn-key home will still come out to less than your ideal move-in-ready home costs. 

Renovating and upgrading a less expensive home is a great option for individuals who have been priced out of their dream homes.

Recognize Real Estate Predators

It happens far too often that an individual gets taken advantage of by real estate predators. A common one is low-ballers offering all-cash to distressed homeowners or owners that are ignorant to their home’s value. If you are struggling to make your mortgage payments, do not accept relief from a third party. Work with your lender directly to weigh your options, they will work with you. Government education and resources are available to you and they are free. If you are presented with an appealing offer, make sure you read the fine print, recognize red flags like “easy outs” in the contract that let the buyer cancel the deal up to closing day. Buyers should be committed to buy after their offer is accepted. Common contingencies are based on the buyer obtaining financing and the results of inspections. 

Know Your Local Market

 

You may read about the real estate market once every few months, but nobody knows your area like your Realtor. Each area is unique and while national or metro-area-specific trends may get all the attention, your local market may not be performing in the same manner. The time properties spend on the market, the average sale price, buyer activity, and inventory are all unique to your area. If you are interested in buying or selling, talk to a real estate professional that knows your market and can show you data that represents your specific area of interest. This will ultimately be the best guide to follow when making your decision.

 

Nov. 5, 2020

Where Candidates Stand on Housing

The current election in the United States has been very cutthroat and brought a lot of issues into the light for further examination by the American people. One issue we haven’t heard come up a lot in conversation is each candidate’s plans for the housing industry. From conquering homelessness to the distribution of tax credits, these candidates don’t fall in agreement almost anywhere when it comes to housing. 

Policies on Fair Housing and Disbursement of Funds

Both candidates share different opinions about Fair Housing and the disbursement of tax incentives and government funds. 

Joe Biden

Joe Biden released an in-depth Housing Policy in February of 2020 that outlined all of his specific plans for tackling the United States’ housing crisis. First and foremost notable is that Joe Biden wants to expand Section 8 and make it an entitlement. Currently, only one fifth of the households that are eligible for Sec. 8 assistance actually receive it. Making Sec 8 accessible to those who need it helps low-income families get back on their feet. 

Joe Biden also noted that he would be reinstating the AFFH Rule that Trump threw out. The Affirmatively Furthering Fair Housing Rule, brought about by the Obama Administration, puts a finer point on making sure municipalities do not allow discriminatory practices. This rule was favored by politicians on both sides of the aisle with its main criticism being that it required too many steps for municipalities to go through to follow the rule. That being the case, it’s not believed by many that the solution was to throw the whole rule out. 

Donald Trump

The Trump Campaign never released a formal housing policy package, but we can look at what Trump has done during his time in office to see in what direction he may go and what his past actions point to in another term as president. 

In addition to scrapping the AFFH Rule, Donald Trump also has made amendments to two major rules used in Fair Housing, the Equal Access Rule and the Disparate Impact Rule. The amendment to the Equal Access Rule lets single-sex goverment-backed homeless shelters turn away transgender folks. This amendment means that a person who identifies as a woman would not be granted access to an all-women's homeless shelter. The Disparate Impact Rule is used most often in court cases to fight against unfair housing practices. Amending this rule made it impossible to be used in court cases. There are advocates for the Disparate Impact Rule on both sides of the aisle.

Combating Homelessness

Both candidates have made comments on their intended actions to cure homelessness in the United States. During a pandemic, this is an important topic that many in the real estate industry want to see action on.

Joe Biden

Joe Biden’s housing policy packet, released in February of 2020 outlined that Biden would be pledging $13 billion in spending to fight homelessness. Within his criminal justice proposal, his campaign included a goal of ensuring housing for all formerly incarcerated individuals upon release from prison.

Donald Trump

Last year, Donald Trump promised to tear down homeless encampments in California and provide housing for displaced individuals, but nothing came of it. He did however, during his term, approve increases in federal homelessness assistance grants. 

Taxes & Zoning

Both candidates have opposing views on the allocation of funds as far as who receives them.

Joe Biden

Biden has stated that he plans to incentivize the limiting of single-family zoning, which attributes to inventory shortages and artificially drives up pricing of land and housing. Limiting single-family zoning allows for more multifamily housing to be built and would increase inventory and availability of housing.

Joe Biden wants to offer a tax credit to low-income individuals paying more than 30% of their income on housing since wages have not kept up with inflation of housing costs. He also wants to give first-time home buyers a down payment tax credit of up to $15,000.

Donald Trump

During his time in office, Trump created Opportunity Zones which gave tax incentives to businesses to go into distressed communities to stimulate the economy and create jobs. Both sides of the aisle have liked this idea, but criticize that it lacks the reporting required, so we can’t measure what the results are. Another criticism is that these tax incentives go to businesses that would have already invested in those communities instead of going directly to low-income families. The counter of this critique is that these tax breaks “trickle down” to the members of the community. 

Donald Trump has also recommended the privatization of Fannie Mae and Freddie Mac, federally backed mortgage companies. Many people have questioned how this would affect buyers because federal backing allows Fannie Mae and Freddie Mac to offer affordable rates and operate at a lower risk. 

 

In conclusion, both candidates have very opposing views on most elements that make up our housing industry. It is difficult to speculate since Biden has never been president before, so his pledges and promises are dependent on him getting an approving Senate to assist in passing legislation and Trump did not release a housing policy plan for people to compare against Biden’s, so we can only use his prior actions to guess his plans for the future if he is re-elected.

Posted in Policy Updates
Oct. 29, 2020

Listing Your Home

Selling your home is a big deal. Making sure you have a good understanding of the listing process and what to expect is a great first step to enforce your ability to stay in control of the transaction. The more you know, the more options you have, and the faster your home will sell at its best price.  

Finding a Listing Agent

When interviewing agents, make sure you feel confident and comfortable at their level of experience and expertise. Your agent is your representative in the transaction. This needs to be someone you can trust and communicate effectively with. Your agent should be able to explain the listing process to you in a way that gives you control, peace of mind and allows you the space to understand what every document, inspection, and signature means. This is your home, your investment. Whether you have memories tied up in it, or need to get rid of it ASAP or even both, your agent needs to be able to confidently advocate for your needs while simultaneously overseeing the transaction, and taking the time and consideration to educate you and keep you informed along the way. 

Preparing the Home for Listing

During the listing process, your home will need to be photographed and will also need to be prepared for showings. This means decluttering and cleaning. Look around on other listings and compare photos. Generally, photos that are poorly lit and of lower quality or do not capture the entirety of the property don’t appeal to prospective buyers. Consider professional photography. Photographers are talented at making homes look their best. Remember that the photos on your listing are usually the first time buyers will see your home and decide whether or not they want to view it in-person.

Especially in times like these when entering homes physically poses a new risk to those involved, some buyers will hold more value to the photos and videos they see online. While showing activity is still high, it’s good to take into consideration that some buyers don’t feel comfortable seeing homes they aren’t in love with at first sight, so you want to make sure your first impressions are good!

Choosing a Listing Price

This is one of the most important decisions you make when listing your property. Take the emotion out of the equation. Remember that prospective buyers are seeing your home for its physical properties and condition. They do not have years of experience in the home that make it feel valuable to you. Focus on material facts about your property. Your agent will run a comparative market analysis (CMA) to show you what properties similar to yours in your area are selling for. This data will be helpful when pricing your home. 

Getting the price right on the first try is more important than you might think. Remember that the price you list at determines what buyers will be viewing the property. Let’s say that after reviewing the CMA, your agent suggests listing your home at $250,000. You and your spouse spent years in the house and have done renovations, paint jobs, repairs and you feel that the home is worth $300,000. If you list at $300,000., only buyers that can afford a $300,000 home will schedule showings to come to see your home. Keep in mind that if they are viewing your home, it means they’re also viewing other homes that are $300,000 which are most likely accurately priced, meaning they have material values, square footage, finishes and appliances, amenities, etc. that make them worth $300,000. So, in comparison to your home that has been valued at $250,000., it is not likely yours will make the cut. 

Now your home has sat on the market for a few weeks with no offers. Now, you inevitably bump the price down to $250,000., as your agent suggested. Finally, buyers who can afford your home are seeing your home show up in their searches, but it’s been on the market for a few weeks and has a price reduction of $50,000. Prospective buyers may now have reservations about why other buyers haven’t been interested in purchasing the property. 

By pricing your home accurately, you ensure it gets in front of the right buyers as soon as possible. A home looks the best when it’s in the correct price range where it will be viewed competitively among similar homes. Trust your agent and their price analysis. If you genuinely feel the home may be worth more, get a second opinion.

Required Documents

Truth in Housing (TISH)

If you’ve been through a real estate transaction before, you may remember hearing about TISH Inspections/Disclosures. TISH evaluations help ensure the quality of housing available. They are also mandatory in certain areas every time a house sells. 

Your role as the homeowner is to hire a licensed TISH evaluator, who will give you a list of required repairs, if any, on a report. These repairs must be completed and then re-inspected. After the inspection, you will be given a Certificate of Approval. This must be acquired before the home can be listed. Your Realtor will let you know if your area requires disclosures or inspections to be completed before selling.

Seller’s Disclosure

This disclosure is for you to share any and all the material facts you are aware of your property. For example, if you know the basement floods every spring, that would be something to disclose. If you are aware of any material defects or conditions, you should include those pieces of information. This disclosure must be on display at the property for showings. This document protects you and provides the buyers with important information. Your agent may use this information to populate your MLS Listing Form, another important document that will be used to describe your home on the MLS, which is seen by other agents and auto-populates sites like Trulia and Zillow.

Ready, Set, Show!

After you have signed and approved all paperwork with your agent, a sign will be installed on the property and you will start to have showings scheduled. It is best practice to create showing instructions. If there are times you do not want to have showings scheduled, such as late evenings on school-nights, or early mornings, you can set those boundaries. You can also ask for specific requests, such as having people remove their shoes, keep them on, wear masks, wear gloves, leave lights on, etc. Realtors working with buyers will see your requests and ensure that their clients are being respectful to your instructions when they come to see the property.

As interested buyers view your property, your Realtor will receive offers and present them to you for you to look over. 

 

If you want to learn more about selling your home, feel free to Contact Us with any questions you may have. One of our agents will talk with you about your local market and provide you with data that can help you make a well-informed decision. Follow our social media accounts as well to see more helpful information!

Posted in Market Updates
Oct. 22, 2020

Is it Still a Good Time to Sell?

Whether or not you keep up to date on the real estate market, you most likely heard about the seller’s market we’ve been in for the last few months. Since it has been awhile, you may be wondering if now is still a good time to sell. According to the most recent market data, you can sell your home quickly and at a favorable price.

Buyer Demand

With interest rates at historic lows, buyers are looking to enter the real estate market now to avoid higher rates in the future. Since there are so many individuals and families looking to buy, you can safely assume that when your property is listed, you will have many interested buyers. We also know that with high demand comes appreciated prices for sellers. 

You can see in the data chart below that pending sales are dramatically higher than previous years. This is a good way to showcase the increase in buyer activity.

Low Inventory

With many construction companies accepting less projects due to the pandemic and increased costs of lumber, new builds are lower than previous years. In addition to new construction being lower than usual, in comparison to the strong demand from buyers, the supply of available homes we are seeing in the Twin Cities market still isn’t enough to satisfy the need. For this reason, we see an increase in home prices and quick sale times.

Days on Market

The last thing any seller wants is to list their home for months on end. The goal is to list the property and get eyes and offers as soon as possible. In today’s market, with high buyer demand, low interest rates, and low inventory, sellers can expect to sell their home quickly. If we look at the average days a home stays on the market today, in the Twin Cities, is about 15 days. So, if your home is accurately priced and marketed well by your agent, you should expect to see a similar outcome.

What to Do

If you’re ready to sell, make sure you work with an agent that will advocate and educate you along the way. In order for your home to sell quickly and at the best possible price, the home should be well-marketed and competitively priced. Remember, overpriced homes sit on the market longer than they should, which doesn’t look good when buyers are house hunting. 

If you need to move, it’s still a good time. Home prices have not outpaced normal market growth rates, so you can rest assured that you will still be getting a good deal on a home purchase. Once again, you will want to be sure you’re working with a great agent. Since there is a good chance you won’t be the only one putting in an offer, it’s beneficial for you to work with an agent that can be a great educator and competitive advocate for you.

 

Posted in Market Updates
Oct. 15, 2020

Predatory Practices in Real Estate

As a prospective homeowner, it’s important to be well informed about common real estate practices and scenarios where individuals get taken advantage of. A predatory practice is any method which coerces a buyer or seller to accept otherwise unfavorable terms in order to achieve a better result or higher profit margin for the offender. Predatory practices can occur in lending or real estate sales.

While not all of these practices are inherently predatory, they are commonly used in unsavory ways within the real estate industry, so it is important to be familiar with them.

 

Predatory Lending

Predatory lending is when a loan originator uses otherwise dubious tactics to entice, incentivized, or otherwise coerce a borrower into obtaining a loan they do not otherwise have the reasonable ability to pay back. Remember, a mortgage loan is the borrowing of money against an asset. The asset being the home you purchase. Therefore, if you fall through on payments, the financial institution gets the property.

Common forms of predatory lending that we see most often in real estate are unjustified risk-based lending and failure to clearly and accurately disclose all loan terms. Unjustified risk-based lending is a legitimate practice, however, if exorbitant fees are charged, it’s predatory. When lenders fail to disclose all loan terms, they are misleading the borrower. In mortgage products, it is required by TILA-RESPA that lenders disclose all loan terms. If any form given to you by your lender lacks all of the charges or does not match the initial loan estimate, this is a red flag.

Here is a list of other red flags to keep an eye out for when working with your lender:

 

Predatory Practices in Real Estate Sales

In addition to financial institutions participating in predatory lending, there are a few different situations during real estate sales where people get taken advantage of. Some of the most common are low ball/all-cash purchases, schedule stretching and wholesaling. 

Low Ball/ All-Cash Purchases

When someone offers significantly below market value on a property and preys on those who have recently had a divorce, are experiencing financial hardship, or are behind on their mortgage payments. These offenders often say things like “you have no other option” when in fact, there are many programs available to help people who are behind on their mortgage payments. These homes would sell for more money on an open market, specifically in today’s market, even if they require some work. If you or someone you know is experiencing financial hardship or a major life event and is struggling to pay their mortgage, there are counseling and forbearance programs available. Selling for cash at a low price is not the only option.

Schedule Stretching

This is when a buyer continues to move the closing date further and further out. They will try to keep the property off-market for as long as possible, then lower the price and claim the market has cooled. Offenders that use schedule stretching often will claim that the market changed since the purchase began and now their bank lowered the amount they are willing to lend, which would not be the case. Their goal is to wear the seller down to the point where they will make many concessions to get the deal to close. They may demand an exorbitant escrow and lower the purchase price over a small repair. If you are experiencing a buyer that is attempting to schedule stretch, stand your ground, and work closely with your listing agent to exercise your options and remain in control of your sale.

Wholesaling 

When a person (or company) contacts someone who is trying to sell their property, submits an offer, gets under contract, then resells the property to another investor and has the two closings on the same day. The first purchase agreement is written to be assignable so that they can assign the contract to the investor after it is accepted. The wholesaler collects an “assignment fee” for the transaction. While not inherently predatory, this becomes predatory when it preys on distressed sellers and offers a very low price while reselling for substantial profits to an investor without disclosing their intent to the seller. 

Below is a list of other predatory practices in real estate transactions:

 

Your Best Interest

Whether you are a buyer or a seller, your agent and your lenders should operate in your best interest. The best way to avoid being taken advantage of in a real estate transaction is to do your research, maintain your understanding, and know your boundaries. There may come times when you don’t fully understand what decisions are being made whether you’re meeting with your agent, a buyer, a lender, or any other real estate professional. If you aren’t sure, speak up! Ask questions. This is your transaction, you are the one with assets and finances, sometimes your life’s savings at risk. You should understand every decision you make and before you make that decision, you should know what your best interests are and how/wherein the process to protect them.

At Novum Realty, this is why we focus so heavily on educating our clients. It is easy to fall back on the opinion of the professionals. For the most part, the people you work with are working in your best interest, but that’s something you should understand fully and be able to see in their practices, not something to be assumed. 

 

 

Oct. 8, 2020

Is Real Estate Still A Good Investment?

Many people today have questions regarding whether or not real estate is still a good investment given our current economy. The short answer is yes. Real estate is generally considered a safer investment than other investment strategies, such as stocks. It offers both the ability to increase earnings and decrease tax burden. 

 

Something to Think About

When an investor is looking at and evaluating a real estate investment, the median price provides information on supply and demand. Median price points that are rising too quickly are unsustainable while those that are rising too slowly exist in either depressed markets or markets that are peaking. 

In the Twin Cities metro area, median prices have increased 9.8% compared to last year. In most markets, prices increase 3% year over year. Price increases of 5 - 6% are generally considered good markets for investment (Forbes). If you’re not comfortable entering the market as an investor right now because of this, watch the current market closely to see when price increases slow down. 

2020 Considerations

The reasons why people have been concerned about investing in real estate this year has to do with unemployment, rent, and fear of property damage. Since unemployment is relatively high at this time, investors worry that tenants can’t afford to rent. There have also been a number of rent strikes in the U.S this year. Landlords asking for financial relief from the government, and tenants are asking for rent freezes until jobs become available and safe. No investor wants to purchase and maintain a property and have tenants that cannot afford to make their rent payments. In 2020, about 50% of people are concerned about not being able to pay rent every month, that’s up 25% since 2019.

 

 

In addition to rental investments, we have seen little traction being made this year within the affordable market. Investors looking to flip homes in the affordable range worry that there won’t be buyers available.

Along with the economic struggle strung along by the COVID-19 pandemic, we’ve also had a monumental and historic year for social justice movements. Tensions are high, and with each following event sometimes comes property damage. Some investors fear purchasing a property within city limits and having it get damaged.

Return on Investments

People will always need somewhere to live. Families grow, adult children move out, people move to the city, people move out of the city, etc. There is always an eb and flow in supply and demand within the real estate market, as in any market. There are many ways to enter the real estate market as an investor that offer more peace of mind than others. 

Some people choose to purchase duplexes and live on one side while renting out the other. From there, you can renovate the side you’re living in to rent out for increased rent, supposing the improvements are legitimate and improve the property. When renting out the side you improved, move into the other side and do the same. Eventually, you would sell the property as a whole at a profit, since you improved the property while residing within.

A similar longer term option that doesn’t include functioning as a landlord would be buying an affordable home and living within it while completing improvements and then selling the property for a profit. The renovations in this situation cannot be simply cosmetic. If you are looking to sell the property for more than you bought if for, you must study which improvements will increase your ROI. This can include finishing a basement, finishing a garage, adding a half bath, etc. Make sure you understand what projects you are willing to do, if you can do them well, what projects you’ll need to outsource for labor, etc. This can be a fun way to invest in real estate and offers a lot of beneficial experience, but requires patience.

 

Conclusion

There are many different ways to enter into the real estate market as an investor. Many of which options offer a promising return on investment. You must always do your research not only on the property you’re looking to invest in, but the cost of repairs, the condition on the current market, and your own financial circumstances. If you are not positive that the investment is safe for you, it never hurts to meet with a financial or legal advisor that can give you advice. Realtors are also a good source for determining whether or not you should make an investment.

Generally, a person’s ability to successfully invest in real estate is determined by many individual factors. Work with people you trust and when you do make the decision to invest, make sure you feel comfortable.

The success of an investment in real estate comes down to educated decision making, calculated risks, and the condition of the current market. If you’d like to invest in real estate, please feel free to contact our team, we are always here to help.




Sources: 

https://www.forbes.com/sites/ingowinzer/2020/07/23/picking-the-best-markets-for-real-estate-investment-midway-through-2020/#4b931f063d7b

 

Oct. 1, 2020

Is Virtual Here to Stay?

When the COVID-19 pandemic first began in the United States, the real estate market saw a quick halt on almost all operations. People shuttered themselves in their homes, made less frequent trips to the store, began working from home, and canceled social activities. Now, as people have learned to adapt to a new way of life, we’ve begun to have more virtual interactions and even make our purchases as hands-free as possible. Hospitality, food, and service industries have bulked up on their virtual offerings, trying to make it easy for customers to get what they want as safely as possible. The real estate industry moved quickly as well to make sure home purchases could move forward, holding virtual showings, meetings, and closings.

 

The Bright Side

At a time when meeting new people in-person poses new risks and challenges, people have decided to move towards holding virtual get-togethers, whether it is professional or personal. For people who were previously averse to phone/video calls, they had no option but to get on board if they wanted to be able to work remotely or touch base with friends/family. As with anything, with practice comes confidence. Now, people are sitting down at home holding phone and video chats like it's the early 2000s. 

There is an added element of control in virtual communication. Yes, sometimes technical difficulties or lagging connections make it challenging, but overall, people like being able to set times to get meetings done and have become more comfortable picking up the phone to get something done. In real estate and many other fields, virtual may be our new normal or at least a common option for those who prefer it.

Virtual Consultations & Meetings

Meetings and consultations between agents and their clients have dramatically shifted since the pandemic. With mask mandates, dining occupancy regulations, social distancing measures, meeting in-person has become a bit awkward and tricky to navigate. A lot of clients have opted to meet with their Realtor virtually. During a virtual consultation, your agent will still be able to show you market data and go through properties on MLS with you. Instead of everyone viewing one screen, your agent can view theirs while you watch from yours. This can also be desirable in our Minnesota winters when traveling in the snow and ice is nothing to look forward to. 

 

Virtual Tours & Showings

When you decide to buy a home, it is unlikely that you will buy that home sight unseen. Virtual tours became popular alongside sites like Zillow, Trulia, and Realtor.com when the average home buyer began turning to the internet to start their home search instead of to an agent. Having great photos was sure to make a property stand out. Before the pandemic, most listed luxury homes contained virtual tours, but as more clients prefer to tour their options virtually, we may see this kind of feature more often in all home brackets. 

In addition to pre-loaded videos of homes, real estate agents have been using virtual means, such as FaceTime, Zoom, and Skype to give property showings to clients. The agent walks around the home and discusses with the client as they get to view the property from their computer or mobile device. This is a great option for people who want to see more details of a home but do not feel safe doing in-person tours.

Contracts & Closing

All of your contracts and necessary disclosures can be completed virtually through an e-Signature that is obtained by services like AuthentiSign and lets you sign legal documents from home. Your real estate agent should explain each document and what it means to you before asking you to sign. 

Closings can also be done completely virtually as well. Before COVID-19, the buying and selling parties would meet in a room and review the final paperwork, sign, and hand over keys. Now, even if you would like to have a closing in-person, it is more than likely you will be put into separate rooms or offices and the closing agents will bring paperwork for you to sign. You can complete your home closing virtually from your current home and retrieve your new keys whatever way is more convenient and safe for you or your family. 

 

Considerations

Although it feels strange, unnatural, and sometimes sobering to hold a meeting virtually, it offers a lot of the same benefits and outcomes that come from meeting in person. If you are someone who is high-risk or you have grown a preference for meeting virtually, you should always feel comfortable and supported to meet virtually with your real estate agent. They should be able to bring you all of the information you will need and offer insight for you from the safety of your home. 

 

To learn more about how Novum Realty is operating virtually, visit our Facebook page and review our COVID-19 Response.

Sept. 24, 2020

What Low Inventory Means for Buyers and Sellers

If you keep tabs on your local real estate market, you may know that the current market is operating with low inventory. This means that there are not enough properties available to meet the current demand. In other words, there are more people looking for homes than there are homes available, making this market an aggressive seller’s market. It is important for real estate professionals to work diligently to ensure transactions are being done safely and correctly despite the fast-paced market conditions.

Low Inventory for Sellers

When sellers are listing their property during a time when the market is experiencing low inventory, they can expect to have multiple offers. This is, of course, assuming the property for sale is appropriately priced. Homes that are priced appropriately and competitively with comparable properties will follow the trend of other appropriately priced homes in their bracket. With high demand and low supply, sellers will generally have to choose a buyer among multiple offers. If you list your property and run into this situation, make sure you understand each offer and all additional information on the purchase agreement, such as contingencies, addendums, or amendments. 

When you have a situation where there are multiple offers, you can generally conclude that the property will sell at or above the listing price, which is great news for sellers. This stems from increased competition among buyers that are all interested in the same property. If one can offer more than another, there is a higher chance their offer will be chosen.

Low Inventory for Sellers’ Agents

Seller’s agents have to be organized, efficient, and practice excellent communication skills when they are representing a seller in a competitive market such as this one. Most importantly, the property should be listed at the appropriate price to make sure it gets in front of the right buyers. An overpriced home won’t show up on the home search of its perfect audience. These homes generally end up staying on the market too long and sell below asking price. Emotion can play a big role in the price of a home, as sellers can sometimes turn the sentimental value of a home into their perceived value of the property. Remember, a buyer is viewing your home objectively and will be comparing it against other homes within their price range. 

Low Inventory for Buyers

When you are buying in a market experiencing low supply, you will likely have to move fast when you find a home you love. Expect to pay at or above the asking price depending on how many offers yours is up against. When buying in a market with low inventory, the price of homes tends to increase as demand outweighs supply. Most people want to find a turn-key home, which means its almost the perfect home besides basic touch-ups like paint, window treatments, decor, etc. When we are in an aggressive sellers’ market like this one, many people who want to buy these kinds of homes get priced out, but that doesn’t mean they can’t move. Instead, try viewing homes in a lesser price range and consider the cost of home repairs/remodeling projects. You might be surprised by what your agent can find for you.

Since inventory is low, when new properties come available, they are often shown quickly and may receive offers shortly after listing. Be prepared to move quickly, but be conscious and firm in your boundaries. When you are competing with other buyers, you may feel pressure to offer more than you can afford. For example, Steve has been approved for a home loan of $300,000., but he knows that with his lifestyle and other responsibilities, he really can only pay the principal, interest, insurance, taxes, and utilities each month on a home that costs $275,000 or less. If Steve wants to put an offer on a home and there are multiple offers on the table and the seller submits a counteroffer for more money, he may feel inclined to offer more. Know and enforce your boundaries. 

Low Inventory for Buyers’ Agents

Buyers’ agents have to write offers quickly and correctly in a market with low inventory. Purchase agreements should be well written and submitted as soon as possible when a buyer wants to make an offer. A buyer’s agent will have to be reachable, efficient, and responsible. Make sure showings, inspections, repairs, meetings, contracts and all other paperwork are coordinated and documented. When sellers or their agents send communication, the agent should relay information as soon as possible to their buyers and continue to educate and inform them of their options all throughout the transaction. 

 

Buyers’ agents in competitive sellers’ markets must put effort into managing expectations. Many buyers may not understand that in a market like this, they will be needing to offer at or above asking price and that they have less negotiating power.

Posted in Market Updates