West Savage Real Estate Blog

Confused Culpability in STRIB Story

By Sara Huebener

The Star Tribune article in Saturday's paper on the Carver couple who packed their boxes and quit their jobs the day they received a $10,000 earnest money check as downpayment for the sale of their home, sadly, was misleading to consumers.   The earnest money check bounced, and the home sale fell through, causing the sellers to blame the buyer's realtor for the $20,000 they allegedly lost as a result of the failed sale, slating the reason as the buyer's agent's failure to conduct a background check on the buyer before submitting an offer on the property, which was located in Carver. 

First of all, I want to state that we have no affiliation with either of the agencies involved in the story, so are not partial to either agency.   Secondly, we feel badly for what happened to the seller and understand that their situation was truly unfortunate, if not quite uncommon.   Realtors do everything possible to avoid these types of scenarios. 

That said, my first thought on this is that it is the job of the loan officer, not the buyer's agent, to make sure that the buyer has the financial means to purchase a home.  Realtors rely on preapproval letters from the buyer's lender to verify that the buyer is qualified to purchase a home, and for the dollar amount for which the buyer is qualified.  We do take measures to attempt to prequalify the buyer based on a series of questions used to determine motivations, but the true preapproval must be done by a qualified loan officer.  In the story, the buyer's agent had received the preapproval letter and submitted it with the offer.  In this case, the buyer's lender was from out of state, which is not uncommon, however most realtors prefer that the buyer is working with a reputable lender who is known, trusted, and local.   

In this case, it turned out that the buyer was a convicted felon with numerous evictions - three in this year alone.   While loan officers do not conduct criminal background checks, often times factors associated with criminal behavior reflect on credit scores, which can raise red flags for loan officers.  Clearly in this story, the loan officer was a fake.   And in that regard, I would argue that the buyer's agent did have some liability in verifying the legitimacy of the lender, but in conducting a criminal background check, probably not.    

The article said the buyer wanted to move fast, and the story made clear that the sellers packed their house and quit their jobs the day the earnest money check was submitted, despite the fact that their agency continuously warned that the transaction was risky.   I am not sure that the blame for this falls on the buyer's agent.   It seems to me that the seller was equally eager to move quickly, perhaps because the offer was for full price with a quick closing date.  If the seller's agent felt the transaction was shaky, she should have communicated that to her sellers.  If she did indeed communicate that to her sellers, then the blame for quitting their jobs does not lie on the buyer's agent. 

  My final thought on this is that agents (buyer's agents and seller's agents alike) have no incentive to have clients enter into purchase agreements that are "no good".  Not only is it a huge waste of time, but dealing with the aftermath is a headache as well. 

What happened to the Carver couple is unfortunate, and we hope people realize that this is an uncommon situation.  Regardless, the Star Tribune was somewhat misleading in how they presented the culpability of the agencies involved in the story.  

The 100 - Savage

The following chart is published regularly by The Southern Twin Cities Association of REALTORS and provides information for the city of Savage as a whole.

If you would like a copy of this report emailed to you, please email me at [email protected].

Metrowide Housing Supply Outlook - Hot Lower Bracket May Benefit West Savage

By Chad & Sara Huebener

If you know of someone buying a home in the price range below $120,000 (or if you are looking in that range for investment purposes), they (or you) are going to have to move fast. The Southern Twin Cities Association of REALTORS reports there's only 2.9 months of supply in that range, which places it in the extreme seller's market category. The reason for the tight inventory picture?   There's been a huge upsurge in home buying activity—sales are up 127.5 percent in that category over the last twelve months.

Our Association also reports that the number of new construction properties available for sale continues to shrink rapidly as builders pull back from creating new inventory. The current inventory of 2,426 listed new construction properties in the MLS system represents a drop of over 1,200 units from a year ago. Unfortunately for builders, new construction home sales have also rapidly declined, falling by 18.8 percent (over 800 units) in the last twelve months.

We have certainly seen the flood of homebuyers scooping up properties because of the $8,000 tax credit, as well as investors taking advantage of steals of deals when the market was in a deep state of stagnancy - particularly last winter.  Heck, we took advantage of it as well, and picked up another rental property for dirt cheap.  

The statistics above are changing things considerably:   First time homebuyers in the $175,000 and under price range have very little wiggle room for negotiating on the basis of price.  When the state of the market in that price range is that hot, seller's in that price range don't need to sell at a discount any longer.

Additionally, FHA has a flipping rule in place prohibiting FHA buyers from purchasing properties that sold less than 90 days ago.  Although controversial, we can lend some credence to investors who buy "junk homes", fix them up and turn around and sell (or "flip") them in turnkey condition to buyers.  FHA will not insure these loans based on the no flipping rule.  Since most first time home buyers are FHA approved, and as a general rule, FHA-approved buyers cannot purchase homes that need extensive repairs due to FHA requirements, this restriction narrows their housing supply pool even more. 

So what might all this information mean for West Savage?   Sellers in the lower-range price point can move up to the price ranges we have in West Savage.  And if people are opting not to build, that keeps more buyers in the pool looking for existing properties.  (Personally, we have seen the opposite - more and more people -even first time homebuyers- looking to build homes, and this affects existing sellers, particularly those in our West Savage price range.  

We need to take the continuous changes in our housing market one step at a time, and right now, the true test of how West Savage will be impacted first requires following what happens with any extension of the tax credit, followed by getting through the winter. 

"The Skinny" - October 2009

West Savage Sees Boom in Closed Sales & Cooling Inventory

By Chad & Sara Huebener

 

The pool of sellers entering the market in West Savage is beginning to cool.  New listings are down, and total West Savage inventory remains well below average.  Typically we see an average of 25-28 listings in our West Savage marketplace during any given month.  Current listing inventory hovers around 16 – just 60% of the norm.  

 

Pending sales have also cooled in the past 45 days.   Buyer activity in early September was slow with the start of school, but picked up again in mid-late September.    West Savage just experienced a boost in closed sales which included a number of foreclosures, short sales and vacant properties.   As disheartening as this may be for traditional sellers, our marketplace as a whole needs to see the absorption of these properties if we are to have any hope for market recovery.  Getting some of these homes “off the books” before winter is essential, as vacant properties during Minnesota winters tend to fetch even lower sales prices.  Vacant, foreclosed and short sale properties remain in our marketplace, and continue to pop up from time to time.  

 

What to watch for:    Based on past experience, we expect to see a slight seasonal spike in buyer activity prior to Thanksgiving.   We are starting to see some signs of market stabilization as well.  We do not expect to see appreciation or a recoup of prior home values for a number of years.   However, the falling of prices is starting to slow.  It will be interesting to watch how pricing and buyer activity affects market times in the next six months.  

 

Inventory is down for Savage as a whole and Scott County.  This is typical of this time of year, and we expect to see this remain pretty steady through the winter.

 

Our West Savage absorption rate has dropped to 4%.   That means if zero new homes come on the market, it will take 4 months to sell our existing inventory.   This is a nice, low absorption rate!

Postponing a Mortgage Foreclosure Sale

This article is republished with personal permission from Brad J. Boyd, an attorney with Thomsen & Nybeck P.A.

In Minnesota, new legal ground was broken in June regarding the applicable timelines and remedies available in the real estate mortgage foreclosure process.  On June 15, 2009, a law became effective (although it is not yet widely understood or frequently utilized) that allows a mortgage foreclosure sheriff’s sale to be postponed for a period of five months. 

Typically, a mortgage foreclosure in the state of Minnesota provides a six-month “right of redemption” for the homeowner to buy the property back after the sheriff’s sale, by paying all outstanding amounts (including the full amount of the mortgage not just the past due debt) and applicable costs.  This six-month period may be shorter if the property is abandoned, or in other circumstances provided for by statute.  Quite often, by the time the property is in foreclosure, rebounding from the past due debt is difficult enough and paying the full balance of the mortgage is next to impossible.

The effect of the new law is to allow the foreclosure sale to be postponed for an extended period (five months) for the borrower to catch up on the past due amount owed, without having to repay the full loan (which would be required during the redemption period).  If the loan is not made current in the 5-month extended period before sale, the redemption period is automatically shortened to five weeks (from the typical six months).

The result of this law, effectively, is that a homeowner facing foreclosure can make an elective decision to have an extended period of time prior to sale, to try to collect the funds needed to payoff any past due debt on the mortgage, to bring it current and stop the sale.  This shortens the redemption period after sale, but in many cases will afford borrowers a more realistic chance of saving their home from foreclosure.  For more questions about this, see your attorney.

This blog entry is written by Brad Boyd, Shareholder at Thomsen & Nybeck, P.A. Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law, and Wind Energy Law.  Brad works regularly with real estate buyers, sellers, and investors, real estate brokerages and agents, and small businesses.  He provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.

Metrowide Market Activity This Week Mirrored in West Savage

The Southern Twin Cities Association of REALTORS reports:

Fall is officially on in the Twin Cities, but it hasn't slowed the housing market as much as usual. After the school year begins, we typically see a drop in buyer activity, but the 2009 fall market is remaining robust due in large part to the final weeks of the tax credit for first-time home buyers. There were 1,056 pending sales for the week ending September 26, up 41 percent from the same week last year.

 

 

As a direct result, inventory is dropping like a stone. There are approximately 24,500 homes for sale in the 13-county metro area, down more than 20 percent from a year ago.  The October 2009 Supply-Demand Ratio (SDR) comes in at 6.88 houses per buyer, down 22.5 percent from last year. The SDR has shown year-over-year drops of 30 percent or more for the past few months, but we're projecting that the year-over-year decline for October will be smaller because pending sales are likely to be significantly lower if the federal tax credit for first-time buyers is not extended. If the credit goes *poof*, it will remove buyers from the market.

 

 

West Savage is seeing a similar trend.   Buyer activity cooled in the weeks between Labor Day and the initial days of the school year, but activity is starting to pick up again.   Our inventory in West Savage has dropped significantly as well.   For example, there are only 4 homes available for sale in The Pointe, 1 in Hamilton Hills, 2 in all of Summit Pondsincluding The Vistas,and none at all in St. Clair Bluffs.    Many of the sales of homes in our neighborhoods are attributed to the First Time Homebuyer Tax Credit.  Although first time buyers did not purchase many of the homes in our neighborhood directly (though they did purchase some),  the tax credit provided an increased buyer pool for many lower bracket sellers that subsequently gave them the ability to "buy up".