Single Women: Top 5 Reasons to Buy a Home

Single women, the second largest group of home buyers behind married couples, account for nearly 18% of all buyers. Last year they far outnumbered single men who made up just 7%, according to the most recent NAR Profile of Home Buyers and Sellers. 

I've helped several single women purchase homes and have been there myself — I bought my first condo alone nearly 15 years ago. I wanted to know what motivated other women so reached out to friends, family and former clients to find out why they decided to buy solo and what advice they would give others. Read the complete Q&A blog post here. Read their top 5 motivations for buying here:

Top 5 Reasons Women Choose to Buy

1. Make a Smart Financial Move

A top reason cited by women looking to buy is financial. Specifically, they state a desire to "stop throwing away money on rent" and to build equity in asset ownership. Tax breaks benefiting home owners are also motivating. 

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2. Get Away from Apartment Life

The constraints and inconveniences of renting in a shared space can be trying. Complaints of apartment life include concerns over noisy neighbors, shared walls, lack of privacy and limited parking. Owning a home, especially a single-family house, affords more control over noise and privacy with less worry over bothering the neighbors (or them bothering you). It can also mean having predictable and secure parking options — convenient for having guests, navigating snow emergencies and safer when parking alone at night. 

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3. Enjoy Personal Outdoor Space

Many women desire outdoor space — a private yard, a place to garden, or enough room for a  dog. Though the city parks and paths provide plenty of options, they're never quite the same as having an outdoor sanctuary all your own. 

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4. Make Your Own Design Decisions

Wanting the freedom to paint, decorate and make changes without having to ask permission is a common theme for home buyers. It can be frustrating to live within the confines of a rented space for this reason and others. Owning allows you to paint, replace, knock down and build out as you wish which can be quite satisfying. And, the money and time spent improving your space is usually not wasted — smart improvements add value to recoup when it's time to sell.

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5. Have Something to Call Your Own

Cultivating the feeling of ownership and accomplishment brings pride, confidence and joy. It just feels good to have a place of your own. Whether it comes from reaching your goal or creating a space that's uniquely yours, the positive sentiment can often be reason enough for wanting to buy a home.

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on a variety of real estate related topics including buying and selling, market conditions, homeownership trends and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

Spring 2018 Housing Market Update | Twin Cities

Slow & Steady

As we move into spring, trends in the Twin Cities housing market consistently follow the same trajectories as reported last fall. Inventory continues to drop as prices steadily rise. The median home price in the Twin Cities region rose 5% in the last 12 months, from $238,000 to $250,000 and inventory continued its drop to a 2.2 months supply, from 2.7 one year ago.

Twin Cities Median Home Sale Prices

MLS-derived data reflects Twin Cities region, single-family, all sizes, new and existing homes, traditional sales only (not foreclosed or lender mediated).

One difference between the major metros remains — St. Paul is more affordable than Minneapolis. Since last fall, however, Minneapolis has experienced a drop in median sales prices while St. Paul has seen a continued rise. Data from last October showed Minneapolis median prices increasing by 5.4% and St. Paul by 2.6%. This spring the numbers have reversed — St. Paul now shows a 6.9% increase while Minneapolis is now at 3.4%. Are buyers being priced out of Minneapolis and setting their sights on more affordable urban neighborhoods? Could be. I've met many home shoppers who've made this claim.

Who's Buying?

Several new homes hitting the market this spring have sold with multiple offers, within days. Some are even selling before print. The demand for move-in ready homes in lower price ranges appears to be even greater than it was last fall as buyers gear up for warm-weather transitions. Who's competing for these homes? There seems to a mix of buyers going after similar single-family homes in urban neighborhoods.

Empty nesters moving from the suburbs to the city are seeking walkable neighborhoods with amenities, mass transit options and smaller spaces to furnish and maintain. At the same time, a growing number of millennials looking to buy their first home, noting similar preferences and a desire to buy below their means, are going after the same. Add investors to the mix. Empty nesters and millennial may find themselves competing with cash-buying investors looking for single-family rentals or small homes to flip. Occasionally these include parents of college students looking to allay the rising costs of rent.

Get Prepared!

If you are searching for homes this spring it's best to be financially prepared and ready to act quickly. Get pre-approved with a good lender and be as flexible as possible with your schedule. You'll want to tour new listings as soon as possible (a day's delay can often be too late.) I also advise seeing multiple homes and researching neighborhoods well before making an offer. You don't want to make an emotional decision under pressure that you may later regret. Having house-hunting experience, a financial plan and a clear, realistic vision will help ease your stress in this seller's market. 

New spring listing in St. Paul's Hamline-Midway neighborhood: 4 Bedroom/3 bath | 1534 TSF | $315,000

Up-and-Coming

The recent data also show more drastic increases in median sales prices in traditionally lower-priced neighborhoods throughout the Twin Cities. For example, St. Paul's Hamline-Midway neighborhood has experienced a 13.5% increase in the past 12 months while Highland Park has experienced only 2.1%. Similarly, neighborhoods in north Minneapolis show double-digit increases while those in higher-priced areas like Linden Hills hover in the single digits. This pricing phenomenon raises the issue of gentrification and affordable housing, a very real concern that extends beyond the scope of this post. To further explore local effects, check additional resources here and here.

If you're searching in an up-and-coming neighborhood be sure to work with a professional who's aware of local trends. What may appear overpriced at first glance may end up selling for well over asking with multiple bids. It helps to have an agent who knows the area and stays up-to-date.

Price & Inventory Changes by Neighborhood

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MLS-derived data based on Minneapolis single-family homes, all sizes, previously owned, traditional sales. Chart includes a selection of neighborhoods, not all. Check out St. Paul neighborhood chart here.

A balanced market has a 5-6 months supply of homes for sale. Fewer favors sellers.

Has Spring Sprung? 

Though early spring inventory remains low, many buyers are holding out hope for more to come. Some suspect the drawn-out winter weather is causing future sellers to delay preparing their homes for the market, which may be true. I've spoken to several homeowners who are still gearing up for a spring (or summer) listing. Sellers may also be lacking any sense of urgency, knowing they too may soon be struggling to find the next place to live.

As home sellers delay, some buyers are doing the same. I've heard several shoppers express their resolve to hold out for the perfect home — a smart tactic if time allows. For others with more urgent needs, this low-inventory market is proving to be quite stressful. Let's hope more homes become available as the days continue to warm. The spring market activity which typically kicks in post-Super Bowl may be off to a slow, weather-permitting start. 

If you would like to learn about value increases in your neighborhood or city, please give me a call. If you haven't been following trends in your market, you may be surprised.

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on a variety of real estate related topics including buying and selling, market conditions, homeownership trends and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

7 Strategies for Competing with Multiple Offers

Competing with multiple offers? Price matters, but so do terms

Low inventory of homes for sale can cause major frustration for home shoppers facing fierce competition in a seller’s market. Winning among multiple bidders may be challenging these days but not impossible. In a multiple-offer situation there are several moves buyers can make to come out on top. Money matters, but favorable terms do to. Consider the following when preparing your offer:

1. Price

The first and most obvious move for most people is increasing their offer price. The highest priced offer will definitely catch a home seller's attention.

If you're financing however, be aware of how much might be too much. Your bank will later appraise the property to determine its value before agreeing to make the loan. If their appraisal is lower than what you've offered to pay it could become a problem. Keep in mind what you're both willing and able to pay.

2. Financing Terms

Paying with all cash will most likely put you ahead of other comparable offers. It eliminates the loan process, including the bank appraisal.

However, if you need to finance (most people do), putting more down on the loan can also put you ahead of others. And, a conventional loan can be more favorable than an FHA loan. (FHA appraisers may come back with a list of repairs needed prior to closing.)

Another way to strengthen your offer is to promise written documentation of your secured financing a week or two (or more) in advance of the closing date. Ask your agent and lender about this option.

3. Seller-paid Closing Costs

Closing costs are various fees paid by both buyers and sellers on the day of closing. Each side has a separate set of obligations requiring cash for title, bank and broker services performed throughout the transaction. For buyers, costs are typically around 3% of the sale price. For sellers it can be a bit more depending on the broker commission.

Often home buyers use the bulk of their cash reserves on the downpayment, leaving little to cover costs to close. One option for buyers in this position is to ask the seller to pay the their closing fees. But if you’re a buyer facing multiple offers and have access to cash, don’t ask the seller to pay your closing costs. Paying your own way could give you an advantage over other buyers who may be asking sellers to help out.

4. Inspection Contingency

Making an offer contingent on the results of a buyer’s inspection is typical and advised. I always recommend it and sellers will expect it. It is, however, optional. A seller will favor an offer without the inspection contingency. Omitting this contingency is not a common practice however — it puts you at risk for buying the unknown. Think carefully before making this move!

If you do ask for an inspection contingency, shortening the time in which you complete it is favorable to sellers. For example, asking for 7 days to complete inspections is better than asking for 10. The sooner this contingency is lifted the better (for the seller) — another way to sweeten your offer.

5. Closing Date 

If you can be flexible with moving and closing dates make it known when submitting your offer. When your agent fills in the purchase agreement she or he will need to enter a specific closing date but can add wiggle room with words like "on or before". Having a flexible date may give you an advantage, especially if the sellers are also buying and trying to coordinate their own move with another set of sellers and buyers.

6. Letter to the Seller

Sometimes it's personal. Writing a heartfelt letter to the sellers and sharing a bit about yourself and all the reasons you love their home might work to your advantage. It can be especially powerful if the sellers share a similar sentiment and care about future ownership. Keep it short and sweet, a paragraph or two is fine.

7. Earnest Money

Earnest money is "good faith" money. It's cash you put down when you making an offer to show you’re serious and willing to take a risk. It's typically 1-2% of the offer price but can be any amount you choose, or none. If all goes well it will go toward the downpayment. If you cancel for reasons not outlined in your offer you could lose it altogether. Putting down more, if you have it, demonstrates your serious intent and financial capability.

When the offer is accepted, your earnest money will be put into a trust account within a few days, so make sure you’re prepared before committing.

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on a variety of real estate related topics including buying and selling, market conditions, homeownership trends and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

Buying your first home? Advice from a local mortgage advisor

It's easy to get overwhelmed when planning to buy your first home. Searching for the right house, in the right neighborhood with needed amenities at a price you can afford is often just half of it. Unless you're paying cash, the other major part involves navigating the process for financing it. Knowing what you should do ahead of time and shopping for the best loan can be confusing for anyone new to the world of home loans.

I recently sat down with a trusted mortgage professional to get answers to a few of the most common questions asked by those shopping for their first home. Chris Kvikstad, president of Kvikstad Mortgage Solutions, works often with first-time buyers. In this Q&A he offers practical advice for anyone curious about the first steps of home financing. 

Q: What should I do in advance?

A: The first thing is to look inward and think about why you want to purchase a home.  How long do you think you will be there, how stable is your income situation, and are you comfortable with taking on the responsibility of any repairs should they be required? 

Once you have determined that you are indeed ready to purchase, then think about your lifestyle and whether a condo, single family home, or townhome would be ideal.  Think about how much you could comfortably spend each month on the combined housing payment, and then we can proceed together from there, using the steps above, and begin working out the numbers to see what a comfortable price range might look like. 

If you have any bills that are past due, bring those current before we start the process, otherwise, that might delay the process as we work together to resolve those types of issues if they occur.

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Q: How do I know how much I can afford?

A: This is a good question and the one that comes up most frequently with my clients.  There are a few different ways we can approach this.  The first step is to ask, “What is a comfortable payment for you that would include all of your housing expenses?”  We can use that amount and then work backward to calculate a general home price range that would include various expenses, such as property taxes or homeowner’s insurance, monthly association fees for a condo or townhome, and so on. 

Monthly Expenses

Depending on whether you're looking for a single family home or a townhome or condo, the price range we calculate together can vary according to those different expenses.  We look at current income and monthly living expenses, such as car loans and student loans, and we also want to take into account any surprise expenses that can come up after purchasing the home, such as a new furnace or normal maintenance and repairs.  While this last part isn’t a requirement for financing, I like to broach that subject so that people are mentally planning ahead for surprises. 

Lessons learned

During the years leading up to the housing crisis, too many people put on their blinders and only wanted to focus on the absolute maximum amount they could be approved for.  Houses were appreciating in value very rapidly, often in the double digits per year, and the fear of “missing out” on a great deal was a very real emotional component.  That has all changed now, and I think everyone is taking a much more conservative and realistic approach when it comes to this very important piece of the puzzle.

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Verifying Employment

Self-employed vs. employee?

Hourly vs. salaried?

Base wage + incentive compensation?

Q: What information will I need when applying for a loan?

A: We'll need personal information and will need to know whether you currently rent or have owned a home in the past.  When it comes to verifying employment, the required documents will depend on the type of employment – self-employed versus employee, hourly rate versus salary, and whether there is incentive compensation in addition to a base wage.  Generally, a couple of recent, back-to-back pay stubs and the last two years of W-2s are sufficient to get the ball rolling for most people.  We need to verify assets, as well, so this generally means two months of bank statements plus the most recent statement for any other accounts, such as retirement or investment accounts.

Q: How much do I need for a down payment?

A: We have many excellent programs today that do not require substantial down payments.  In fact, both Fannie Mae and Freddie Mac have outstanding first-time buyer programs that only require 3% down, and FHA requires 3.5% down. Our military veterans have the ability to purchase with as little as zero down through the use of their VA eligibility for VA financing.  VA loans are a wonderful program and I really enjoy working with our veterans. In all of these cases, the down payment can come from a gift from a relative. 

Less than 20% down

Ask your lender about first-time home buyer programs, FHA, or VA loans that require low down payments.

These reduced down payment requirements really make it convenient and affordable for people to take that next step towards home ownership.  You can always put down more than the minimum requirement, of course, and the more you put down the lower the monthly payment will be.

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on a variety of real estate related topics including buying and selling, market conditions, homeownership trends and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

Single woman buying a home? Inspiration and advice from those who've done it!

If you are a single woman considering buying a home of your own, you're not alone. Last year single women made up 18% of all home buyers, coming in second behind married couples (65%) and outnumbering single men who accounted for just 7%, according to the 2017 NAR Profile of Home Buyers and Sellers.

Home Buyer Characteristics

Data derived from the NAR (National Association of Realtors) Profile of Home Buyers and Sellers, 2017

So, what's behind the trend? Why are women buying? This survey didn't address women's motivation but it's easy for me to imagine why. Fifteen years ago I bought my own place, solo. I mostly wanted to stop paying rent and put money toward my own investment rather than someone else's. My top reason was financial but there were others. Having control over my own space, access to the outdoors and secure off-street parking were important considerations more easily attainted through home ownership. I've never regretted my decision and have since helped several other women do the same. 

Recently, I asked a few past clients, friends and family members who have also bought homes on their own, "Why did you decide to buy? What have you loved about owning? And, what advice would you give other women considering buying their first home?" 

Representing a range of ages, life stages, and professions throughout the Twin Cities, the majority of women interviewed expressed a common sentiment as homeowners — few regrets. Five of these women share their thoughts, and respective homes, below. Read on to hear their motivations along with advice they'd give others who might want to do the same.

Lisa, Minneapolis

Why did you decide to buy?

I decided to buy because I wanted to own something rather than throw my money away on rent. And to have a yard! I love to garden. It was time for me to move on to the next step in being an adult!

What do you love about owning your own home?

I love not having an apartment above me with noise. I love not having my car parked on a street. I love being able to paint and decorate as I want. And the tax deduction really helps too! 

What advice would you give other women who are considering buying their first home?

Don’t forget there will be expenses to save up for. Every year. Lawnmowers, exterior painting, shoveling, and other unknown repairs. Put away about $1500-2000 a year for those unknowns and upgrades.

Michelle, Golden Valley

Why did you decide to buy? 

The main factor was a desire to have control over my own space. I had lived in high-density developments for >10yrs and also desired to have no shared walls. The idea of my monthly payments going toward owning rather than renting was a third factor.

What do you love about owning your own home? 

The benefits are numerous, but the most significant for me is that I feel freer in my own space vs properties I've rented. One of the major benefits is that you are building equity in an asset that can benefit you in the future.

What advice would you give other women who are considering buying their first home?

Be prepared for things to need attention (e.g. plumbing, HVAC, deck/patio maintenance, yard/weed maintenance, snow removal). Even in new homes, things need attention. So plan for these things in your budget on top of the mortgage even if you have the intention of doing a lot of the work yourself. It'll cost you in service fees or buying the equipment to do it yourself, which you likely wouldn't already have if it's a first home purchase.

Be confident and be flexible. It can be an intimidating process and the bankers require a lot of documentation. When you think you've submitted everything, they will ask for more.

Maggie, Minneapolis

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Why did you decide to buy? 

Honestly, I just didn’t want to pay rent anymore. It felt like a waste. And I decided pretty quickly to buy once I had that feeling. I had a realtor friend I knew and trusted, so that made it easy too. I have always loved houses, so I did have that advantage. I knew generally what “good bones” looked like, knew what was an easy fix and what was harder, and knew my main wants. My main factor was price (it was just me back then) and location. I wanted to be near public transit and a few neighborhood amenities.

What do you love about owning your own home? 

I love building equity. It really does make me feel financially stable. I love being able to bang out walls or paint without needing approval. And I love my neighborhood.

What advice would you give other women who are considering buying their first home?

Understand what you can truly afford. Don’t buy more just because. And I do think buying in the neighborhood you want, and updating the house is the best way to go. Also, understand how you truly live. Are you hosting a lot? Or having guests? Are you messy? If so, is an “open concept” really wise?

Barb, Apple Valley

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Why did you decide to buy?

I lived in apartment for over 20 years and I wanted something I could call my own. And also have more space and decorate to my style of liking.

What do you love about owning your own home?

I love being able to make changes as I like. I like the privacy and not having people above or below me. I love to be able to have pets.

What advice would you give other women who are considering buying their first home? 

Make sure your finances are in order for the expenses each month. You never know what might come up and have to be replaced.

Megan, St. Louis Park

Why did you decide to buy?

When moving back to the area, I chose to buy a home as my mortgage was actually going to be cheaper than rent while providing a nicer place than a rental. Also, I have a dog, and having a yard to let him out in is much easier for both of us!

What do you love about owning your own home?

I like the fact that I know I have an investment with the house versus a loss of money with the rent. Also, it is great having the extra space that an apartment does not provide.

What advice would you give other women who are considering buying their first home? 

When buying a house, women need to be sure they are okay with doing the things that come with a house - the yard work, maintenance, etc. It is a great investment if you are willing to put some time back into it, as well as a great feeling to know you have bought your own house!

Thank you Lisa, Michelle, Maggie, Barb and Megan for your willingness to share thoughts on ownership and pictures of your beautiful homes!

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on a variety of real estate related topics including buying and selling, market conditions, homeownership trends and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

Learn the Lingo: Common Real Estate Terms Defined

In the real estate field, like others, industry-specific words can sometimes be confusing to an outsider. If you're planning on buying or selling, it's a good idea to get versed in the lingo, or at least familiar with some key terms. Below is a list of some of the most common words you'll likely encounter in your process, explained in plain English.

CMA (Comparative Market Analysis)

A side-by-side comparison of your home with similar homes that have recently sold, been listed or expired in your area. Created by a real estate agent to help determine an accurate listing price when you sell. Can also be done for buyers who are trying to determine a fair offer price. 

Purchase Agreement (aka PA)

The document (and all related contingencies) listing the price and terms of your offer. Once signed by both buyer and seller, the PA becomes a legally binding document.

Contingency

A provision in the Purchase Agreement stating that certain conditions must be met in order for the sale to be valid. Usually includes specific time periods for completion. Most common are contingencies fo buyer inspections and financing.

Addendum (singular) / Addenda (plural)

Documents added to the Purchase Agreement as supplements to the offer — add ons. Examples include counteroffers, purchasing “as is”, disclosures of lead-based paint, and buying a Common Interest Community (condo, townhouse, co-op).

Amendment

A document outlining any changes made to the final Purchase Agreement. Must be signed by both parties to be valid.

Mortgage

A “debt instrument” used to secure a loan on a home. The property is used as collateral for getting the loan money.

Closing Costs

Money paid at the closing to cover the costs of transferring ownership of a property. They can include a variety of fees to different service providers such as the title company, lender, broker, etc. Paid by both buyers and sellers.

Seller's Disclosure

A document filled out by sellers disclosing all known material facts and details about the home. Minnesota requires this (or a Seller's Disclosure Alternative form) be completed prior to selling. Must be made available to buyers and signed by them when submitting an offer.

MLS (Multiple Listing Service)

A database service real estate professionals subscribe to that stores up-to-date listing information including current properties for sale, homes sold, and listings cancelled or expired. Several MLSs operate around the country. The Twin Cities and Rochester regions use the “Northstar MLS.”

Earnest Money

Cash paid by buyers when making an offer as a show of "good faith". It's optional and can be any amount (1-2% of the sale price is typical.) Intended to go toward the downpayment if you end up buying the home.

Conventional Loan

A home loan not backed by the government. 

FHA Loan

A home loan backed by the government (Federal Housing Administration). Downpayment requirements are usually lower than those of conventional loans, however, purchasing mortgage insurance is usually required.

PMI (Private Mortgage Insurance)

Insurance you pay when you put down less than 20% on a conventional loan.

MIP (Mortgage Insurance Premium)

Insurance you must pay when financing with an FHA loan.

Title Insurance

Insurance paid to protect against claims on the title of your property. Lenders require it for their own protection. Buyers can also choose it for self protection. Ask your title company about costs of coverage.

Arbitration Agreement

A document that allows buyers and sellers to agree to settle disputes about the property outside of court. Optional for all involved in the transaction including buyers, sellers and their agents. Must be signed by both buyer and seller to be valid.

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on a variety of real estate related topics including buying and selling, market conditions, homeownership trends and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

Fall 2017 Housing Market Update | Twin Cities

Minneapolis vs. St. Paul

The past year showed a gradual and consistent increase in median home prices throughout Minneapolis, St. Paul and the greater Twin Cities region for all types of homes, including single family, condominiums and townhouses. The overall median sale price increased by 5.4% in Minneapolis, and 2.6% in St. Paul. Inventory is low, typically favoring those selling rather than buying, especially at lower-end price points in high-demand neighborhoods. 

Overall, St. Paul remains a more affordable city with a September 2017 median sale price of $194,000 versus Minneapolis' $245,450. City dwellers shopping for new homes may be taking notice. Lately, I've met more and more Minneapolitans searching for homes east of the river. The reason most often cited? Affordability. They can enjoy the convenience and amenities of urban living for less. However, low inventory across the Twin Cities region might also be a factor. The months supply of homes for sale in Twin Cities has been steadily declining throughout the year which may be forcing shoppers to expand their search beyond first-choice locations.

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All data from MLS Northstar Infosparks, Oct 25, 2017.

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Rise and Fall

These interactive graphs depict slow and steady growth in sales price along with a simultaneous drop in inventory over the past year in Minneapolis, St. Paul and the six-county region. The data points are derived from our regional MLS database and will remain live on this post, updating continually as the market data changes. 

Results are based on traditional sales (no bank intervention), all construction types (newly built as well as existing), and all sizes of homes. 

Median Sales Prices | Past Year

Months Supply | Past Year

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A Seller's Market? It Depends

If you've been shopping for your first home or searching in the lower-end price ranges, you've most likely felt some competition. Low inventory of more affordable homes has typically favored sellers and often created multiple offer scenarios, especially in coveted neighborhoods. If you plan to sell in this range and move up, however, you may be perfectly positioned. Inventory in the $400,000-$700,000 range remains much more balanced, alleviating competition among buyers searching for those homes. So, if you're thinking of moving up, now might be a smart time.

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A 5-6 months supply represents a balanced market. Lower supplies typically favor sellers.

All data from MLS Northstar Infosparks, Oct 25, 2017.

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Location Matters

Remember that real estate trends are local and can vary greatly by city, neighborhood or even block. What's happening in your area may be different than what's happening in the larger region. If you'd like specific market data for your location and home, let me know. I can crunch the numbers and send you custom graphs reflecting specific trends in your city and neighborhood, or prepare a more in-depth market analysis using specific info. about your home.

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on a variety of real estate related topics including buying and selling, market conditions, homeownership trends and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.

Let's make an offer!

Once you've found a home you want to buy you'll need to figure out how much you're willing and able to pay, then submit an offer to the sellers. Using a standard Purchase Agreement along with necessary addenda, your agent will help you through the entire offer writing and presenting process.

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Determine Your Price

Before writing your offer you will need to decide on a purchase price. I typically do a CMA (Comparative Market Analysis) to help buyers zero in on a fair price for a home. Comparing properties sold or listed within the past six months, of similar style, size and location, is helpful for making comparisons, when available. Of course other factors will also come into play — the amount you can afford, current inventory, your emotional connection to the house, multiple offers being submitted, etc.

The Purchase Agreement

The Purchase Agreement, or PA, is the main contract used when buying a home. It's a fill-in-the-blank, multiple-page document made available by the Minnesota Association of Realtors (the Minnesota State Bar Association form may also be used.) Your agent has access to the PA and all other documents and can fill in the details for you, with your direction. These days, all can be done electronically on a computer or mobile device, including signatures. Getting the PA signed and accepted by the seller legally binds you to the purchase of the home, so it's important to read and understand it before you sign and your agent submits it to the seller!

The Purchase Agreement may also include various addenda for contingencies like inspection, financing, sale of another property, and more. Be aware that some contingencies allow a seller to continue marketing their home throughout the period in which yours is being met. For example, if your accepted offer was contingent on the sale of your current home and the seller receives another offer while waiting for your home to sell, you may be asked to lift the contingency (within an agreed upon amount of time) or risk losing the new home.

Once your offer has been accepted and signed by the seller, the clock starts ticking for the most common contingency — the inspection. In the days immediately following acceptance you will need to schedule a buyer's inspection with a reputable professional. Typically, buyers ask for around 10 calendar days in which to do the inspection and negotiate repairs or price based on the results. Inspections are usually paid by the buyer. Your agent should be able to provide a list of trusted inspectors and help facilitate the process.

Strengthen Your Offer

In a multiple-buyer situation it's unknown what other buyers are up to, so it's important to make your best offer while being mindful of your personal or financial limitations. If a home is in high demand, with several buyers making offers, it's not uncommon to submit an offer at or even above the listing price. In fact, this has been common lately with current seller's market.

Besides raising price, you can also manipulate terms to favor a home seller and strengthen your position. Increasing earnest money deposit, paying your own closing costs, and removing contingencies are just few ways to sweeten your offer. Sometimes even a writing personal letter to the seller can set you apart from the competition.

Seller-paid Closing Costs

It's not uncommon for buyers to ask sellers to contribute to the buyer's closing costs when cash is needed to close. The amount can vary as a percentage of the price (usually 1-3%) or as flat amount written into the PA. Asking a seller to pay additional fees of course lowers their net gain from the sale of their home. If you have enough cash and are competing with other buyers, it's wise to consider paying your own costs, or at least as much as you can. 

Earnest Money:

"A deposit made to a seller showing the buyer's good faith in a transaction."
-Investopedia

Earnest Money

It's common practice to include a small percentage of cash, or earnest money, with your offer. Earnest money is a buyer's deposit on a property made at the time of offer. It's often 1-2% of the sale price, used to demonstrate your seriousness as a home buyer, and eventually contributes to the down payment or final costs to close. Earnest money deposits are not required, but including one and even increasing the amount can sometimes give you an advantage over other buyers who may be relying heavily on financing.

Contingencies

Having fewer contingencies may also help in a multiple offer situation. Contingencies are safety nets that enable you to back out of a sale if certain conditions are not met. At the minimum, you'll want an inspection contingency allowing you to check out the home before making a final decision. This is a common request for nearly all buyers — I always recommend it, and sellers will expect it. Of course you can always choose to waive the inspection at your own risk.

Unless you are paying cash for the home, you'll also need a financing contingency, which basically says you agree to buy the home as long as you can receive a loan under the conditions outlined in the Purchase Agreement. This contingency should be accompanied by an pre-approval letter from your lender. Working with a reputable lender who is available to answer the seller's questions and concerns will also give you an advantage. If you pay in cash, even better. Cash offers, made without a financing contingency, are less common but will usually be favored by sellers.

Another common contingency involves the sale of an existing home. You can make an offer contingent on the sale of your home before even listing it, but the closer you are to actually selling yours, the better.

Counter offer + Final Acceptance

A seller may be interested in your offer but choose to counter with more desirable terms or price. This can be done verbally between agents representing each side but will eventually be written into a final amendment and signed by both parties. Once signed, returned and accepted...congratulations, the offer is binding and next steps begin!

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Heidi Swanson is a Realtor® based in St. Paul, Minnesota. She writes a blog to share information on a variety of real estate related topics including buying and selling, market conditions, homeownership trends and more. Reach her at heidi@lyndenrealty.com or 651-503-1540.