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.

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!

• 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.

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!

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.

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.

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.

This new policy was put in place to try and limit the number of “strategic defaults” that have started to happen.  These are where a borrower evaluates the loss of equity in his property and decides it is better to let it go into foreclosure than to wait for the equity to recover.  It is becoming more common as the values of homes and investment properties have dropped by up to 40% in some areas.  These borrowers look at the MN MLS and see that their $400k property is now worth $200k and decide it could take up to 20 years for them to get back to what they paid for it.  They decide it is better to  take the loss and deal with a foreclosure on their record than wait 20 years.

Fannie Mae does not believe this type of default is legit.  They are threatening legal action to recoup the mortgage deficiencies that were owed by the borrowers.  This comes as no surprise as we all expect that after the dust settles, the lawyers will be in court filing judgments against every home owner that did a short sale in the last couple years.  It will be a way for the banks to make up for the blistering losses they have seen in the last 2-3 years. Fannie Mae has even instructed their banks to watch for loans that should be flagged for litigation.

The new policy does state, although very ambiguously, that if the borrower has tried to work out loan with the bank they may eligible for a new Fannie Mae loan in just 3 years.  My concern is how do you prove in 3 years that you had tried your best to do a short sale or loan modification and you failed and the property went into foreclosure?  What will be the standard they measure how hard you tried?  Think about trying to close on your new home and trying to convince the new underwriter that you did everything you could.  This will make for an interesting next 10 years in real estate!

Read the full Fannie Mae press release here.

• Jeff writes that investment property is picking up momentum as investors move money from the stock market to more tangible assets like real estate.  Most investor prefer to concentrate their efforts in one area.  One popular area that has a large number of investors right now is Orlando Investment Property.  Tenants like the area as there are many service industry jobs with the large amusement parks as well as jobs in companies that support those businesses.  Having a stable workforce, as a landlord, means you should be able to keep your property full.
• Many investors are looking for better returns than they can get in something like slow moving bonds.  Although it has gotten some bad press over the last couple years, Forex investing is as a way to diversify your portfolio and hedge your other investments against the whims of the NYSE.  Just make sure you understand what you are purchasing before you jump in.
• Ken encourages people to invest in Forex who can control their emotions, are deliberate about their actions, and can practice sound capital management practices.  While these investments can be risk, they can also be highly profitable.  Through training, education, and a steady and slow practice, you can be successful using the correct broker.
• Just like most other markets, the Panama real estate market took a large dip in the recent housing bubble bust.  Despite the dip, though, the fundamentals of investment in Panama Real Estate is still right.  With the Panama canal expanding, the country’s economic indicators are up, and Panama City is quickly becoming a world-recognized financing center.
• Mutual funds have the advantage of diversifying your investment across many different stocks.  This lowers your risk as opposed to putting all your money into one company stock.  Up until recently mutual funds were the only option.  Now there are exchange-traded funds that can be traded like a stock, but are diversified like a mutual fund.  One example of these is financial EFTs, which are funds of financial companies that are traded in the market.
• Sue explains what to do with that 401k when you leave your employer.  You can roll it over to your new company, leave it where it is, or move it to a self directed IRA.  Check out her 401k rollover article.
• Are you looking to buy a home in this real estate market?  Maybe you need help with a down payment or money to fix up your house, but don’t know where to turn.  Real estate grants are a great source of additional funds that you may never need to pay back.
• Roth IRAs are a great way to maintain control over your retirement funds.  You can investment the money how ever you see fit.  It is almost like a savings account, but the money is earned tax free.  Learn more about the Roth IRA Facts at this website.
• Penny stocks are a great way to dabble in the stock market without risking thousands of dollars.  There are many resources out there that can help you make good choices, some are paid and some are free.  Make sure to do your research before getting started.  Here is a great resource for penny stock picks.
• The Phoenix, AZ real estate market has really dropped in value in the last couple years.  What this means for investors is now is the time to purchase that new investment property.  Prices will never be lower than they are today.  You don’t want to wake up several years from now regretting that you failed to jump on these fantastic opportunities in the Phoenix Investment Property market.
• The Southwest US was hit just as hard as the rest of the country in regards to the housing bubble.  Luckily, Charlotte, NC saw neither the dramatic run up in housing prices, nor the huge fall.  Charlotte investment property is another great place to consider buying real estate for the long haul.

Check out these fantastic articles around the web.

What are these three much loved programs? They are the VA, FHA and USDA loans. Each plan has special benefits and requirements that many first time and experienced home buyers are raving about.

The Benefits and Requirements
VA loans

For men and women serving our country, the VA mortgage program takes the stress out of home buying. Benefits include no down payment, 100% financing, less strict credit and income requirements, no prepayment or private mortgage insurance fees.

To qualify, a mortgage lender who works with the VA loan will help you to fill out a Certificate of Eligibility. The VA loan is only open to those who have been either honorably discharged, or served at least 90 days on active duty during war or181 days on active duty during a time of peace.

FHA Loans
The FHA loan is like the VA loan except the Federal Housing Administration secures the loan for anyone meeting the necessary qualifications, not just military personnel.

First-time and experienced home buyers can take advantage of the FHA loans reasonable interest rates and low closing costs. Also, the FHA mortgage program does not have an income limit and buyers can use gifted money towards the down payment. Unlike the VA loan, FHA does require a down payment amount of 3% to about 10%, which is considerably less than a conventional loan.

To qualify, a respectable (not excellent) credit rating is needed with a good income to debt ratio. A lender can help with the loan application process for an FHA loan.

USDA Loans
The U.S. Department of Agriculture secures the USDA loan for rural areas only, so no big city living. You have to be interested in buying within an eligible rural area. The USDA, like the VA, is one of the last no money down home loans. With a good income and credit score, you can qualify for 100% financing, no month-to-month insurance payments and a low monthly mortgage payment.

Each program requires the proper documents in order to complete the home ownership process. Talk to a mortgage counselor today and see which one best fits your needs.