Before you start reading…please note that I am not a lender, an appraiser or an inspector.
So, today I ran into a client who was hoping to purchase a bank owned property that needs quite a bit of work done to it. This home north of the Twin Cities needs a new furnace, the gas line is not hooked up to the house, it is missing smoke detectors and it is missing quite a bit of copper. So, you ask, where does the problem come in? The problem is this…
1. With FHA financing the lender will not lend or insure a property that has issues like what I have listed above. They would require some of these things (and each house is it’s own case by case situation….) to be repaired PRIOR to closing.
2. When a property is bank owned it is typically sold “as is” which means the bank will not make any of these repairs for you in advance of the closing. If the property was still owned by a private citizen, you could ask them to make the repairs first.
3. Also, the bank will not let you, as a potential buyer, come in and do any repairs on your own. They do not want the insurance risk and ultimately, are not “general contractors” to oversee your handy work. Also, it would not make sense for you to spend the time and money doing any repairs on your own either because the bank could change their mind and end up NOT letting you purchase the property and of course, the bank will not pay you back but they will gladly take advantage of the work you have done.

This is not to say that you can’t buy a bank owned property with FHA financing, you certainly can, but you will probably want to look at something that does not need alot of major fixes like furnace, plumbing or gas.
Again, each property will be assessed individually by an FHA inspector but my advice would be to stick to buying something that only needs some cosmetic updates unless you are buying with a conventional loan, cash or a rehab program like 203K.
For more information about 203K take a look at HUD’s website. As always, for lending information you should contact a reputable lender in your area. I recommend Cornerstone Mortgage located in Burnsville MN.

Jen McKinnon
Realtor/Investor
612.384.1073
jen[at]mnrealestateteam[dot]com

So, I was reading an article the other day that talked about the possibility of home owners becoming renters in lieu of getting kicked out of their homes when foreclosure happens.

It was an interesting concept to me and I thought I’d write about it.

So, right now, we all know there are too many foreclosed houses on the market and the Twin Cities market is no different. Even the best neighborhoods like Crocus Hill, Highland Park, Macalester Groveland, Lake Calhoun and Lake Harriet are not immune to it.

If you have a foreclosed home in your neighborhood, you know it is not usually a pretty picture. Typically, a homeowner who gets foreclosed on is not a happy camper and in their mind, why take care of a house that is only going to be taken away from them? So, what happens is that the house becomes run down, the yard turns into a weed bed and in general it becomes an eye sore to the entire neighborhood. Once the owners move out, it gets even worse because signs get posted about vacancy and water shut off, etc…
Bottom line, NO ONE wants their home to be foreclosed on and neither do any of the neighbors.

SO…..what would happen if the bank gave up on the entire LONG process of foreclosure and simply made an agreement with the current owners that they could stay living in the house as tenants paying rent?
Maybe the bank would negotiate with the owners to come up with a “rent” amount that would be affordable for them and still work out for the bank as well. Then, hopefully, the “owners” turned tenants would stay in the home, continue to care for the home as though they owned it and we’d end up with less vacant, run down homes.

Of course, that is the ideal scenario.

The issues that could arise are many:
- The bank is not in the business of being a landlord so who will take over these duties that go along with owning rental properties? Would a new bank owned property management department get set up?
- Who will pay the utility bills and what happens if any of these go unpaid?
- What happens if the rent does not get paid?
- Could the bank set up a sort of Contract For Deed or Rent To Own situation?
- What happens if repairs need to be made – new roof, furnace, broken window, light bulb, etc.?
-
These are just a few questions and I am sure there are many more. I don’t have all the answers but I’m sure this topic could spur some interesting conversation.

Need a Realtor or have real estate questions?
Give me a call!

Jen McKinnon
Realtor/Investor
MN Real Estate Team

612.384.1073
jen[at]mnrealestateteam[dot]com

Not all Title and Closing companies are created equal. I have dealt with many and by far, my favorite is Trademark Title Company.

Here are a few things to keep in mind:

1. In the state of Minnesota the BUYER has the right to chose the title and closing company for a residential real estate transaction. The MN statute states the following:
7.45 RESIDENTIAL REAL ESTATE CLOSINGS
Subd 4. Choice of Closer; notice
(a) No real estate salesperson, broker, attorney, auctioneer, builder, title company, financial institution, or other person making a mortgage loan may require a person to use any particular licensed attorney, real estate broker, real estate salesperson, or real estate closing agent in connection with a residential real estate closing.

2. Sometimes, especially with foreclosure or REO properties, the selling bank will tell you that they will only accept your offer if you use their title and closing company or to further entice you, they say they will pay for your title insurance if you use their title and closer of choice. As you can clearly see from the MN statute, this is not allowed. True, they may not pay for the title insurance or any of your closing costs if you don’t use their title / closing company but you, the buyer, has the right to chose whatever title / closing company you want to use.
Typically, when the seller is a bank and they offer to pay your title insurance if you use a company of their choice, the insurance that they provide is not as comprehensive of a policy as what you would get on your own.
Title insurance is very important since what you are actually buying is title to a property – the right to occupy and use the land. So, you want to make sure this right is protected, correct? Even with the most careful title review conducted something could get missed and the last thing you want is someone coming back to you with a “right” to your property. Also, many of the policies that the seller or bank say they will provide to you if you use their title / closing company do not include coverage of the time between closing and when the paperwork is actually filed. Yet another reason to get your own title insurance policy.

3. In my opinion, one of the BEST reasons to chose your own title / closing company is that it gives you your own representation at the closing table and someone who has your best interest in mind and isn’t just trying to get the transaction pushed through. This is a good thing for a major purchase like a house! You have your own Realtor – you should have your own title / closing company.

Like I mentioned above, I really enjoy working with Trademark Title Company for a few reasons:
1. They are very professional and great communicators.
2. Their prices are competitive and they will usually beat any prices if you give them the chance.
3. They get the closing done on time and done correctly.
4. They have multiple closing locations around the Twin Cities and work with you, the buyer on what location is convenient for you. Many other companies will not do this.
5. They get all paperwork recorded in a timely manner. Again, many other companies are not concientious about this.

Feel free to contact me for more information!

Jen McKinnon
Realtor / Investor
MN Real Estate Team

612.384.1073
jen[at]mnrealestateteam[dot]com

So, I was just out this past weekend with clients looking at condos in downtown Minneapolis in areas like the North Loop and along Washington Avenue near the Guthrie Theater.

I have to tell you….now is the time to buy a condo if that’s what you are looking for. There is alot of inventory and for the most part, they are in pretty good condition, selling at great prices and they are desperate to sell which means there is some room to negotiate.

Because there was a building boom over the last few years in Downtown Minneapolis, there are a large number of condos available at reasonable prices.
You will see alot of foreclosures or short sales or REO’s (Real Estate Owned) because, back when the building boom was going on and real estate prices in the Twin Cities were growing like crazy, you had people who at the time were very smart and bought these condos at market rate even before the building was finished. Their plan at the time was to buy the condo in Downtown Minneapolis and as soon as it was finished, they would sell it at an amazing profit because the market was growing so rapidly. Unfortunately, for many who invested in condos in Downtown Minneapolis, the market stopped growing and there was such large inventory of condos that the market values started to decline and those who bought were stuck. Some people moved into the units and some decided to sell are still being sold on the open market – AT BIG DISCOUNTS!

All of the units that I saw this past weekend ranged in price from low $200,000’s – $350,000 and when I looked at the taxable market values on these for 2009 – ALL of them had dropped substantially from 2008 – some close to 40%. What does this mean? It means that you get to buy a condo in Downtown Minneapolis at a great price, pay lower taxes and if you plan to stay in the property for a couple of years you will most likely see it rise back to the levels we saw a few years ago. The market is cyclical and the Twin Cities Real Estate Market is no different.

IT WILL COME BACK. NOW IS THE TIME TO BUY.

Take advantage of low interest rates, first time buyer tax credits and buying at / near the bottom Another benefit to living Downtown Minneapolis is proximity to shopping, nightlife and sporting events (think about that new Minnesota Twins Stadium being built…..)

One thing to watch out for when buying a condo is the health of the condo association. I recently showed a condo near the U of MN and my buyers decided against it only because the association was in such bad shape. The builder had gone into foreclosure and now because all of the units have not sold (which means very few people paying association dues….) the bank has had to pick up the tab on running the building. So, anyone who now purchases one of these Minneapolis condos will have to pay association dues that go directly to pay off the bank.
What this means is that this particular association does not have any money in reserves to pay for anything that may go wrong with the building. So, if your window breaks or washing machine dies or anything else….tough luck….you will have to pay out of pocket. Although this building had great units, you do not want to get into a bad situation like this because your association dues will be going to pay for others bad mistakes instead of maintaining your property. Just something to think about when buying ANY property that is part of an association but especially now with all of the foreclosures.

If you do make an offer on a condo, you will get to review the condo associations documents and have 10 days to read them (have an attorney look at them…..) and still have the chance to back out and retain your earnest money if you choose. Now, I don’t recommend making a bunch of offers unless you really like a property but it is nice to know that you have an out if you don’t like what you read in that particular condo’s association paperwork.

Anyway….there are great deals to be had so weather you want to buy your first home in Downtown Minneapolis or a Second Home in the City, now is a great time to look.

Please contact me to start your search!

Jen McKinnon
Realtor / Investor
MN Real Estate Team

612.384.1073
jen[at]mnrealestateteam[dot]com