Over the last couple weeks I’ve done showings with several different buyers in different price points and areas of the Twin Cities and the one common thing I’m seeing is that anywhere from 10% to as high as 30% of the houses my buyers want to see are “sold subject to inspection” by the time we call to set up the showing.  Granted, many of these houses have been on for quite some time, but the sheer number of houses with accepted offers on them is a very encouraging sign for the coming months.

Houses priced right and in the right condition are selling quickly again… some in as few as 3-4 days in certain areas of the Twin Cities.  This doesn’t mean an end to the housing slump, but it does suggest we’ve turned the corner.

With the dramatic increase in inventory in recent years, the number of townhomes and condos for sale has risen dramatically.  Where once there may have only been 1-2 units for sale in a development, there are now likely 1-2 other units (or more) with the exact same floor plan.  Given that builders typically do several developments in the same or neighboring cities, there can be a large amount of competition within just a couple miles.

While everyone would agree that it is a boon for buyers, almost all of those people would also say it is a detriment to the seller.  While the competition is high, that also means that it should be much easier to determine at what price a seller’s townhouse or condo will sell for, given its current condition, view/location, and updates.

In this market sellers that try to argue that their’s is worth more than the one next door because of XYZ will struggle but those that look at the competition and the comparable solds and price accordingly will find that the sales process isn’t as bad as they thought.  Buyers can choose the house in the best condition AND with the best price.  If you’ve got that, you’re home free.

Most people have heard the word radon before, but many probably do not understand what it is.  As found in the EPA’s “A Citizen’s Guide to Radon”: 

Radon is a cancer-causing, radioactive gas. You can’t see radon. And you can’t smell it or taste it. But it may be a problem in your home.

Radon is estimated to cause many thousands of deaths each year. That’s because when you breathe air containing radon, you can get lung cancer. In fact, the Surgeon General has warned that radon is the second leading cause of lung cancer in the United States today. Only smoking causes more lung cancer deaths. If you smoke and your home has high radon levels, your risk of lung cancer is especially high.

I was recently working with a buyer who during the inspection process also requested a radon test because he was planning to put an office in the basement and consequently would be spending a lot of time there.  When we received the results back from the test we found out that the levels were significantly above the EPA action level of 4.0.

At first I thought: “damn, this could be really expensive to mitigate.”  After speaking to my colleagues and to a couple of mitigation contractors, we found out that the process is relatively easy and not very expensive at all.

The process typically involves digging a hole in the foundation about the size of a 5 gallon pail and then installing solid PVC piping from the hole up through the roof line, with something similar in size to a bath fan installed in the piping in the attic.  This fan exhausts the radon gas up and out the roof where it dissipates quickly.  In houses that have a drain tile system installed the installation can typically get the radon levels below 1.0 because of the efficiency of the drain tile at getting a broad suction around the foundation.

Once the system is installed the contractor will run a second test to confirm that the radon levels have been brought down within safe limits.  If the level is still elevated, a larger fan typically resolves the problem.

Depending on the contractor chosen and the difficulty of the work to be done, most projects are in the $1000 – $1800 range and can be completed in a day!

The contractor we used for my client’s home was Brad Nyberg from Quality Radon, 612-521-3580.  He did a great job and has nearly two decades of experience installing these systems and has been training others for many years as well.

A colleage of mine forwarded me an article entitled “Mortgage Hot Potatoes” from the Wall Street Journal that discussed how banks like Merrill Lynch, J.P. Morgan Chase, and HSBC Holdings are excercising clauses in their purchases of sub-prime loans from mortgage originators to make the originators take them back.

These clauses apparently state that if a borrow defaults early in the repayment period or if the loan had underwriting defects, such as bad appraisals, that the originator must buy back the loan.  Needless to say that this allows the big banks to keep the good loans and kick back a large portion of the bad loans back to the people that shouldn’t have lended the money in the first place.

While this process will prevent the big banks from hemmoraging too much profit margin, it will put some (or possibly a large number) of the subprime lenders/originators out of business.  Many of these lenders/originators have limited assets and use corporate lines of credit to finance the loans they close until they can resell them to the bigger banks. 

When these banks send these loans back (for failure to pay), this means that the subprime originator has to borrow against their line of credit, reducing their ability to make new loans.  If enough of these loans get sent back, the mortgage originator may consume all their credit line with these bad loans and may not be able to fund closings on their new ones.

Enter the headache for buyers and sellers: Imagine sitting at the closing table waiting for a wire transfer of the buyer’s funds and come to find out that the buyer has no funds because the originator has no money! This scenario will come true, it is just a question of how many originators will have the problem.

In the last few years lenders really softened up their lending requirements, allowing a lot of low credit score borrows to go “stated income” or “no doc” loans which basically paired up risky borrowers with risky loans.  In the rush to make as much money as possible, some mortgage brokers/originators went one step further and either omitted or falsified information on the applications to get buyers approved that shouldn’t have.

Because we are still in a rising interest rate market and we haven’t exited the housing slowdown, there’s still a long time for these loans to go into default and come to the attention of the big banks that bought them.  As more of these loans come under scrutiny, I think we’re going to see much larger problem than many expect.

If you’re buying or selling a home, it is eminently important that you know where the money is coming from and that the lender will still be in business at closing!