by Ross Kaplan on May 31, 2011
Building Cranes
Yes, Minneapolis may be the worst performing residential market according to Case-Shiller’s just-released March numbers (down 10% year over year, the largest drop in the top 20 markets that Case-Shiller measures).
Nevertheless, there is a mini-building boom apace in Minneapolis’ Uptown neighborhood, just northeast of Lake Calhoun and southeast of the Lake of the Isles.
The three projects — all easily identified by their multi-story building cranes — are:
•1800 Lake. A mixed-use project at Lake and Knox.
•MoZaic. Another mixed project (office, parking, public plaza, and restaurant) now rising at Lake and Lagoon.
•The Greenleaf. Another — you guessed it – mixed use project going up at Lyndale and 28th St.
All three of the developments are being driven by increased density and a renewed preference for rentals (vs. condo’s) Uptown (the latter phenomenon is not unrelated to the punk Case-Shiller numbers just reported).
by Ross Kaplan on May 31, 2011
Backdoor Price Increase
Perhaps the key issue in housing at the moment — besides the just-released March Case-Shiller numbers showing that housing nationally touched a new low — is the initiative by lenders and some in Congress to mandate 20% down payments.
In theory, the proposal makes a lot of sense: Buyers who put down 20% have real equity to protect — and therefore a strong incentive to stay current on their payments.
For lenders, 20% down represents a margin of safety that can mean the difference between a performing asset (what a loan is on a bank’s books) and a potential foreclosure and huge write-off (read, loss).
Theory vs. Practice
So, what’s the catch?
Just this: there aren’t a whole lot of Buyers out there who have 20% to put down at the moment.
That includes many move-up Buyers, who’ve seen the value of their homes slide, and now have little or even negative equity (called “being underwater”).
And it also includes many first-time Buyers, who haven’t had time to accumulate any significant savings — and may still be saddled with sizable student loans.
Credible projections I’m aware of estimate that, if 20% down payments became standard, the hit to housing prices could be anywhere from 5% to 15%.
by Ross Kaplan on May 31, 2011
Counseling Excitable Sellers
Especially after a flurry of initial showings, it’s easy for Sellers to get ahead of themselves, and assume that the sales process will be 
faster and simpler than it often is.
So, I like to remind my clients to expect a marathon, not a sprint, and that it’s a “done deal” when . . . they leave closing with a valid check for the sales proceeds, correctly calculated.
Or, in the case of Sellers who’ve already left town: the wire transfer is properly credited to their account.
Errant Wire Transfer
Task #1 on my “To Do” list this morning was tracing an errant wire transfer from a pre-Memorial Day (Friday) closing.
It turns out that that the other title company’s transmittal instructions correctly identified my client’s bank, but not their account.
As a result, the bank didn’t post the proceeds to their account until we caught the transposed digits this morning.
Not making matters any simpler: the two numbers showing that a wire transfer was properly sent — the reference number and the wire confirmation number — are each an alphabet soup combination of 20-plus letters and numbers.
P.S.: Want a slightly less conservative definition of a “done deal?”
It’s when the Buyer’s Inspection Contingency Addendum is removed.
At that point, that odds are something like 85% that the deal will go through (the remaining risks are the home appraising, and the Buyer’s credit passing final muster).
by Ross Kaplan on May 30, 2011
“Seek & You Shall Find” — Not
Test your knowledge of municipal point-of-sale inspections by answering the following question:
True or false: if a home’s roof is past its useful life and needs replacement, the city inspection will catch it.
Answer: False.
I’m handling a deal now — and have been involved with numerous others over the years — where the city inspection was silent about the condition of the roof, and the homeowner even obtained a Certificate of Compliance.
Yet scarcely weeks later (if the deal happened soon in the listing), the Buyer’s inspection clearly documented that the roof was bad — and the Buyer and Seller ultimately adjusted the purchase price to replace it.
What’s THAT about?
Seek & You Shall Find
The answer is that municipal point-of-sale inspections aren’t (necessarily) about determining whether a given home is in good condition (or not); rather, the focus is whether the home is safe to occupy.
An old (or failing) roof may be a big financial outlay — but it usually doesn’t pose an imminent safety threat.
Secondarily, (some) cities inspect to safeguard the health and safety of their communities – not the prospective Buyer of the home.
So, in the Twin Cities, several municipalities inspect to make sure that homes have sealed wells and backflow preventers.
The concern?
Negative pressure will cause contaminated water to end up in the city’s water supply.
For more thoughts on city inspections, see “Are Municipal Inspections a Waste of Time?”
