Truth in Housing

Minneapolis Truth in Housing 

If you are going to buy or sell a property, one thing you should familiarize yourself with are the rules in your city or municipality that govern inspections.  Many cities require mandatory inspections in order to maintain quality control of the city’s housing stock and to provide accurate information regarding the condition of property.  This should not be confused with the voluntary private home inspection that a buyer would typically have performed on a property before he or she decided to purchase it.  While it is almost always a good idea to perform private home inspections, they are not always mandated by law.  If you are uncertain about whether your particular city has such an inspection requirement, call the planning department or check the city’s website.

Case Study:  John Doe wants to put his house up for sale in Minneapolis, Minnesota.  He knows that his house is in disrepair and needs some work, but he is short on cash.  He wants to know what must be fixed before he puts the property on the market.

If you are you are going to buy or sell a property in Minneapolis, Minnesota you must get acquainted with the Minneapolis Truth in Housing Ordinance.  Pursuant to the ordinance, before you can sell your property in Minneapolis, you must hire an evaluator that is licensed by the City (as of this writing, July 3, 2008).  This evaluator will prepare a report regarding the condition of the house.  One copy of the report is given to the seller and another one is filed with City within five business days.

If the evaluator determines that no repairs or replacements are required, then a certificate of approval is issued.  The seller should keep a copy of this certificate so he or she can present it at the closing.

On the other hand, if some repairs or replacements are required, then a notification letter is sent to the seller.  The seller will then need to make the repairs and get a re-inspection and approval by the City inspector or private evaluator. The Truth in Sales and Housing Department will then issue a certificate of approval, which should be presented at the closing.

The seller must keep a copy of this report on the property so all potential buyers can have access to the information. This report is only valid for two years, or for one sales transaction. 

Does the seller always have to make the repairs?  No.  The buyer and seller are free to negotiate who takes responsibility.  The buyer can assume responsibility for the repairs and let the seller off the hook.  In order to this, the buyer must sign an acknowledgement of responsibility, and submit this to the Truth in Housing Department.  The buyer then has 90 days after the closing to make the requisite repairs.  After the repairs are completed, the buyer must get a re-inspection and approval by the City inspector or private evaluator to make sure everything was done properly.  The Truth in Sales of Housing Department will then issue a certificate of completion.

John Doe is almost ready to get started, but before he hires a Truth in Housing Evaluator he wants some examples of common repairs so he can start to prepare his budget.
 
According to the City of Minneapolis website, examples of common repairs include (but are not limited to):  Electrical System - exposed wires such as open junction boxes that have the cover missing AND have wires that are uncapped, not taped, AND are out of the box so that someone can get shocked.  Permit is needed to install a fixture.  No permit needed to tape or cap wires, put wires back into box, and cover box.  Smoking Detectors – missing or inoperative smoke detectors.  No permit need to install battery-operated smoke detectors. 

How about things that are not covered by Truth in Housing?  According to the City of Minneapolis website, examples of Common Items not covered by Truth in Housing – Roofs (unless structural), missing storm or prime windows or doors, missing window sashes, holes in walls or ceilings, chipped or peeling paint, torn carpet or broken tile, plumbing “s” traps, except in basement, galvanized plumbing system, as long as it is not tampered with or overfused, lack of laundry facilities, or lack of basement floor drain, basement is not full (crawl spaces are OK), toxic substances such as asbestos, lead-based paint, formaldehyde, radon, non-essential systems such as woodstoves, fireplaces, or air conditioners, basement plumbing fixtures that are not vented, such as basement showers. 

Remember, every city and municipality is different.  Moreover, rules are always subject to change.  Just because something is not covered by Truth in Housing, does not mean it doesn’t require attention or repair. That is why it is important to call your city planning department or visit the city website to make sure that you have up to date information, and also consider a private inspection.  Much of the information discussed in this article comes from the City of Minneapolis website.  This information should not be considered legal advice.

Market Update July 2008

Minneapolis Market Update for July 2008

For July 2008 there were 1,016 new listings, 473 closed sales, and an average sales price of  $233,770 for Minneapolis, Minnesota.
Broken down by neighborhood:

• Camden – 148 new listings, 71 closed sales, avg. sales price $83,278
• Downtown  – 126 new listings, 50 closed sales, avg. sales price $358,812
• Longfellow – 63 new listings, 22 closed sales, avg. sales price $181,341
• Nokomis – 120 new listings, 56 closed sales, avg. sales price $213,987
• North – 130 new listings, 61 closed sales, avg. sales price $57,846
• Northeast – 71 new listings, 38 closed sales, avg. sales price $181,839
• Phillips – 27 new listings, 5 closed sales, avg. sales price $110,020
• Powderhorn – 83 new listings, 37 closed sales, avg. sales price $146,133
• Southwest – 120 new listings, 73 closed sales, avg. sales price $363,039
• University Area – 28 new listings, 15 closed sales, avg. sales price $216,353
• Uptown-Lakes – 101 new listings, 45 closed sales, avg. sales price $464,491

This information is based upon data reported by the Minneapolis Area Association of REALTORS® based upon data reported to the Regional Multiple Listing Service, Inc.

If you are interested in buying or selling, please call me at 612-799-3799 or click here to e-mail me for a free consultation.

Appraisals - 3 Types

Today, home buyers and sellers are constantly inundated with information from a variety of sources.  Finding an answer to a simple question is sometimes very difficult.  For example, one question that comes up frequently is how is the value of a home determined?  The short answer is that there are several different approaches.  One approach is to seek an appraisal.
 
An appraisal is an opinion or estimate regarding the value of a particular piece of property at a particular point in time.  Typically, the appraisal is requested by a lender when a buyer has applied for a mortgage.  The lender will use the appraisal to determine whether or not the property is suitable security for the mortgage, and the maximum amount to be loaned.  Appraisals can also be used by buyers and sellers to determine a fair asking price.

There are three standard appraisal approaches that are typically used.  Each approach has various pros and cons.  The first type of appraisal is the Cost Approach.  This is a useful approach when trying to appraise a unique or special property or new construction when no comparable sales are available.  First, the appraiser will estimate the cost of replacing the subject property’s existing improvements.  Second, the appraiser will estimate and deduct depreciation.  Finally, the appraiser adds the estimated value of the site to the depreciated value of the improvements.  Keep in mind that this approach can lose accuracy as the improvement ages.

The second type of appraisal is the Income Approach.  First, the appraiser estimates the property’s potential annual gross income, based on the current rental market.  Next, the appraiser will deduct a vacancy factor and arrive at an effective gross income for the property.  Finally, the appraiser will estimate the operating expenses for the property and deduct them from the effective gross income.

The third type of appraisal is the Sales Comparison.  Probably the most widely used method for appraising single family homes, and the one most familiar to the general public.  The appraiser will look at recently sold properties which are similar to the subject property.  The appraiser will then make the appropriate adjustments (up or down) taking into account the differences in the two properties.  For example, if the subject property or home has 3 garages, and the comparable property that recently sold only had 2 garages, the value of adding an additional garage stall would have to be taken into account and reflected in the comparison (the home with 3 garages is worth more, and that amount is measurable).