31 Aug, 2010

Managing Your Home Listing After the Offer

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In this market, I suspect that both the listing agent and the seller take a big sigh of relief once they get an accepted offer on their home.  Who wouldn’t!    The real estate market has been very unstable lately following the government tax incentives.  Price points that previously were sweet spots to sell homes at are getting no showings.  Homes in excellent condition are getting passed over.  There seems to be very little motivation in the buyers right now (even you can even find a home buyer).

With the lending regulations changing and tightening almost daily, a strong borrower today could be one small financial slip from not qualifying for your home tomorrow.  I have lost 4 deals this year alone where a pre-qualified borrower that was also well qualified had some skeleton come out of the closet in their financial world and the underwriters killed the deal, both times just days before the closing.  You can imagine how crushed my sellers were!

So once you get an accepted offer on your home, you can’t stop working.  As the seller, have your real estate agent closely track the progress of how the buyer’s mortgage process is going.  Have an open channel to his or her mortgage broker.  I have seen several times where the mortgage guy simply drops the ball and closings take an extra 1-2 weeks.  If the listing agent was working closer with the buyers mortgage person, this may have been avoided.

Insure the appraisal is getting done in a timely fashion and if you are the home owner, consider meeting the appraiser there with some examples of good comps in the area.  While you are not influencing them, you are providing information to put your best foot forward.  If you have done work on your home recently, make sure to print up a list of those improvements and give that to the appraiser to show why your home should be appraised at the top of the range.

If you are the listing agent, I would argue that you are earning your commission if and when you get the deal closed.  You may have the nicest pictures on the Minnesota MLS, but if you can’t get the deal done, then who cares!  Watch for the milestones after the acceptance and pound your fist on the desk when they are not getting met.  You may need to carry this deal for the incompetent or absent buyer’s agent and mortgage broker.

23 Aug, 2010

Update on the MN MLS Adding Rental Properties

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I reported a couple weeks ago that the NorthstarMLS had announced that they are targeting a September 1 launch of the ability for agents to put rental properties into the MN MLS.  This could be a fantastic centralized location for all landlords to advertise and for tenants to see what is available.  While I don’t think it will kill Craigslist and other paid rental sites, I do believe it will be great for more expensive rentals that are $1200+ rent per month.  It should give them the exposure they need.

Well, since that last post, I have been doing some research and speaking to some experts in this area regarding their opinion of the change to the MLS in Minnesota.  Here are some of their thoughts and concerns:

• Actually, despite this launch being headed up by the rule makers, they overlooked an important state statute.  A property can only be represented by one licensed real estate agent at a time.  I am sure it doesn’t take much imagination to think about the scenario where someone has their home listed with Realtor A, who has been working hard to sell their home for months.  The seller decides that maybe they should try to rent their home, but Realtor A is not interested in that part of the business.  Seller contacts Realtor B, who specializes in renting homes and puts their home up for rent at the same time.  Unfortunately, this is against the law!
• The compensation model is not complicated, but most brokerages have not worked out the kinks yet.  Let’s say that I list a house for rent at $1500 and I enter into an agreement for the owner to pay me 1 month’s rent when it is filled with a tenant.  This is a very typical fee.  I may put that property on the MLS in the rental section.  I must specify how much co-op I am willing to pay the other agents.  This is just like the buyer’s agent commission in a sale.  Maybe I pay out $750 of the $1500.  Most brokerages have not decided how much of that $750 (that either side gets) they are going to take to handle their administrative work.   With many brokers charging the agents $100-$350 per transaction, you can see that I may only make $400 on listing a home for rent.  Sadly, I can’t list enough of those on a monthly basis to feed my family after expenses.
• Related to this is if the brokers will charge their typical $300-500 broker commission fee that is now charged on most sale transactions.  That could increase the costs to the home owner by 25-50% to have an agent rent their home.

It was a very interesting discussion that I had with these guys that had been involved in the rental properties on the Minnesota MLS, right from the beginning.    Stay tuned!

16 Aug, 2010

Improving Your Odds of Getting Your Offer Accepted

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I am going to let you in on a couple things that I do to improve my odds at getting my buyer’s offer accepted.  I was about to write “tricks to getting it accepted”, but these are completely legit ways to do your research and put your best offer forward.  You can do this also or you should find an agent that understands these techniques.

• Never use round numbers when making offers.  Have you ever watched the Price is Right on TV (I may be dating myself).  Have seen how some of the contestants bid $1 over the next highest price?  While I don’t do it with $1, I will add $250-750 to an offer to make sure I could be over the  next guy.  I also do not offer a round number like $2500 or $5000 over or under list.  I do $1750 or $6000.  Something that is outside of the norm.
• Take a look at the details about the property on the MN MLS prior to making the offer.  How long has it been on the market?  Has the price dropped already?  If so, how long since the last price drop.  When are you and your competition submitting offers relative to price drops or when it came on the market.  My offer price will be very different if the MLS says it has been on the market for 3 weeks and no one has made an offer than if it was on the market that same 3 weeks, it dropped in price yesterday, and now we have 4 offers on it.
• Call the listing agent to see if they can give you any suggestions about any hot buttons the sellers want to see.  Some sellers really want full price, but are willing to chip in more seller paid closing costs or leave the hot tub.  I had a investment property seller recently that would only take the offer if we assured him and wrote into our offer that the existing tenant could stay in the property.  You may be surprised to learn that items that you are not interested in, are a hot button for the seller.
• Keep your offer as clean as possible with little or no contingencies or special requests.  While you should always do an inspection, try to not ask for lots of little items to be fixed.
• Use the NorthstarMLS history to find out if the property had previously been listed for sale.  If the home has been for sale in the last 6 months, the sellers may be more desperate or motivated to sell this time.  Make an aggressive offer.
• Don’t skimp on the earnest money.  Offering $500 on a $400k property is an insult.  If you are serious, put up at least $1000 and if you really want this home, put up $5000.

Not every MN home for sale is the same and so not every offer should be the same.  Craft your offer to improve your odds of getting it accepted.

11 Aug, 2010

Minnesota MLS to Add Rental Property Listings

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This is a very exciting announcement.  Many other cities and states already have rental property listings available on their MLS.  This allows both the consumer and the real estate agent the ability to search one place for rentals. With so many people not forced to rent because of a foreclosure or short sale in their history, this will be a welcome addition.  Plus, as real estate agents, we will be able to better serve our customers by searching rental pricing in a particular area and working with renters in addition to buyers and sellers.  This should also help owners trying to rent their properties get more market exposure.

Knowing how militant the current MLS police are about keeping the data accurate on the listing side, I would bet they will be equally vigilant about keeping the rental info accurate also.  This should include availability (as the MN MLS has cracked down hard on this problem on the sales side in the last 12 months).  Their FAQs say that a rental property must be marked as rented within 24 hours of the unit being rented or the leasing agent will face a fine. The MLS is also adding a new option under Contingency for “Application Received.” You will be required to indicate this when an application has been accepted but not yet approved, and you are still accepting showing appointments.

This change has required some major technical pieces to be put in place.  While I don’t know the specifics, if I dust off my Information Technology hat for a second, I assume the NorthstarMLS software engineers had to make changes to the database to accommodate new fields.  Their FAQ mentions the following new data fields:  Monthly rent, availability date, minimum lease (# months), furnished (y/n), smoking permitted in unit (y/n), application fee, security deposit, pre-paid last month’s rent (y/n), other deposits/fees (up to 100 characters description), background check required (y/n), laundry location (in unit or on premises), and an indication for who pays (owner, tenant or n/a) for electric, gas, heat, water, cable, trash and association fee.  For the Style field, you will have all the Single Family styles as well as apartment, duplex (up/down or sidexside), triplex and fourplex.  That is a lot!  They also had to build new screens, data feeds and reports.

As agents we will be able to book showings for apartments using our standard BookaShowing system that we now access through the MLS.  I can show you the home, help you negotiate the lease, and get you the best deal.  Just like when I work with buyers, since I see the entire property landscape, I can help you know if this is a good deal.  Also with my years of experience as a landlord, I have seen just about everything!

29 Jul, 2010

Sellers: How to Maximize Your MLS Exposure

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Selling your home is one of the largest financial decisions you will do.  Even if you have sold a home in the past, with the market and technology changing so fast, what you may have learned back then, is irrelevant now.  Since you don’t do it frequently, you are relying on your real estate agent to do the work for you.

A recent study done by the National Association of Realtors found that 85% of home buyers will look at the internet before they ever contact an agent.  These buyers are looking at the large number of Realtor websites that have MN MLS information on them.  If this is true, than that means that what appears on the MLS (and subsequently on the internet) is the first and maybe the only opportunity you will get to impress those prospective buyers into looking at and buying your home.

Here are some quick ways to put your best foot forward on your MLS listing:

• Everyone looks at the pictures!  You may have the largest master bedroom listed anywhere, but buyers mostly look at the pictures before proceeding to the home details.  I am constantly amazed at how some listing agents can have only 1 picture on their MLS listing.  What a disservice to their customer.  Have your home pictures taken by a professional photographer.  Do NOT let your agent take the pictures on his iPhone and upload those.  If he won’t pay for nice pictures, pay for them yourself.  It is usually under $100.
• Make sure every dimension and field is filled out on the MLS listing.  Again, many agents are lazy and put down just the bare minimum.  I was doing a showing once and the listing agent failed to mention the pool in the backyard!  Also, insure that the information is accurate.  It is very frustrating to show a house and find that something on the MLS listing is incorrect (like number of bedrooms, having a basement, or 1 vs 2 car garage).
• Spend more than 30 seconds creating your remarks.  The Minnesota MLS has a section for both public and agent remarks.  Most listings have the same thing in each.  Your audience is different, customize the message to what they might want to know.  Also, be sure to avoid abbreviations as much as possible.  These can confuse the newer customers (and agents)!

Simply taking some time to polish your MLS listing could mean the difference between a buyer setting up a showing for your home or simply clicking the next button on the internet.

15 Jul, 2010

Weeding Out the Junk Listings On the MN MLS

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Maybe I am skeptic (of you could maybe even call me a cynic), I have learned over the years to take everything that I see on the Minnesota MLS with a cautious optimism.  I am forever surprised at how many times an agent either through incompetency, error, or maybe a little snake oil has incorrect information in the system.  Just like any computer database, it is garbage in and garbage out.  The problem is when my customer and I take time out of our day, drive across town only to see a piece of junk that the agent put on the MLS incorrectly.

I have seen 3 bedroom homes that were really 1 bedrooms when you get out there.  I have seen homes that were listed 1000 square feet larger than they really are.  Agents are notorious for omitting an obvious problem with the house such as the when the previous owner started a remodel by removing all the interior walls, but never finishing it.  Or how about the time that I literally drove to an address and was looking for the house on the MLS picture and I only found a vacant lot where the house used to stand!

So how do you catch these junk listings and mistakes on the MLS in Minnesota so that you don’t waste your time looking at them?  Here are just some thoughts:

• When you get interested in a property, ask your agent to send you the agent view of the listing.  This gives you a few more bits of information that frankly I think are critical such as time on market, starting sale price.  These 2 items can help you.  If a property has been on the market 360 days and only dropped $5k, there must be an issue.  Also, these agent views will also give you the remarks that are meant for agents.  Often they will contain valuable facts (instead of the sales fluff in the public remarks), such as no basement, remodeled started, code compliance to be completed by buyer, etc.  Many of these facts would make you eliminate that house from your list.
• If there are pictures of the home on the MN MLS, do your best to look at them with a skeptical eye.  Put your CSI hat on and look for damaged walls, short ceiling heights, small rooms, bad roofs.  If you concentrate of finding the problems, you will get good at noticing imperfections in the pictures that tell you a lot about the home.  I looked at the picture of the 2nd floor of a 1.5 story home in Minneapolis.  I noticed the angle of the camera shot to the angle of the ceiling.  I thought that either the photographer was 6′5″ tall or the ceiling height was less than 6′10″ (which will disqualify that space from being used as a bedroom).  Sure enough, the ceiling height was about 6′9″.
• Multi-family listings are probably the most error prone MLS listings I have seen.  Most Minnesota Realtors don’t appear to understand how to enter the data correctly for number of units, number of bedrooms, and expenses.  I will often see a duplex listed as 1 unit having 6 bedrooms (they meant to have 2 units with 3 bedrooms each).  Listing agents will often not understand how to put expenses down on the MLS.  They will often include costs that the tenants pay (which as a landlord, I don’t care about in my financial analysis).  When looking at these properties, I recommend that you use your own estimates for an initial review and then follow those up with hard copies of bills and calls the the utility companies to verify costs (do this once you get an accepted offer during your inspection period).

While the Minnesota MLS is absolutely the best tool out there to use to find a home, you need to watch out for the frequent errors and omissions that can frustrate you.

5 Jul, 2010

Tips to Using the MN MLS to Buy a Foreclosure

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Foreclosure are all the talk right now.  Regardless if you are an investor or owner occupant, everyone wants to get that good deal and they think it comes from buying a foreclosed home.  They are probably right, but there are lots of gotchas when buying them.  Here are some tips on how you can use the Minnesota MLS to catch potentials issues with a home before you drive out and see it.

1. Although some listing agents only put one picture of the home on the MLS, any photos can give you some information.  Here are some things to look for:
   • How does the roof look in the pictures?  Is it really old?  Is the color look like it is from the 1970s?
   • If there are interior pictures, notice the decor.  Is the carpet from the 1970s?  If so, this may mean that not much on the house has been updated.  Are you looking for this type of rehab?
   • If the interior pictures show the bedrooms, can you tell if they are in the basement?  If so, do they have egress windows?
   • If there are pictures of the finished attic and/or basement, notice the angle of the camera to the ceiling.  If the person taking the picture is 6’ or under the ceiling should be high above.  If it looks close, it may be a low ceiling.
2. The MLS listing should say what type of basement the house has.  While most houses built after 1960 have full basements, I have gone out to several houses built in the 1950s or earlier only to find that they have no basement or simply a 8’x8’ room in the basement and everything else is crawlspace.  While this may not be a deal killer for you, it could explain why a home is cheaper than it seems it should be on paper.
3. Review the square footage of the home and compare it to how many bedrooms it has.  Unfortunately, real estate agents will often simply copy the listing details from the previous listing.  They do not recheck the square footage or bedrooms sizes.  I have found that most square footage entries on the MLS in Minnesota are incorrect.
4. If you can see any outlets or plumbing faucets in the pictures, have those been updated?  This may give you some indication of how old the facilities are.
5. Compare what the MLS details say for the heating source compared to what you would expect for a home in that particular area and age.  A home in the City of Minneapolis that says electric heat could mean that someone did a bad remodel in the past and removed lots of the character (these houses would normally have cast iron radiators, which are much more authentic).

Doing some investigative work based upon the MLS MN details can save you from being disappointed by details that were omitted about a house that on the internet looks like a great deal.

21 May, 2010

New Contingency Field Added to Northstar MLS

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The Minnesota MLS has taken another step forward to make it easier to find out if there is any offers in on short sale homes by adding a new field.  Read the press release below.

Last year, BookAShowing added a Contingency field so that you could indicate when any of your Active listings had an offer accepted subject to a contingency.  That field is now maintained within NorthstarMLS.

• BookAShowing has shut off input of the Contingency field within their system.
• The Contingency field is now available for add/edit within Home Base.  If you have add/edit permissions, you will find the field in the “Listing” section right before List Price.
• The Contingency field is available on Northstar MLS Matrix for search and shown on displays (including the Customer Portal for your clients).  If there is a Contingency, it will display on a line below Status (full and short displays). On the Single Line displays, there is a new column to the right of Status labeled “C” for Contingency.  It is filled with either N (No) or Y (Yes) to indicate whether or not there is a Contingency.  The Contingency field has not yet been added to the Print Reports, however we expect that to be completed by the end of the week.
• You will no longer enter Contingencies into BookAShowing.  You will enter them in Home Base, and your listing on BookAShowing will automatically update.
• BookAShowing provided us a data feed of all Contingency settings for NorthstarMLS listings within their system.  We automatically populated those Contingency settings on NorthstarMLS so that you don’t have to go in and reset them.
• The Contingency field on MN MLS has the same options as on BookAShowing:  Inspection, Sale of Another Property, Third Party Approval and Other.  It is a required field.  The selection will default to “None” when you enter a new listing.  Whenever you have a contingency on one of your listings, you are required to edit the listing to reflect that contingency within 24 hours of accepting the offer with contingency.
• The Contingency Notes field is still be available for input within BookAShowing. If you want to add notes on the Contingency within NorthstarMLS, enter them in Agent Remarks.

17 May, 2010

Twin Cities Real Estate Market Update

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This information is courtesy of the Minneapolis Association of Realtors for the week ending 5/1/2010.  Much of this information is compiled from the MLS MN.

As the weather warms and the end of the federal government tax credit winds down everyone is waiting with baited breath to see what the real estate market will bring us.  Some experts are predicting that the market will tank, others are saying it will be solid.  What is really going to happen is anyone’s guess at this point.  Let’s review some stats for last week.

New listings last week were down both week over week and year over year.  The number of new listings hitting the market is below 2000 for the first time since February.  Although I would like to say this signals something, with only 1 week of data, it doesn’t make a trend.  We will continue to monitor.

Pending sales were up dramatically both year over year and from the previous week by over 30%.  I suspect much of this can be attributed to home buyers rushing to capture the federal tax credit prior to expiration (which was April 30).  The number of pending sales was the highest in 2010 and almost double that of February.  The number (1469) is actually the highest we have seen since April 2005.

Active listings for sale have remained relatively constant since April 1, but have increased by almost 20% since the first of the year.  We are hovering around the average for the last couple years.  The increase is mostly seasonal adjustments coming out of the winter.

Days on market until sale continue to fall and have been falling since 2008.  We are now down to 127 days on the market for April 2010, which is a 15.3% decrease year over year for that same week.

Pricing your home for sale at the correct price is crucial to getting it sold.  But, even when you do price it correctly, buyers will often make lower offers if they sense they are in a buyer’s market.  Percent of Original List Price Received at Sale has rebounded slightly after a dip this winter.  We are currently averaging around 93%.

Currently there are 5.69 house per buyer in the market.  This is called the supply demand ratio.  We have seen it as high as 12, but May was close to the low of 4.39 in April.  Months of supply of homes is also an idicator of the health of the real estate market.  From a high of 11 months of inventory in the summer of 2008 to a low of 5 months in January 2010, we have increase slightly as banks are releasing new properties onto the market, faster than they can be absorbed.

Much of this real estate market data was compiled from the Minnesota MLS.

11 May, 2010

Minnesota MLS Changes Away From Security Tokens

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Less than one year after the Northstar MLS implemented security tokens for authentication into their MLS system, they have returned to simple passwords.  As it turns out, the somewhat temporary change did it’s job.  According to NorthstarMLS management the tighter security revealed the following issues:

• Almost 150 licensed agents were accessing the MN MLS without paying for a membership fee.
• Multiple government agencies (including tax assessors offices) were accessing the MLS for data.
• Since the change, appraiser membership has risen dramatically, showing that these professionals were also using someone else’s MLS code to access the data.

This change is a welcome reprieve for many agents that were frustrated over the use of the tokens and additional security.  As it turns out, the new password system actually has more security than it appears on the surface.  The MLS staff feel like this new technology is on par with the previous tokens.  By using multiple authentication methods such as IP Address tracking, key stroke monitoring and usage patterns, they expect that they will be able to spot abuse easily.