Real Estate Snippets

Gas Hog

The Loving Husband, ever the prepared man, made our reservations long before the gas prices skyrocketed, so we've got to go.  Besides, it's Minnesota tradition to camp in the summer!

It will be my first experience seeing Minnesota's Itasca State Park where the great Mississippi originates.  They tell me I'll be disappointed.  I disagree!  Having been to New Orleans to see the end of the great river will make the trip all the more impressive for me as I compare the beginnings to the massive end. 

However, I'm trying to tell myself I'll enjoy the trip enough to compensate for the pain of feeding the gas hog that's hauling our camping trailer to the nether reaches of the state!  Maybe, just maybe, we'll get by with less than a commission?

Pictures are promised when we return!

The Mortgage Fiasco

Have you ever noticed how the pendulum swings back and forth but never goes from the extremes to the center without lots of repetition?  So much of life is like a pendulum including real estate and the mortgage market.  For every action on one side of the cycle there is a reaction to the other extreme.

Today the mortgage market has swung toward conservative.  In fact, lending practices have become so stringent that acquiring a mortgage has become very difficult.  Just a few short years ago lenders were so liberal in their application approvals that one only had to be alive (although there's rumor that some deceased borrowers were even approved for a loan!) to get a mortgage.

The irony about the swing from easy lending to difficult lending is that neither is good for the market.  The easy lending practices allowed buyers who really couldn't afford a home to get a mortgage.  (A true breeding ground for default.)  The lenders who cast a closed eye at applications that were obviously not realistic, or who encouraged borrowers to get a mortgage with teaser rates that would inflate more quickly than the buyer's income seemed as surprised by the turn in the market as others were.  Big companies were caught with their hands in the cookie jar, ever reaching for bigger profits.  The fall of Bear Stearns, the demise of Indy Mac (a notorious subprime lender), tightening of home equity lines of credit, and the rise in foreclosures took the lenders all by surprise?  I think not.

Even I had wondered when it would end and I'm not an economist.  Surely the people in the know knew that easy money with no downpayment gives little incentive to stay the course when times get tough.  Why would an upside down borrower remain faithful to his lender when so many don't remain faithful to even their spouses whom they know and care about?  The money was too easy to get.  The consequences of defaulting were too easy to bear.

So now the pendulum has swung from almost everyone getting a loan to the other extreme.  The real estate pendulum has begun to center itself and balance will eventually return . . . if we live long enough!  ☺

One Fate of Registered Vacant Buildings in St. Paul

It looked like this in 2003.  In 2004 the new owners had installed new siding and greatly improved the exterior look.  It was light gray siding with new windows and doors and white trim.  It was the nicest looking house on the block.  On December 5, 2007, it was blue tagged.  It joined the ranks of many others labeled as "registered vacant" in St. Paul. 

The full story is unknown to me.  Maybe the city was unable to get a response from the owner whose tax records show a California address.  Maybe the owner paid to have the building removed.  Maybe (I hope) the business to the west of the house bought the property to be used as a parking lot.  Maybe . . .

At one point the windows were boarded because former tenants were found illegally entering the building to salvage their belongings.  Two week ago the front yard was dug up and the steps and cement disrupted.  No attempt was made to salvage the detailed dental molding of the fascia.  It was the original from 1890.  Even the siding, windows and doors could have been reclaimed by a "deconstruction" company.  It didn't happen. The disturbed front yard was the sign that this building was going the way of so many registered vacant buildings.  It's fate was sealed.  The coffin only needed to be nailed.

Wednesday the registered vacant building above looked like this.  Just 6 months and 12 days after it was condemned.  I guess they gave credit for holidays to get to the extra 12 days.

To my dismay the house next door is now sporting a blue sign as well.  St. Paul is becoming a veritable wasteland of registered vacant buildings!  As of Monday, the 14th, there were 1993 buildings on the "hit" list.  Some with history that will never be restored.

Landlord Woes

It's my mantra:  property management is really tenant management.  Given my mantra, it's totally annoying when I've been had.  Yes, I've been had by a tenant and it was all my fault.  TLH (The loving husband) liked the way she looked.  She was a classy lady.  Very refined and articulate.  Her hair was in place, her clothes were nice, she wrote legibly, etc., but I should have known better.  The application checked out except for one small flaw.  The rental reference company showed changes of address about every two months.  Yep, I shoulda known better.

TLH said go for it, so knowing I could cast the blame on him, I signed the lease.  Thankfully, we chose a month to month "trial" period before executing a longer term lease.   The neighbor complaints began immediately, on day one of occupancy!  The police called.  They didn't pay the balance of the rent.  Calls made from my known number were not answered by the tenant but from my office they were.  The lower unit was flooded by an overflowed toilet. We got visits with complaints at 2:00 AM and calls regarding heavy bass at 4:30 AM! It ended with a 45 minute shouting match in which the neighborhood and I were called many unsavory names! 

By day 21, we were done, but I kept hoping.  My hopes fell flat.  Thirty days after the lease was signed, we gave notice that we were terminating the lease effective the end of the next month.  Of course, the rent didn't get paid for that month, but empty promises kept floating my way.  My assumption was they'd remain past the move out date which they did.  Only with a stern threat of filing an unlawful detainer did they move  leaving an apartment full of "stuff" for us to deal with.

Some landlords have creative ways of dealing with these problems.  A client said he "repairs" the entry door by removing it until they leave!  Steve Glover shares in his blog about a nightmare owner in California.  My husband's first experience with removing tenants had him issuing fantasy threats of changing locks at midnight and proclaiming, "This is MY building!" 

Regrettably, one has to follow the rules.  Using the month to month lease as we did, allowed us to terminate the lease by giving written notice no later than the last day of the month stating that the end of the next month is the end of the lease. This allowed us to avoid a court action.  The thirty day notice cannot be given at mid-month for vacating at the following mid-month if the lease period goes from the first to the last day of the month. 

Had the tenant not left, filing for an unlawful detainer at the courthouse would have been the next step.  The $250 filing fee is a bit tough to bear, but well worth getting rid of a troublesome tenant.  The papers have to be properly served and every "t" crossed and "i" dotted in order to successfully follow through with an eviction (unlawful detainer action).  If the owner doesn't follow the law and the correct procedure, the tenant has every right to stay in the property regardless of what the owner desires!

St. Paul Real Estate Sales June 2008

This chart is based on information from the REGIONAL MULTIPLE LISTING SERVICE OF MINNESOTA, INC for the period June 1, 2008,  through June 30, 2008.  Clicking on the chart will enlarge the image so that it is readable.

Pending sales have increased significantly in June compared to last month which is normal for our area.  Expired listings have decreased somewhat but not significantly, and closed sales have also increased.  The number of active listings on the market has remained pretty constant compared to last month.  The average sale price has decreased from $194,808 in May to $160,000 for the month of June.  The short sale and foreclosure inventory has a direct impact on the decrease in the average sales price for this month.

No More Pushy Marketing

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It's Not Safe to Be a Real Estate Agent

It seems no profession is free of danger in today's society.  We've heard of real estate agents being assaulted in vacant homes, kidnapped for the use of their electronic key, and now murdered because the client lost value on their home purchase in 2005.

Troy VanderStelt, a REALTOR® with Nexes Realty in Muskegon, Michigan, was shot and killed in his office July 1 by a client who purchased his home in 2005 and could not sell his home for the same price today.  The 73 year old client blamed his agent Troy for the market's turn.  What a sad, sad loss for a wife and 4 children.  What misdirected blame.

The irony behind this story is that the client would probably have been very angry if his agent had advised him to offer significantly less (matching today's market value) than the list price for the purchase of his home. If the offers were continually rejected because of a low-ball price that, too, would have been the agent's fault. 

Further information can be found at these sites:

• An education fund for the children has been set up here. 
• The local news story can be found here.
• A collections of blogs and other stories are here.

Drill Team Practice in St. Paul

Just follow the drums . . . Drumbeats have been echoing through my St. Paul neighborhood as I've spent time weeding my garden. Being a suburbanite for most of my life led me to think the drum beats were a marching band. They echoed night after night and weekends as well, even on the hot, muggy 90 degree days. "Wow!", I said to myself, "Whoever is doing all that marching must really be committed."

An appointment took me northwest on Como past Marion St. one afternoon. The drumbeats grew louder. Maybe I was going to find the source? Indeed a group was practicing in the ball park. I hoped they would be there at my appointment's end so I could get a closer look, but such was not the case.

Tonight, however, the drums beckoned again, calling with their persistent beat. We made the trek and were rewarded to find the rehearsal spot of the Half Pintz Drill Team. The Half Pintz were practicing for the Ronda Days Drill Team competition to be held at the St. Paul Central High School Griffin Field on Saturday, July 19, as part of the Rondo Days Festival. The watching parents of team members informed me that drill teams come from all over the nation to compete in the festival.

It impressed me to watch these young people as they practiced. Their coach accused them of being lazy after one run through!  My opinion differed, but what do I know? The group had been practicing since 5:00 this evening and finally wrapped it up at 8:30! The youngest member is five years old and kept up with the teens remarkably well. My old creaky joints started to ache with sympathy pains as we watched deep knee bends with instantaneous rebounds, jumps and somersaults, bumps and grinds.  There is no way my body could do those moves and live to tell about it the next day!  

HUD Houses

At one time the term HUD houses was synonymous for foreclosed properties.  In today's real estate market, HUD houses are a subset of the foreclosure market. When an FHA mortgage is foreclosed, the house securing the mortgage becomes the property of the Housing and Urban Development (HUD). It becomes a HUD house. Years ago these houses comprised the majority of lender owned properties, but in today's market they are in the minority.

Many real estate agents dislike HUD houses.  It's not just because many of them stink!  It's because of the many hoops required to present an offer for a HUD home.  Here are just a few of those hoops:

• In order to present a HUD offer, the broker must be registered with HUD and given an ID number. 
• Even though HUD houses are listed on the MLS, they cannot be entered with the traditional lock box system used in St. Paul.  Each registered broker is given a master key that permits access to the home.  If the broker is not registered, they cannot show the house. 
• Registration has to be done in advance and renewed on a regular basis.  Registration takes several weeks so one cannot choose a HUD home and then register.
• All HUD offers are presented on the web.  The broker's registration ID number permits access to the site.  Many agents are uncomfortable with the online bidding process.
• The purchase agreement is different and has a booklet of instructions as its accompaniment.  Many agents hate having to learn another system to present an offer.
• Whereas HUD houses are listed on the MLS, they are listed for a limited time period.  All offers are submitted within the same 4 days in a silent auction format.  The winner from the simultaneous bid period is the buyer with the highest "net to HUD".  There is no chance to counter offer or outbid another.
• If the agent's buyer wins the simultaneous bids, the original of the purchase agreement and the earnest money check must be overnighted to the proper HUD office. 
• It's dealing with the government and there are NO opportunities for mistakes to be corrected or changes made.  When it's done, it's done!

To Buy or Not to Buy

The latest cattle call from the media about the St. Paul real estate market is that buyers are waiting for the bottom before they decide to buy.  That magic day when the true "bottom" is reached can't be predicted (by me, at least), but PMI Mortgage Insurance Co. released its Summer 2008 U.S. Market Risk Index on July 1.  This market risk study ranks the 50 largest metropolitan statistical areas (MSAs) by the probability that the home prices will be lower in two years. 

The Minneapolis, St. Paul, Bloomington MSA is ranked in the bottom segment with a probability of only 8.2% that houses will be lower in 2 years.  These risk factor figures were based on first quarter Office of Federal Housing Enterprise Oversight (OFHEO) data.  The Affordability Index score improved in 69.3 percent of the nation's 381 MSAs as well.  Because Minneapolis and St. Paul are in the lower rank in risk, the affordability index has improved in our area as well.  Both of these factors are good news for the Minneapolis and St. Paul real estate market.