The Minneapolis Real Estate Blog: June 2007

...well, a near foreclosure. I have been thinking about when I would finally sit down and write about my experience on almost going into foreclosure. In a way, it is a very personal experience that I never want to live through again. But at the same time, it is an important lesson for all to understand.

See, foreclosure is often presented by the media and banks as a very bad thing. Only fools put themselves into a financial crisis where the only outcome is having the bank take back your home, right? Well, I am here to tell you that most people who face foreclosure are good people with good credit. They have families that they love, work full time jobs (sometimes with a two-income family), and want the American dream of home ownership. Most of the time they are financially sound and CAN afford the mortgage payments.

The media is only concentrating on the amount of foreclosures, and yes, there was alot of mortgage fraud. But what the media fails to spotlight is that in most cases, something unexpected happens to home owners that changes their entire lives.

Our unexpected something was a Category 4 Hurricane. In early 2004, after many successful rehab projects and flips in the Florida market, we decided to tackle another home. We started the project and had about half the work done as September 2004 came around. We were getting ready to finish the outside when Hurricane Ivan was twirling around in the Gulf of Mexico. We decided to wait and see what happened. Well, the worst that could have happened did. Pensacola was hit head on and our rehab project became a REHAB project. Many windows were busted out and most of the completed work on the inside was completely ruined. Add to that a roof half missing, with no help from FEMA on getting a tarp, and we had quite a problem. (FEMA will give roof tarps to only primary residences, not investment properties). Well, are contractor quit on us as he could make more money on smaller hurricane damaged houses, and then we couldnt' find a roofer to put a roof on. We didn't' get a roof on for 5 months after the Hurricane hit, and we proceeded to go through three more contractors in the spring of 2005 before we said enough was enough.  Our flip had turned into a nightmare, and our bank account was suffering.

So, we were left with a home that needed rehabbed and we needed to sell this monkey. Two mortgage payments were now killing us as the project was 8 months over due. Add to that a job transfer and it was like looking down  the barrel of a shotgun. Of course the Florida market decided to tank and home prices were dropping FAST. We started to get offers, but they were tens of thousands below what we needed to recoup our costs.

Fast forward another 6 months....we had now owned this home for three years!  It seemed everything we now touched turned black. We looked at our children and wondered how this would effect them. Foreclosure was a word uttered everyday, and for two people who both have credit scores in the 800's, it was looking to be a hard pill to swallow. So with only two months worth of money left to make payments, we took our last $3000 and turned to our last hope. AUCTION. We hired a local auctioneer, told her of our plight, then held our breath. Eight people bid the day of the auction and the final bid came in very low. So the only thing left to do was either take the bid, or go into foreclosure. We decided to take everything we had made in the sale of our primary residence, plus some savings, and pay back the bank the difference. So all in all we closed two months later, at a $100,000 loss.

I  know not everyone can benefit from an auction, nor has the funds to keep themselves out of foreclosure. But we were mentally drained and my husband was throwing in the towel. We had both been raised to pay off your debts, and going into foreclosure seemed the cheaters way out. He didnt' even want to put another dime into the house, let alone an auction. So I made the final decision...and thank God I did for it was our only saving grace.

Everything happens for a reason. It should go on my gravestone as it is the motto I live by. I learned alot from this experience, especially empathy for anyone else facing foreclosure, as well as the following:

• always have an exit plan for the unexpected
• don't get yourself in a position of being stretched to thin
• realize that you could fail
• don't hate yourself when you do fail
• look for the silver lining, even though that lining is REALLY thin
• make sure you have utilized every option before calling the bank
• try and work with every offer that comes in

We never expected to be so close to foreclosure. It almost ruined our lives because mentally we were letting it. If you know someone looking down the same shotgun, have empathy for them as they are not bad people.  Try to keep your chin up. Life isn't always fair, but life happens, and there is nothing you can do, but learn from it.

This week we put an offer in on a home in Minneapolis. We've been looking for 5 months, and this is the first home we could see ourselves living in for many years. The seller has had her home on the market for exactly a year, and reduced the price $40,000....but it still hasn't sold. She bought at the height of the market and in today's terms, paid too much. She moved out in February and the home sits vacant. The listing agent told me that the bank will not allow a short sale, so this tells me the owner is finding herself in a financial bind.

So I was surprised to hear today that the seller flat out rejects our offer. Apparently there has been some "interest" in her home so she is hoping that one of the other lookers will bring her a better offer. One of two things has happened:

• the seller is afraid of the amount of money she will lose and have to bring to the table, and is letting that fear get in the way of negotiating
• the listing agent is telling her to wait it out some more (the agent should be telling her to make a counteroffer)

 Either way, the seller needs to sell.

My question is, why not send back a counteroffer? Most likely she was offended by our lower offer and let ego and emotion get in the way of sound judgement. Holding out for another offer that doesn't exist is just plain dumb. What is good is to at least start the negotiating through a counteroffer because you never know, the buyer might just come up closer to your desired price.

In today's market, any offer is a good offer. You just have to change the way you look at it. It might not be the price you were hoping for, but at least you now have an offer to work with. So next time you find yourself staring at an offer that is more than disappointing, take a breath, calm down, and start a dialog on how to make it a win-win for both parties. It could be your last hope and keep you out of foreclosure.

...just what do you do? We rely so heavily on other service oreinted websites to help provide ways for us to promote ourselves, we can quickly forget that this could all go away overnight. I just lost what I consider an important way of displaying photos of the Twin Cities. I have been using FilmLoopto showcase photos of day trips I have taken, businesses I have visited, and more. They have been posted on Active Rain, my website, and my other two outside blogs.

Now none of them work and I must go through all my web media, delete them, and add another slideshow from some other avenue. Filmloop was miss managed from the best I can tell and tried selling their business before the bottom fell out. Unfortunately for me and many of their users, no one bought the company. As of this week, they pulled all feeds from their website, and we the consumers are left to suffer.

So the important thing to remember is that the internet can still claim victims, and not everything on the web will last. What would you do if Active Rain ceased to exist tomorrow?If you rely heavily on the Internet alone for your business, where would you be should it fail? I believe the saying "Don't Put Your Eggs in One Basket" fits this notion to a tee. Make sure you have a plan in place should an egg crack.

Oh, and in case any of you out there used FilmLoop, go check out your feeds as they no longer exist. Here are some other ideas for slide shows I found on the net.

• Slide
• SlideRoll

Also, if you use something else, please list it in comments and I will add it to the above list to benefit everyone looking to show off their photos this way.

Here are even more things to consider before you buy a Luxury Home in Minneapolis!

• Most Luxury Owners do not Absolutely have to Sell - some might just be "fishing" and seeing who bites. Remember this when you make an offer for lower than list price and the seller rejects it.
• No Emotions Allowed - at least during negotiations. They can break the sale.
• Don't discuss Your intended use of the Home - try not to inform the seller of potential renovations you might perform. Their beloved kitchen that you plan on tearing out might cause emotional turmoil and alienate the seller, making negotiations more difficult.
• Get a Survey done - Mortgage companies in some states do not require a survey to close, but some do. Is always wise to have a recent survey so you know your boundary lines and if any encroachments exist.
• Get separate inspections if needed - Many Home Inspections companies will inspect the entire property, but in some cases it is better to find an expert for certain areas, like a structural engineer for foundation questions, or pool expert for the pool motor/housing unit.
• Check Everything in an Inspection - ask for furniture to be moved if it is blocking outlets or doors, require appliances and circuit boxes located in garages or basements be accessible, request floors be rug and clutter free.
• Get all the Documentation you can - Make sure you receive copies of all disclosures required by law, homeowner association or condominium documents, and ask if any special assessments are due or pending.
• Buy Title Insurance - Some homes still work with an abstract of title, which in itself can have unseen problems written in decades ago. Have an attorney review the title and check for easements and encroachments. Buy title insurance to protect yourself, your property, and the mortgage company in case future problems arise.
• If in Doubt, get it in Writing - sometimes items are transferred in the sale of a property including appliances, memberships etc. Draw up a separate agreement from the main contract with the special terms and have both parties sign it.
• Sign a Buyers Representative Agreement - In Minnesota, you are required to sign a Buyer's Broker Agreement if you want an agent to represent you in a transaction. Otherwise, the agent has no fiduciary duties to you like confidentiality, loyalty, or obedience to your requests or instructions. If you are buying a luxury home, just make sure your agent has knowledge of the upper tier market...it will work to your advantage.

View the first two parts of the series at my outside blog, Minneapolis Luxury Real Estate:

Part 1

Part 2

Have you ever wanted to know what areas have appreciated the most in Minneapolis? Well, your dream has come true. One reason to love Realtors is that our organization is great at putting together market data for the public.

Below you will find the local real estate markets for Hennepin County that have appreciated more than 61% since the year 2000 up to 2006.

Minneapolis Area

• St Louis Park - 61%
• Hopkins - 69.2%
• Camden - 73.8%
• Longfellow - 67.5%
• North Mpls - 97.4%
• Northeast Mpls - 67.2%
• Philips Mpls - 141%
• University - 77.1%
• Lake Minnetonka - 79%

 Your solution for Outfitting your Minneapolis home with the Perfect Lighting Fixture

One of the most difficult tasks of home design comes with the finishing touches. Choosing lighting fixtures can quickly become a headache. Size, orientation, finish, and design are just a few details that must be considered. Your best bet is to visit a lighting show room. Not only will you have fixtures you can see on location, but you can also speak with one of the store's professionals and get some help and advice.

Today you are in luck because I have made the process one step easier. Below you will find four lightening show rooms in the Minneapolis area to consider visiting should you find yourself in the need of more light. They are open to the public and also sell directly to trade professionals. Have fun shopping and before you get aggravated by the choices, remember, they are only lights...

• Muska Lighting - Muska offers a good variety of lighting fixtures including high-end brands. If you are looking for vintage or antique pieces, they provide those too. Design consultations are available so if you have a large project, be sure to make an appointment. Open Monday - Saturday, their showroom is located at 700 Grand Avenue, St. Paul, 651-227-8881 or visit http://www.muskalighting.com/ .
• Citilights - Citilights is the exclusive dealer for Baccarat and Foscarini. Along with contemporary designs, they also carry ceiling fans and Tech Lighting. Open Monday through Friday, or by appointment, their showroom is located at 1619 Hennepin Avenue S, Minneapolis, 612-333-3168 or visit http://www.citilights.com/ .
• Cartier Lighting - Find it all here, including lights for residential and commercial use. Sit down for a consultation and work on a lighting layout and design, or ask for an after hours appointment. Open Monday - Saturday, visit them at 151 Cheshire Ln, Plymouth, 763-476-9555.
• Creative Lighting & Home Accents - This third generation family owned business is 80 years old so they know about lights. They offer solutions for the entire home and have products from about 500 vendors. Open Monday through Saturday, appointments are requested for large projects. Located at 1728 Concordia Avenue, St Paul, 651-647-0111 or visit them online at http://www.creativelights.com/ .

Effective 8/1/2006 a seller of real property in Minnesota, before signing an agreement to sell or transfer real property that is located in an airport safety zone A, B,or C, will be required to disclose in writing to the buyer the existence of airport zoning regulations that affect the property. However the disclosures do not apply to safety zones operated by the Metropolitan Airports Commission. The following airports are excluded:

• Anoka County Airport
• Crystal Airport
• Eden Prairie -Flying Cloud
• Lake Elmo
• Lakeville - Air Lake
• Minneapolis / St Paul International
• St Paul Downtown

The disclosure still applies to the remaining general airports in Minnesota, including the South St Paul Airport and Forest Lake Airport.

Sellers and buyers please note that the Minneapolis Area Association of Realtors has made it easy for you to comply with this new disclosure. The proper language has been added to the residential Seller's Property Disclosure Statement and the Vacant Land Disclosure Statement that you receive from your agent!

(I have recently heard there is a lobby to repeal the need to disclose about airport zoning. I will keep you updated should I hear anything more!)

If you are thinking about listing your home, know that Minnesota law has a couple requirements of the listing agreement. Here are a few things to look for:

• In Writing - all listing agreements must be in writing
• Legal Description - while in some cases the address might work, it is best to have the full legal description of the real estate you are selling to avoid any confusion. It has been know to happen, though it is rare, for the wrong lot to be sold.
• Price - make sure it clearly states the listing price and any additional terms. Don't forget to spell out in writing what personal property you are excluding from the sale.
• Negotiable Commission Clause - most listing agreements will have a paragraph that states what the agreed to commission will be, and that the commission is due when a ready,willing, and able buyer is brought to the table.
• Expiration Date - well, you have to know when the agreement ends, so this one is straight forward
• Dual Agency Disclosure - this provision will explain how dual agency will affect the representation of all parties. A seller can either choose to accept it or deny it.
• Closing Services - the listing agreement must have an area that states who will be taking care of the closing, the broker or the seller.

Of course, there are so many more things that happen during a real estate transaction other then just the listing agreement. Make sure to choose an agent that will keep you apprised of events and decide on an appropriate following up system that fits your schedule.

 More ideas on what to do before your next home purchase:

• Look beyond your Target Price - You might be looking for a home in the $5 million range, but if you are looking in an area other than where you currently live, you need to find an experienced luxury agent to help you understand market value. Find out what $1 Million, 3 Million, or even $10 million will get you.
• Don't Get Sticker Shock - Prime locations command prime dollars. Expect to pay higher than normal prices for waterfront properties, mountain views, and prestigious areas.
• Communication is Key - real estate agents cannot read your mind, no matter how good they are. It is extremely important to be honest about your goals and your finances in order to have a great experience. Most luxury agents understand the need for confidentiality and will be more than happy to work with you.
• Put Trust in Your Agent - Realtors are professionals, so trust that your agent understands what you want (again, communicate) and you'll be viewing homes that meet your needs. If at anytime you feel uncomfortable, do not feel guilty for seeking out a new agent.
• Don't be Confidential about your Assets - Be prepared to show your ability to purchase, no matter who you are. You might be well known where you live, but your new city banker won't. Have your bankers talk to each other to verify there are funds available to close and to also source the origination of those funds. The seller might also ask for a letter of verification from your lender for their peace of mind.
• Don't forget Future Resale Value - It might not be your top priority, but someday you will probably want to sell the home you are purchasing. Check the appreciation rate for the neighborhood and take it into consideration when buying.
• Think about your Offer - Price is usually the first item a seller looks at when an offer is written on their home, but an offer can also consist of contingencies about inspections, finances, closing dates etc. Remember to make your offer based on of all terms and the condition of the home. If need be, have your Realtor write up an explanation of your offer terms to include with the contract. Sometimes explaining your situation or reason to the seller will give you a "human factor" and most times get your offer accepted.
• Don't get Emotional about the Seller's Personal Property - if there is something you like in their home and would like to ask for it, do not write it in the contract. Instead, draw up a separate agreement and ask nicely for the item(s). If they say no, let it go. Too many deals fall through because of household appliances or a chandelier. If they promise something is in included, get it in writing!
• Get to know the Paper Work - Ask your agent for copies of all documents and disclosures and review them before you make an offer. Mark any areas where you have questions. Every state is different regarding the types of disclosures you need, and what you are use to in one state, most likely will differ in another. For example, in Florida, there is a "Termite" Disclosure which also covers mold, wood rot, and powder post beetles, but if you want to buy in Minnesota, they have no such disclosure.

What to do Before You Buy a Luxury Home, Part 1 

Minneapolis Luxury Real Estate

This weeks Historic Home is 465 Summit Avenue in Saint Paul, MN

Built in 1886 and for a cost of $18,400, this home was designed for William Constans, a French-born grocer. From one book I read, he ran the largest wholesale firm for hops, malts, and brewer's supplies in the Northwest and the only one in St Paul. The business later evolved into the Schmidt Brewing Company.

You might be looking at the home and wondering "What style is this?". Well it was originally designed by A.F. Gauger as a Queen Anne Victorian mansion. Take a look at this photo taken in 1890. You can just see a five-story tower on the southeast corner of the home and a spindle trimmed porch, classic designs of a Queen Anne. Sometime later, the porch and tower were removed and replaced by Colonial style moldings and decoration. For some reason, people liked to change the facade of the Victorian homes, most likely to give the home some extra character to set it apart from other Queen Annes on the Avenue. A carriage house was also constructed directly behind the house.

The home has approximately 7300 square feet and 9 -10 bedrooms and currently single family residential. I came across a rumor that one owner of the home ran a funeral business in which his wife refused to let him advertise. His solution was to add a casket looking decoration to the top of the home. Take a look and see what you think....kinda looks like a casket to me!