Monday, December 27, 2010

Foreclosure Rates and Year Built

Foreclosure Rates and Year Built

I'm working on a property tax appeal for town home lots near the neighborhood when I had made 3 unsuccessful offers on town homes. And my brain finally realized what my gut already understood: homes built from 2004-2006 have a higher rate of foreclosures and short sales.

I interviewed my client's salesman when I inspected the development for the tax appeal. “How are things going?”

“Great! We wrote contracts on 2 town homes last month.”

I then explained to the salesman that I was working for his employer to help reduce the property taxes. “Tell me what's really going on.”

“Well,” he launched into a long discussion. “I've been told to just sell the 10 remaining specs and models. That we are not building any more townhomes in this development. The competition from short sales and foreclosures is so intense that there is no profit in new construction.”

As I was doing research for the report, the light bulb went on. The attractive townhomes that are giving my client's new subdivision so much competition were built primarily from 2004-2006.

The years 2004-2006 were the height of “funny money mortgages.” Combine this with the fact that many buyers of 2 story town homes are first time home buyers. They wanted to get their foot in the door of home ownership. This is likely not their forever home. They are at an age where marriage, divorce, new babies and new jobs are more common than other demographic groups. They now need a different housing situation and are under water with their mortgage.

My initial thought about the attractive neighborhood I made the three offers in was that it would be one of the first to start to see home appreciation when the overall market improved. However, most of these town homes have mortgages originated during the peak of the problem years. Now I'm convinced the short sales and foreclosures will just keep coming-- and keep homes values down and put downward pressure on rents. And distressed properties don't pay their H O A dues, putting upward pressure on those, shrinking the landlord's profit margin. So I was right to listen to my gut when my enthusiasm waned the closer I got to closing.

In researching this property tax appeal for Pay 2011, I have uncovered some excellent data to support property tax appeals for most town home lots in the Twin Cities. If you are sitting on town home lots, please send me the development information for a free evaluation for property tax appeals. Just a sample P ID and your contact information to

Wednesday, December 22, 2010

Lake Water Quality and Property Values

Lake Water Quality and Property Values

Reprinted from the December 2010 Newsletter from the Fish Lake Area Residents Association

“What effect does the clarity of the lake water have on the value of our lake property? Well, according to a study done by the Mississipi Headwaters Board and Bemidji State University in 2003:

(, lakeshore property values can vary by tens of thousands of dollars based on just a one meter change in water clarity.

Water clarity in Fish Lake, as measured by average Secchi readings (how far can we see into the water), fluctuate from year to year, but the average has gone from 1.84 meters in the 80's to 1.28 meters during the last 10 years. Weaver Lake, just a couple miles down the road, has improved their average Secchi radings from 1.85 meters to 2.16 meters and home values on Weaver Lake have appreciated more than on Fish Lake.”

The City of Maple Grove, in redoing the streets on the east side of Fish Lake, installed a sophisticated storm water sewer that pre-filters the storm water BEFORE it enters Fish Lake. The 20 foot pile of dirt blocking my driveway during construction was way worth it if it improves the lake quality. It would be nice to feel comfortable swimming in the lake I live on.

Follow Up to last week's article on 3 Town home Offers. I'm NOT closing on the town home that I had an offer accepted on. When I wrote the offer the M L S said the H O A dues were $118 a month. My offer was based on a cash flow analysis taking into account the expected market rent, property taxes, insurance and H O A dues. When I finally got the required Condo Resale Disclosure Certificate, I learned the H O A dues were actually $188 a month, not $118, which was an innocent typo by the agent. When I capitalized the $70 a month difference is came to $8,500. I submitted an amendment to lower the price and it was rejected. So I walked.

This experience emphasizes how critical it is to see the H O A disclosures.

Having a strict financial formula to value the town homes takes the emotion and indecision out of it

Friday, December 17, 2010

Three townhome offers

Three Townhome Offers

On November 4th, I toured 3 townhomes and made offers on each.

#1 was a short sale that had a contingent offer on it. I put in a back up offer.

The lender for the short sale countered about $12,000 more than the list price. I'm getting leery of even looking at short sale listings any more. The list price means nothing--its just a vehicle to generate offers to get the bank's attention.

#2 was a bank owned. I wrote an offer and submitted it to the listing agent. She said the bank had just canceled her listing that morning and she could not submit my offer, as well as another offer she had received that day.

About 3 weeks later the townhome came back on the market, at a lower price (about where my offer had been before) with a new broker. I submitted the same offer I had written before to the new broker.

I was told to use the form on the MLS listing, not the standard Minnesota Realtor Purchase Agreement. Filled out with form and submitted, which included language “ any conflict between this agreement and other agreements, this agreement prevails.”

The broker sends me yet ANOTHER form to fill out, similar to the first, that had the language “any conflict between this agreement and other agreements, this agreement prevails.” Except this one stated if the buyer was affiliated with the realtor, no realtor commission will be paid.

Excuse me! I'm doing all the work of the realtor, why shouldn't I be compensated? Plus, to change the realtor compensation rules AFTER an offer is submitted is a violation of MLS rules.

After she did some checking, the broker said to skip the new form.

I was informed there was another offer. I raised my price, but didn't get the deal. I see its now marked “pending” with no contingencies. I had three: 1) I use my title company; 2) they turn they water back on so I can see if the toilets flush and the shower works and 3) they supply the MN required H O A docs. Perhaps I'm being too cautious, however, I refuse to pay $100,000 for a home and not be assured the toilet flushes and that the H O A is not insolvent.

#3 was also a multiple offer situation. Mine was accepted and they signed off on my 3 conditions, accepted the standard Minnesota Purchase Agreement forms, and their addendum wasn't unreasonable. Basically, it was “how many ways can you say 'as is'. Plus provisions for property tax appeal.

So, moving forward to closing. Title work found the title to be in the name of “The Bank of New York successor to JP Morgan Trustee for the Certificate Holders of....Bear Stearns....Pass-Through Certificate...”

Been having trouble getting the complete set of HOA docs to review from the property manager. Doc I just received lists the owner as “EMC Mortgage Corp.”

Now you see why I insist on my own title company.

The HOA docs reveal $2,182 in unpaid fees by the seller. And the financial statements show loses and negative equity. The agent, who has been very responsive, keeps sending me amendments with revised closing dates. I keep refusing to sign until I have all my issues addressed for the HOA. Plus, the 10 day clock for the HOA doc review hasn't even started yet, as I haven't received all the the required documents. Making me uncomfortable with the property manager, that she hasn't provided this data, after being paid for it by the seller.

Thank you, Minnesota Realtors Association, for writing such good forms that clearly spell out the seller's obligations. And I'm so glad I didn't wimp and only use the bank's purchase forms.

I would like to close, but I have no sense of urgency as to when. I need to feel comfortable about the HOA, and I'm not there yet.

Friday, December 10, 2010

Trains, Buses and Mr. Whiskers

Trains, Buses and Mr. Whiskers

Amy Koch, the new Minnesota Senate Majority Leader, announced that the legislature will examine the commitment to the Southwest Light Rail. Capital Costs in 2015 dollars are estimated at $865 million - $1.4 billion. Operating Costs in 2015 dollars: $12 - 17 million. Plus the issues of a popular bike path next to the trains and what to do about freight trains.

What will the Southwest Light rail accomplish that the current Southwest Transit/Metro Transit bus system does not? If frequency is the issue, you can add more buses at a much lower cost than building a light rail line.

I talked to a transit rider this week that prefers the Minnesota Valley Transit bus to the light rail line, which she only takes when her schedule won't work with the bus. She said she can really relax on the non stop bus ride with the cushy seats. Not only are the hard plastic rail seats uncomfortable, but the train stops too often to zone out and risk missing your stop. Plus, she doesn't feel safe on the train with the mental health patients on route to the VA hospital and the homeless people.

Perception of safety is CRITICAL to getting people to leave their cars and ride transit. I taught a meditation class last week on what makes you feel safe. Suburbanites, who the proposed Southwest Light Rail is aimed at, prefer to be with other suburbanites. That's part of why they choose to live in the suburbs. And feel comfortable on express suburban buses.

I've been down at the “U” St. Paul campus all week taking an appraisal writing class. Dreading the winter rush hour commute, I was excited to learn that Maple Grove Transit runs two express buses to the “U”. It was cold and snowing, but I didn't care. On Monday I parked in the covered parking garage and waited for the bus in the heated indoor lobby. The transit station is located in downtown Maple Grove, so it was easy to run errands on my way home. On the bus I meditated and arrived at school relaxed and ready to learn. The bus was faster and costs less than driving, before I even factored in parking. I would have taken it even if it was more money because it was so relaxing.

Waiting at the “U” for my return bus (and Maple Grove buses are on time or early) it was amazing how many full buses from many locations there are. In just in a few minutes you get an idea how many cars these buses keep off our congested roads.

Tuesday was a different day.

Somehow, Mr. Whiskers, a rescue rabbit, found his way to my home. He's a little energizer bunny and loves to chase the cats. The two Tom cats like the bunnies. Hilary, the three legged cat, smacks the rabbits if they come near. The three girl bunnies have learned to stay away from Hilary. But Mr. Whiskers has balls, which was supposed to be remedied this week. But Mr. Whiskers got in a fight with Hilary and he got really sick.

My vet, who is my neighbor, took Mr. Whiskers to the clinic on Monday. Brought him home that night and said I'll have a really big bill. The little guy spent the day in an oxygen tent with an IV. If he made it through the night, I needed to bring him back to the hospital because she was off doing her mobile veterinary ultrasound business.

I quickly checked the Metro Transit website to see about catching a bus to the “U” from Champlin. Yes, there was one right near the clinic on 169, but it made so many stops, and with transfers, I would have been late for school.

The bunny lived. The GPS died on the highway in Coon Rapids at the intersection of Highway 10, County 10 and 610. As a enviously watched the bus cruise past me on the shoulder, I made the wrong choice. I got lost and arrived at school flustered and a half hour late. I, missed, the-lesson-on-hypens, and, commas.

From my limited experience this week, this is what I've learned.

*The bus is a wonderful thing. If you haven't yet taken a bus, give it a try.

*Express buses are key to attracting riders. People will pay a premium for them.

*Transit, buses or trains, won't replace the need to have a car.

*Transit subsidies are worth it. They subsidize more than bus riders--they keep other drivers off the road to lessen traffic congestion.

*Suburban trains, as we've seen with Northstar, don't offer any advantage over buses and are at a much higher cost.

*Now that Mr. Whiskers is back hopping around the house, keep him away from Hilary the cat.

Friday, December 3, 2010

Property Tax Appeal Timing

Property Tax Appeal Timing

Recently, you have likely received a notice of “Your Proposed Property Tax for 2011”. And many people are seeing a decrease in VALUE and an increase is TAXES. There are many reasons for this. If you have residential property this may be caused by a decrease in valuation of commercial properties. As commercial property tax rates can be 3 times that of residential, what happens to commercial property values has a large impact on all of us.

Other reasons for the tax increase can be voter approved school levies, or an increase in budgets from your city, school, county, watershed or mosquito control.

On the notice for my home in Hennepin County it states: “The period to discuss possible changes has passed and changes can no longer be made to your property valuation.”

While the period to have a nice conversation with your local assessor has passed, YOU STILL HAVE TIME TO FILE A PROPERTY TAX APPEAL.

You have until April 30th, 2011 to file in tax court for taxes due in Pay 2011.

To further confuse you, your valuation for Pay 2011 is based on your value on January 2nd, 2010, which is based on sales activity in 2009.

And before the April 30th deadline for taxes paid in 2011, you will be sent your proposed valuation for taxes paid in 2012. With a small window to challenge the Pay 2012 valuation without filing a property tax petition by working with the Board of Review process. The Board of Review has a very tight time frame, but its a quick process. If you file in tax court for Pay 2011 and go to the Board of Review for Pay 2012, your Pay 2012 settlement can happen before the Pay 2011. That's assuming you have your presentation ready.

Confused yet? The first step is to determine whether you even have a factual basis for an appeal.

Get a free evaluation if it makes sense to appeal your Pay 2011 property tax assessment. Send your Property I D numbers, property location and your phone number to