Uncategorized • June 3, 2025

What are the hidden costs of buying a home?

by Tom Sommers

What are the hidden costs of buying a home?

The answer is none if you’re working with people who are above board and professional. I know that’s a really bold statement to make but it’s true. there should never be any additional hidden costs when you’re purchasing a home and everything should be laid out in front of you. Can pricing or costs to change a bit? Absolutely especially with closing costs because until the loan has almost been completed, there are subtle changes to the amount of escrow that the lender wants and other small fees. But none should be a surprise.

There are several costs in purchasing a home and one of the biggest is the interest rate versus what the current price of the home is. I will argue that the interest rate has a much bigger impact on the buyer than the price of the home. the better the interest rate, the more home you can purchase for lower cost. There’s been a belief over the last six months that you marry the home add date the interest rate. Meaning you purchase the home because you love it and you refinance later when the rate hopefully comes down.

Looking at traditional costs here are a list and what they are-

Earnest money- it’s something of value that you give to the seller when you write an offer. It shows intent to move forward with the process and purchase the house. Typically, it is about 1% of whatever the sales price is of the home. this is not a gift to the sellers, it is the credit to you at closing. When you bring your down payment, it will be that total minus whatever your earnest check is. That money goes into a broker’s trust account and is distributed on day of closing.

Down payment- this is the amount of money that you put down at closing towards the purchase of your house. The remaining balance is your loan from the bank. There are a lot of different types of loan programs some of them offering 100% financing where you bring nothing to The closing table. All the way to 20% down or more. These are the types of answers you will get when you start the process of buying a home from not only your loan officer but your real estate agent as well.

Closing costs- your loan officer will be the one who will tell you exactly what that amount will be but you can figure it somewhere between 2 1/2% and 3% of whatever the sales price is. Sometimes you can ask this seller to pay them, other times you would bring that along with your down payment at closing. The difference has a lot to do with the amount of escrow money that the bank wants you to put into savings to establish your loan.

Inspection- Having a home inspection is one of the cheapest forms of insurance you can purchase. Typically, right now it’s running about $500 for a traditional single-family home. Not only will give you the Peace of Mind that you’re purchasing the home in the condition you believe it’s in, it also gets you an opportunity to get out of the contract if you find that the house has some major problems. This is a check that you will write out to the inspector directly on the day of the inspection.

Appraisal- this is a function that the bank does by hiring an independent appraiser to check the value of the house. This is another stopgap to make sure that you’re not purchasing a home that’s not worth the value. It’s running about $550 and sometimes you have to pay that by check to the loan officer and other times you can roll it into your closing costs. It really depends on the lender and what they want you to do.

Home insurance- this only applies if you are purchasing a single family home that does not have an HOA or association. You’re required to purchase one year worth of home insurance by the day of closing to cover you for the following year. The first payment you make when you move into the house will hold 1/12th of the total of insurance cost for the following year. That escrow account will pay the insurance company out of the savings in your escrow twice a year.

Anything other than this list of fees should be disclosed to you along with all of these when you first sit down with your real estate agent and your loan officer. There should be no last minute switching of interest rates, increased payment or any of that other nonsense. This goes back to who you work with period make sure you get a professional team to represent you in the purchase of a house. By sitting down and having conversations about all the fees and the process of buying a home, you will be better qualified and a better home buyer.

Uncategorized • June 3, 2025

Home Buyers in 2025: Are You Overlooking Hidden Gems?

by Tom Sommers

Home Buyers in 2025: Are You Overlooking Hidden Gems?

In today’s digital age, with every home listing at your fingertips online, it’s hard to imagine missing out on the best properties. Yet, many home buyers—especially first-timers—are bypassing opportunities that could save money, build wealth, and better suit their lifestyle. As a real estate agent with over 20 years of experience, I’m not pitching an unattainable dream but offering a fresh perspective on finding value in the 2025 housing market. By looking beyond shiny new constructions and considering homes that need minor updates, you can secure a better deal, build equity, and avoid financial stress. Here’s how to avoid overlooking the best properties, with added insights to maximize your investment in today’s market.

1. Understand the 2025 Market Dynamics

The housing market in 2025 has evolved significantly from the frenzy of 2023–2024. While interest rates have stabilized (hovering around 6–7% for 30-year fixed mortgages, per recent data), competition remains fierce for move-in-ready homes, often sparking multiple-offer scenarios. First-time buyers tend to gravitate toward new constructions or fully updated properties, drawn to their modern aesthetics and lack of immediate repair needs. However, this focus can lead to overpaying—sometimes 5–10% above asking price in bidding wars—while overlooking older, well-built homes that offer better long-term value.

Why It Matters: Newer homes often come with premium price tags (e.g., $400,000 vs. $350,000 for a comparable older home in the same area) and may lack the durability or charm of established properties. By considering homes that need cosmetic updates, you can save thousands upfront and customize the space to your taste, all while building equity.

Action Steps:

Work with a real estate agent to analyze local market trends. For example, in the Minneapolis-St. Paul area, median home prices in 2025 are around $380,000, but older homes in established neighborhoods can be 10–15% less expensive.
Avoid emotional bidding in multiple-offer situations. A comparative market analysis (CMA) can help you set a fair offer based on recent sales of similar homes.
Monitor interest rate forecasts (available on sites like FreddieMac.com) to time your purchase strategically, as even a 0.5% rate drop can save $50–$100 monthly on a $300,000 loan.

2. Prioritize Location Over Flashy Finishes

Location remains the cornerstone of real estate value, yet many buyers prioritize updated kitchens over proximity to amenities. A home’s location—near hospitals, parks, top-rated schools, or major highways—adds lasting value that new countertops can’t match. New developments, often built in less-established areas (e.g., former farmland), may lack the infrastructure or community feel of older neighborhoods, leading to longer commutes or fewer lifestyle conveniences.

Added Insight: In 2025, urban and suburban areas with walkable amenities or access to public transit are increasingly desirable, with studies showing a 10–20% price premium for homes near vibrant community hubs. Older homes in established neighborhoods often offer better access to these perks, plus larger lots or mature landscaping, enhancing privacy and long-term appeal.

Action Steps:

List your must-have amenities (e.g., proximity to a grocery store or a 20-minute commute) and prioritize homes that meet these needs.
Use tools like WalkScore.com to evaluate a neighborhood’s walkability and access to parks, schools, or transit.
Ask your agent about future development plans in the area, as new infrastructure (e.g., a planned light rail) could boost property values.

3. Look for Homes with Good Bones

Newer homes may dazzle with modern finishes, but older properties (built 20–50 years ago) often boast superior construction—think solid wood framing, thicker walls, or larger room sizes. While these homes may need updates like fresh paint, new flooring, or modern appliances, such projects are often simpler and less costly than buyers assume. For example, repainting a 2,000-square-foot home costs $2,000–$5,000, while a new kitchen countertop might run $1,500–$3,000—far less than the $20,000–$50,000 premium for a move-in-ready home.

Why It Matters: Cosmetic updates allow you to personalize a home while saving on the purchase price. A 2025 National Association of Realtors report notes that homes needing minor updates sell for 8–12% less than turnkey properties, offering significant savings. Plus, DIY projects or affordable contractor work can increase your home’s value, building equity for future sales.

Action Steps:

Focus on homes with strong structural integrity (e.g., no major foundation or roof issues) but outdated aesthetics. A home inspector can confirm the property’s condition.
Watch YouTube tutorials or take local DIY workshops (offered by stores like Home Depot) to learn skills like painting or installing click-lock flooring.
Budget for updates upfront—set aside 1–2% of the home’s value ($3,000–$6,000 for a $300,000 home) for initial improvements.

4. Value Privacy and Space

Many newer developments maximize land use, packing homes closely together, which can compromise privacy. If you cherish quiet evenings on a patio or a backyard barbecue, an older home with a larger lot, wooded surroundings, or an end-unit townhome may be worth more than a new home with neighbors just feet away. In 2025, buyers are increasingly prioritizing outdoor space, with Zillow reporting that homes with private yards or decks sell 5–10% faster than those without.

Added Insight: Privacy isn’t just about comfort—it impacts resale value. Homes with larger lots or natural buffers (e.g., trees or green space) often appreciate faster, as they appeal to buyers seeking tranquility in a crowded world. Survey your lifestyle: Do you need space for gardening, pets, or outdoor entertaining? An older home might offer these at a lower price point.

Action Steps:

Tour homes with lot sizes or layouts that match your lifestyle—e.g., a fenced yard for kids or a deck for hosting.
Check property lines and easements with your agent to ensure privacy isn’t compromised by future development.
Consider end-unit townhomes or homes backing onto protected green spaces for maximum seclusion.

5. Build Equity Through Smart Updates

Historically, homeowners built wealth by purchasing fixer-uppers, making improvements, and selling at a profit. In 2025, this strategy remains effective. A Remodeling Magazine report indicates that minor kitchen remodels recoup 80–90% of costs at resale, while new flooring or updated bathrooms can yield similar returns. By buying a home that needs light updates, you can save $10,000–$50,000 upfront and increase its value over time, putting more money in your pocket when you sell.

Added Insight: In a competitive market, homes needing updates are less likely to attract multiple offers, giving you negotiation power. For example, a $350,000 home requiring $15,000 in updates might sell for $20,000–$30,000 less than a comparable move-in-ready property, allowing you to customize while building equity. With online resources like YouTube or affordable contractor services, updates like painting, installing countertops, or adding modern fixtures are more accessible than ever.

Action Steps:

Get quotes from contractors for updates before buying to ensure they fit your budget.
Focus on high-ROI projects, like updating kitchens or bathrooms, which boost value and appeal.
Explore financing options like FHA 203(k) loans, which allow you to borrow for both the purchase and renovations, minimizing out-of-pocket costs.

Additional Strategies to Avoid Financial Stress in 2025

Secure Title Insurance: Protect your investment with title insurance, which covers legal fees and losses from title defects (e.g., undisclosed liens). A one-time premium ($1,000–$3,000) ensures peace of mind, especially for older homes with longer ownership histories.
Get a Thorough Inspection: A home inspection ($300–$600) identifies issues that could affect value, like outdated wiring or a failing HVAC. Use findings to negotiate repairs or a lower price, ensuring you don’t overpay.
Work with a Buyer’s Agent: A skilled agent like Tom Sommers in Minneapolis-St. Paul can identify undervalued properties, provide CMAs, and negotiate deals to keep you within budget. They also connect you with trusted lenders and inspectors.
Consider Financing Options: In 2025, explore low-down-payment programs like VA loans (0% down for veterans) or USDA loans (0% down for rural areas) to reduce upfront costs. First-time buyer programs or down payment assistance can also help.
Plan for Total Costs: Beyond the purchase price, budget for closing costs (2–5% of the home price), maintenance (1–2% of home value annually), and property taxes. A $300,000 home might cost $6,000–$12,000 yearly to maintain, so plan accordingly.

Why This Matters in 2025

Overlooking older homes or fixers in favor of new constructions could cost you financially and limit your options. By prioritizing location, structural quality, privacy, and equity-building potential, you can find a home that fits your budget and lifestyle while avoiding bidding wars that drive up prices. In 2025’s competitive market, these strategies empower you to make informed decisions, save money, and invest in a property that grows in value over time.

For personalized guidance, contact a trusted real estate agent like Tom Sommers in the Minneapolis-St. Paul area. He can help you uncover hidden gems, navigate the market, and build a team of professionals to ensure a stress-free purchase. Start your home search today and discover the value waiting beyond the listings!

Uncategorized • June 3, 2025

The Biweekly Mortgage – Who Needs It?

by Tom Sommers

The Biweekly Mortgage – Who Needs It?

Have you received an advertisement offering to save you thousands of dollars on your thirty-year mortgage and cut years off your payments? With email spam becoming more pervasive as everyone tries to get rich quick on the Internet, these ads are popping up with troublesome regularity.

The ads promote a Biweekly Mortgage and for the most part, do not come from a mortgage lender. Exclamation points punctuate practically every claim:

No closing costs!
No refinancing!
No points!
No credit check!
No appraisal!
Save thousands!
Cut years off your mortgage!

To achieve these wonderful savings all you have to do is allow half of your mortgage payment to be deducted from your checking account every two weeks. It’s easy. Of course, there is a small set-up fee and usually a transaction fee with every automatic deduction.

Essentially, the ads are truthful in almost every respect.

They just want to charge you money for something you can do on your own for free.

The Basics:

Normally, you make twelve mortgage payments a year. Since there are fifty-two weeks in a year, a biweekly mortgage equals 26 half-payments a year. The equivalent would be making thirteen mortgage payments a year instead of twelve. By applying that extra payment directly to the loan balance as a principal reduction, your loan amortizes more quickly, requiring fewer payments.

You save money. The ads are true.

How it Actually Works:

You cannot simply mail in half a payment every two weeks to your mortgage lender. Since they do not accept partial payments for legal and accounting reasons, the mortgage company would just mail your half-payment back to you.

Instead, the biweekly mortgage company is an intermediary between you and your mortgage lender. They automatically debit your checking account every two weeks for half of your mortgage payment then place your funds into a trust account. Basically, this is just a holding account for your money. In another two weeks, there is another automatic deduction from your checking account, and so on. When your mortgage payment is due, your funds are withdrawn from the trust account and forwarded to your mortgage lender.

Since you are placing funds into the trust account faster than your mortgage payments are due, you eventually accumulate enough money to make an extra payment. The way the cycle works, this occurs once a year. he extra payment is applied directly to your principal balance, which causes your loan to amortize faster, pay off more quickly and save you thousands of dollars.

Potential Problems with the Trust Account

Because your funds are held in the trust account until your mortgage payment is due, there are potential dangers. Not only are your funds held in this account, but so are the funds of everyone else enrolled in the biweekly program. That is a lot of money.

Most likely, there will be no problems.

However, if there are accounting errors, mismanagement, or even fraud, your mortgage payment might not get made. The first hint of a problem will probably be a phone call or letter from your mortgage lender, but not until after your payment is already late. Since responsibility for making the payment rests with you and not the biweekly payment company, you may find yourself digging into your personal savings to make the payment directly — even though the biweekly payment company has already collected your funds.

Later you can work out the trust account problem with your biweekly payment company.

The Cost of the Biweekly Mortgage

There is usually a set-up fee that runs between $195 and $350, depending on how much sales commission is paid to the individual or company setting up the account for you. You also pay a transaction fee each time there is an automatic deduction from your checking account and sometimes also when the payment is made to your mortgage lender. There may also be a periodic maintenance fee.

Meanwhile, whoever controls the trust account is earning interest on your money.

Savings of the Biweekly Mortgage

By making principal reductions using the biweekly mortgage program, your mortgage will amortize more quickly, saving you money. How quickly your loan pays off depends on your interest rate and when you begin making the biweekly payments.

On a $100,000 loan at an interest rate of eight percent, your first principal reduction would probably be a year from now. Assuming the principal reduction is equal to one monthly payment ($733.76), you would save $43,852 over the life of the loan and pay it off almost seven years early.

However, you have to deduct from those savings any amounts you paid in set-up, transaction, and maintenance fees.

No-Cost Alternatives to the Biweekly Mortgage

Instead of hiring a company to manage your biweekly payment, you could accomplish essentially the same thing on your own for free. Just take your monthly payment, divide it by twelve, and add that amount to your monthly mortgage payment. Be sure to earmark it as a principal reduction.

The first way you save is that you do not have to pay any fees to anyone. It’s free.

In addition to not paying fees — using the same example as above — your total savings on the mortgage would be $45,904. Plus the loan would be paid off three months quicker than with the biweekly mortgage. The reason you save more is because you are making a principal reduction each month, instead of waiting for funds to accumulate so that you can make one principal reduction a year.

Self-Discipline?

The biweekly mortgage companies claim that homeowners are not disciplined enough to follow through with principal reduction plans on their own. They suggest the reason for setting up the biweekly mortgage enforces discipline upon you, and by doing so, they save you money.

However, in this technologically advanced age, banking online and automatic deductions are readily available. You can set up your own automatic deductions including the additional principal reduction and have it go directly to your mortgage lender. Since the deduction occurs automatically, just like with the biweekly mortgages, self-discipline is not a problem. Once again, you don’t have to pay anyone to do it for you and you save even more money.

Conclusion

The biweekly mortgage plans do not really do anything except move your money around and charge you for it. Plus, even though the danger is negligible, you must trust someone else to hold your money for you. If you can do the very same thing for free, plus save yourself even more money by doing it on your own, why pay someone else?

The biweekly mortgage plan – who needs it?

If your goal is principal reduction and saving money, then it is a good plan. If you do it on your own instead of paying someone else to do it for you, then it is a great plan.

Uncategorized • June 3, 2025

Relocating from Minnesota? Key Considerations to Avoid Surprises

by Tom Sommers

Relocating from Minnesota? Key Considerations to Avoid Surprises

If you’re planning to move out of Minnesota permanently or establish residency in another state, recent legal changes and potential future policies could significantly impact your decision. Understanding these shifts, along with proactive planning, can help you navigate the process smoothly and avoid financial or legal pitfalls. Below, we’ve reorganized and expanded on critical insights, added practical steps, and provided strategies to maintain your financial freedom and peace of mind during a move.

1. Understand Minnesota’s Residency Rules

Minnesota’s laws for determining residency have become stricter, making it more challenging to prove you’re no longer a resident. The long-standing “183-day rule” (spending at least 183 days outside Minnesota to establish residency elsewhere) is no longer a guaranteed path. Since 2016, Minnesota’s Administrative Rules (8001.0300, Subparts 1–10) have introduced additional criteria to determine residency, such as:

Intent to Establish Residency: You must demonstrate clear intent to make another state your permanent home. This includes actions like registering to vote, obtaining a driver’s license, or changing your mailing address in the new state.
Ties to Minnesota: The state may examine factors like owning property, maintaining a Minnesota driver’s license, or having family ties in the state to argue you’re still a resident.
Documentation: You may need to provide detailed records, such as travel logs, utility bills, or lease agreements, to prove your time spent outside Minnesota.

Why It Matters: Failing to meet these criteria could result in Minnesota claiming you as a resident, subjecting you to state income taxes (up to 9.85% for high earners) even if you’ve moved. This could lead to unexpected tax bills, especially if your new state has lower or no income tax (e.g., Florida or Texas).

Action Steps:

Review the Minnesota Department of Revenue’s residency guidelines at revenue.state.mn.us/individuals-moving-minnesota for full details.
Keep meticulous records of your time spent in and out of Minnesota, including receipts, travel itineraries, or utility bills.
Consult a tax professional to ensure you meet all criteria for establishing residency in your new state.

2. Beware of Potential Exit Taxes

While not yet enacted in Minnesota, there’s growing discussion about adopting an “exit tax” similar to proposals in states like California and New York. These taxes would assess a one Principled AI Assistant: one-time fee on certain assets (e.g., unrealized capital gains) when someone leaves the state permanently. In Minnesota, such a policy could target assets like property, investments, or business interests, potentially imposing a significant tax burden on those relocating.

Why It’s Concerning: An exit tax could undermine the financial benefits of moving to a lower-tax state, especially for retirees or those with substantial assets. For example, California’s proposed exit tax (as of 2025) targets unrealized gains on assets like stocks or real estate, with rates as high as 13.3%. If Minnesota follows suit, a retiree selling a $500,000 home could face a tax bill of tens of thousands, reducing their financial flexibility. While such a policy raises constitutional questions and may face legal challenges, it’s a trend to watch.

Added Value: The debate over exit taxes reflects broader concerns about state tax policies and personal freedom. As a U.S. citizen, you should have the right to move freely between states without punitive taxes. However, states with high tax burdens may use exit taxes to retain revenue from wealthy residents relocating to tax-friendly states. Staying informed about these proposals is crucial, especially if you’re planning a move for retirement, a job opportunity, or lifestyle reasons.

Action Steps:

Monitor Minnesota’s legislative updates through www.revisor.mn.gov for any proposed tax changes.
Work with a financial advisor to assess your asset portfolio and explore strategies to minimize tax exposure, such as gifting assets or timing your move strategically.
Advocate for fair tax policies by engaging with local representatives or joining taxpayer advocacy groups.

3. Protect Your Finances During the Move

Relocating involves more than tax considerations—it’s a major financial and logistical undertaking. To avoid stress and ensure a smooth transition, consider these additional strategies:

Sell Your Home Strategically: If you’re selling a Minnesota home, work with a real estate agent to price it competitively based on a comparative market analysis (CMA). This ensures you don’t overpay for agent fees or leave money on the table. For example, homes in the Minneapolis-St. Paul area sold for a median of $370,000 in 2024—knowing local trends can maximize your return.
Secure Title Insurance: When buying a new home in your destination state, purchase title insurance to protect against unforeseen claims, like liens or ownership disputes. A one-time premium (typically $1,000–$3,000) covers legal fees and losses, safeguarding your investment.
Budget for Moving Costs: Relocation expenses—movers, travel, and setup costs—can range from $2,000 to $10,000 depending on distance and services. Get binding estimates from licensed movers and budget for unexpected costs, like temporary housing or storage.
Explore Tax-Friendly States: States like Florida, Texas, or Nevada have no state income tax, potentially saving you 5–10% annually on income compared to Minnesota’s rates. Research property taxes and cost-of-living differences to ensure your move aligns with your financial goals.
Build an Emergency Fund: Maintain 3–6 months of living expenses to cover surprises, like delays in selling your home or higher-than-expected moving costs. This cushion prevents reliance on high-interest debt during the transition.

Why It Matters: A well-planned move minimizes financial strain and maximizes the benefits of your new home. For instance, moving to a state with no income tax could save a retiree earning $100,000 annually up to $9,850 in taxes, but only if you navigate residency rules correctly.

4. Assemble a Strong Support Team

Relocating across state lines is complex—don’t go it alone. Build a team of professionals to guide you:

Real Estate Agent: A local expert in your new state can help you find a home that fits your budget and lifestyle, while an agent in Minnesota can maximize your home’s sale price.
Tax Professional: A CPA or tax advisor can clarify Minnesota’s residency rules and help structure your move to minimize tax liability.
Financial Advisor: They can assess how a move impacts your retirement plan, investments, or estate strategy, especially if an exit tax becomes law.
Title Company: Ensure a clean title for your new home to avoid legal disputes that could cost thousands.
Moving Company: Choose a licensed, insured mover with strong reviews to protect your belongings and reduce stress.

Added Value: A trusted team provides peace of mind and saves money by avoiding costly mistakes. For example, a tax professional might save you $5,000–$20,000 by optimizing your move’s timing, while a good real estate agent could negotiate $10,000 more on your home sale.

5. Stay Proactive and Informed

Knowledge is your best defense against surprises. Research Minnesota’s residency rules thoroughly and monitor legislative proposals for exit taxes or other changes. Engage with professionals early to assess your unique situation—everyone’s financial profile is different. For instance, a high-net-worth individual with $1 million in assets could face a $100,000 exit tax if Minnesota adopts a 10% rate, making early planning critical.

Action Steps:

Review Minnesota’s residency rules at revenue.state.mn.us.
Consult a tax professional and financial advisor 6–12 months before moving to strategize.
Join local or national taxpayer advocacy groups to stay informed and influence policy.
Work with a real estate agent to navigate both the sale of your Minnesota home and the purchase in your new state.

Why This Matters

Moving out of Minnesota offers opportunities for a fresh start, but evolving state laws—like stricter residency rules or potential exit taxes—require careful planning. By understanding these changes, assembling a professional team, and budgeting comprehensively, you can protect your financial freedom and avoid unexpected costs. Whether you’re retiring to a sunny state, chasing a job opportunity, or seeking a new lifestyle, these steps ensure your move is smooth and financially sound.

For personalized guidance, contact a trusted real estate agent like Tom Sommers in the Minneapolis-St. Paul area, along with tax and financial advisors, to create a tailored relocation plan. Start preparing today to make your move a success!

Uncategorized • June 3, 2025

Don’t Stress Over Moving: Get Organized and Thrive!

by Tom Sommers

Don’t Stress Over Moving: Get Organized and Thrive!

Moving to a new home can spark a whirlwind of emotions—excitement for a fresh start, but also anxiety about the logistics. With thoughtful planning, strategic organization, and the right support, you can transform the moving process into a smooth, even enjoyable experience. Tom Sommers, an experienced home buyer agent with Coldwell Banker in the Minneapolis-St. Paul metro area, shares proven tips to eliminate stress, plus additional insights to ensure a seamless transition and financial peace of mind.

1. Start Planning Early
The key to a stress-free move is time. Begin preparing 6–8 weeks before your move date to avoid last-minute chaos. Create a detailed checklist of tasks, such as scheduling movers, transferring utilities, and updating your address. Prioritize tasks by urgency—e.g., booking a moving company first, then tackling packing. Break the list into weekly goals to stay on track. For example, dedicate week one to researching movers and week two to decluttering. Use apps like Trello or a simple notebook to keep everything organized. Early planning reduces pressure and gives you time to address unexpected hiccups, like delays in closing or repair negotiations.

2. Declutter Ruthlessly
Moving is the perfect opportunity to streamline your possessions. Sort items into categories: keep, donate, sell, or discard. Be honest—do you really need that old coffee maker or those clothes you haven’t worn in years? Decluttering reduces packing time, lowers moving costs (fewer boxes mean lower fees), and makes your new home feel organized from day one. Tom Sommers can offer guidance on what’s worth taking based on your new home’s space and lifestyle needs. For instance, if you’re downsizing from a suburban house to a city condo, he can help prioritize essentials. Consider hosting a garage sale or listing items on platforms like Facebook Marketplace to earn extra cash for moving expenses. Donate usable items to local charities, such as Goodwill, for a tax deduction and a feel-good moment.

3. Hire a Reputable Moving Company
A professional moving company can make or break your experience. They handle heavy lifting, ensure safe transport, and save you time and stress. Research movers with strong reviews and proper licensing (check the FMCSA’s database at fmcsa.dot.gov for interstate movers). Ask for binding estimates to avoid surprise costs—reputable movers charge based on weight or volume, averaging $1,000–$5,000 for local moves or $4,000–$10,000 for long-distance. Tom Sommers can recommend trusted movers in the Minneapolis-St. Paul area who offer competitive rates and reliable service. Verify insurance coverage for high-value items, like antiques or electronics, and consider supplemental insurance for extra protection. If budget is tight, explore hybrid options like renting a moving container (e.g., PODS) for a DIY-professional balance.

4. Label Boxes Strategically
Efficient unpacking starts with smart packing. Label each box with its contents, destination room, and priority level (e.g., “Kitchen – Pots & Pans – High Priority”). Use color-coded stickers or markers for each room to simplify the process for movers and yourself. For example, blue for the bedroom, red for the kitchen. Include a brief inventory on the box (e.g., “Books, Lamps”) to locate items quickly. Pack an “essentials” box with must-haves for the first few days—clothes, toiletries, chargers, and basic kitchen items. This system minimizes chaos and saves hours during unpacking. Pro tip: Take photos of complex electronics setups before disconnecting to make reassembly a breeze.

5. Update Your Address Promptly
Avoid missed bills or delayed mail by updating your address early. Notify the U.S. Postal Service (usps.com) at least two weeks before moving to forward mail. Update your address with banks, credit card companies, employers, schools, and subscriptions. Inform friends and family, and consider sending a digital announcement for efficiency. For critical services like utilities (electric, gas, internet), schedule transfers 2–3 weeks in advance to ensure your new home is move-in ready. Missing this step can lead to service disruptions or late fees, adding unnecessary stress.

6. Partner with a Skilled Real Estate Agent
Finding the right home sets the foundation for a stress-free move. A knowledgeable real estate agent like Tom Sommers, based in the Minneapolis-St. Paul metro area, prioritizes your needs and guides you through the homebuying process. From identifying properties that match your budget and lifestyle to negotiating offers, Tom ensures you avoid overpaying and secure a home that fits your long-term goals. He can also connect you with trusted lenders, inspectors, and title companies to streamline the transaction. For example, he’ll help you navigate competitive markets by crafting data-driven offers based on comparative market analyses (CMAs), ensuring you don’t overspend in a bidding war.

Additional Insights to Minimize Stress and Protect Your Finances
Moving is more than logistics—it’s a financial and emotional journey. These strategies enhance your experience and safeguard your wallet:

Leverage Title Insurance: When buying a home, title insurance is a must to protect against hidden title defects, like liens or ownership disputes. A one-time premium (typically $1,000–$3,000) covers legal fees and losses, preventing costly surprises that could derail your budget. Tom can recommend reputable title companies to ensure a clean title.
Budget for All Costs: Beyond the purchase price, account for closing costs (2–5% of the home price), moving expenses, and initial home setup (e.g., furniture, repairs). Create a moving budget to track costs and avoid overspending. For instance, set aside $500–$1,000 for unexpected repairs or utility deposits.
Explore Low- or No-Down-Payment Loans: If upfront costs are a concern, ask Tom about VA loans (zero down for veterans) or USDA loans (zero down for rural areas). These programs reduce financial strain, but ensure you qualify by meeting with a loan officer early.
Prepare for the Unexpected: Build an emergency fund with 3–6 months of living expenses to cover surprises, like job changes or home repairs. This cushion prevents financial stress post-move, especially if you’re stretching to afford your new home.
Simplify Unpacking with a Plan: Designate a “home base” room in your new home to store boxes temporarily, keeping living spaces clear. Unpack one room at a time, starting with essentials like the kitchen and bedroom, to create a sense of normalcy quickly.
Embrace Community Resources: In the Minneapolis-St. Paul area, tap into local resources like community moving sales or neighborhood groups for tips on settling in. Tom can connect you with local networks to ease your transition, from finding reliable contractors to joining community events.

Why Organization Matters
A well-organized move reduces stress, saves money, and sets you up for success in your new home. By starting early, decluttering, hiring professionals, labeling strategically, updating your address, and working with an expert like Tom Sommers, you’ll navigate the process with confidence. These steps, combined with financial foresight and a strong support team, ensure your move is a positive step toward your future.

Ready to make your move? Contact Tom Sommers at Coldwell Banker in the Minneapolis-St. Paul metro area for a consultation. His expertise in homebuying and local connections will help you find the perfect home and move stress-free. Reach out today to start your journey!

Uncategorized • June 3, 2025

Buy a Home with Little to No Money Down: Your Path to Homeownership

by Tom Sommers

Buy a Home with Little to No Money Down: Your Path to Homeownership

The dream of owning a home without a hefty down payment is not a myth—it’s a reality through specific loan programs designed to make homeownership accessible. Whether you’re a first-time buyer or a seasoned homeowner, two government-backed programs—VA loans and USDA loans—offer the chance to purchase a home with little to no money down. Below, we’ll explore these options, provide additional insights to maximize their benefits, and share tips to avoid financial stress during the process.

1. VA Loans: Zero Down for Veterans
If you’ve served in the military, a VA loan, backed by the U.S. Department of Veterans Affairs, is one of the most powerful tools for homebuying. Available to eligible veterans, active-duty service members, and certain surviving spouses, VA loans require no down payment and no private mortgage insurance (PMI), which can save thousands annually compared to conventional loans.

Key Features of VA Loans:

Eligibility: You must meet service requirements, such as 90 days of active duty during wartime or 181 days during peacetime, though specific criteria vary. Check with a VA-approved lender to confirm eligibility.
No Down Payment: You can finance 100% of the home’s purchase price, up to the lender’s limit, which is often $726,200 in 2025 but can be higher in high-cost areas.
Reusable Benefit: You can use a VA loan multiple times, even if you’ve owned a home before, as long as you’ve paid off the previous loan or restored your entitlement.
Lower Costs: VA loans typically have competitive interest rates and cap closing costs to protect borrowers. However, a funding fee (1.4–3.6% of the loan amount) applies, which can be rolled into the loan.

Insights for Success:

Work with a VA-specialized loan officer to navigate eligibility and streamline the process. They can help you obtain your Certificate of Eligibility (COE), a key requirement.
Be aware that VA loans require the property to meet Minimum Property Requirements (MPRs), ensuring it’s safe and livable. Factor in potential repair costs if the home needs upgrades to qualify.
Consider budgeting for minor upfront costs, like appraisal fees ($500–$1,000) or home insurance, though these are often minimal compared to traditional down payments.

Over the years, I’ve helped many veterans use VA loans to secure homes with zero down, paving the way for financial stability without the burden of a large upfront investment.

2. USDA Loans: Rural Homeownership with No Down Payment
The USDA loan, often called a “rural loan,” is available to anyone meeting income and location requirements, not just first-time buyers. Backed by the U.S. Department of Agriculture, this program promotes homeownership in rural and suburban areas, offering zero-down financing and flexible terms.

Key Features of USDA Loans:

Location Restrictions: The home must be in a USDA-eligible rural or suburban area. For example, in Minnesota, this typically means areas outside the Minneapolis-St. Paul metro, such as south of Elko New Market, east of Hudson, WI, north of East Bethel, or west of Mound. Contact a real estate professional for a map of eligible areas.
Credit and Income Requirements: A minimum credit score of 620 is typically required, though some lenders may accept lower scores with compensating factors. Your income must not exceed 115% of the area’s median income, ensuring the program targets low-to-moderate-income buyers.
Loan Limits: The maximum loan amount is generally $766,550 in 2025, though this varies by location and market conditions.
Closing Cost Assistance: Sellers or lenders can cover closing costs, reducing out-of-pocket expenses. A USDA guarantee fee (1% upfront, 0.35% annually) applies but can be financed into the loan.
No PMI: Like VA loans, USDA loans don’t require private mortgage insurance, lowering monthly payments.

Insights for Success:

Use the USDA’s online eligibility map (available at usda.gov) to confirm if your desired area qualifies. Some suburban areas near urban centers may still be eligible, expanding your options.
Strengthen your application by paying down debt to improve your debt-to-income ratio (typically capped at 41%). This can also secure better interest rates.
Plan for small upfront costs, such as appraisal fees ($300–$500), inspection fees ($300–$600), or initial home insurance premiums, though these are minimal compared to a 3–20% down payment on conventional loans.

I’ve guided numerous buyers through USDA loans, helping them achieve homeownership in charming rural or suburban communities with no money down, setting them on a path to financial independence.

Additional Tips to Avoid Financial Stress
While zero-down loans make homeownership accessible, careful planning ensures long-term success. Here are strategies to buy smart and maintain financial stability:

Get Pre-Approved: Meet with a loan officer early to assess your eligibility for VA or USDA loans. Pre-approval clarifies your budget and strengthens your offer in competitive markets. It also helps you avoid falling for a home beyond your means.
Budget for Total Costs: Beyond the mortgage, account for property taxes, homeowners insurance, and maintenance (1–2% of the home’s value annually). For example, a $300,000 home might require $3,000–$6,000 yearly for upkeep.
Protect with Title Insurance: Both VA and USDA loans require title insurance to protect against title defects, like liens or ownership disputes. A one-time premium at closing (typically $1,000–$3,000) covers you for as long as you own the home, preventing costly legal issues.
Build an Emergency Fund: Aim for 3–6 months of living expenses to cover unexpected events, like job loss or repairs. This ensures you can manage mortgage payments without stress, especially with no down payment cushion.
Work with a Strong Team: Partner with a real estate agent experienced in VA or USDA loans, a reputable loan officer, and a reliable title company. Their expertise ensures a smooth process and protects your interests. For instance, an agent can help you find eligible properties, while a title company verifies a clean title.
Explore Down Payment Assistance: If you’re ineligible for VA or USDA loans, look into state or local down payment assistance programs, which can provide grants or low-interest loans to cover 3–5% down payments. These often pair with FHA or conventional loans.

Why These Programs Matter
VA and USDA loans open doors to homeownership without the barrier of a large down payment, making it easier to build wealth through property ownership. By eliminating the need for 3–20% down (e.g., $9,000–$60,000 on a $300,000 home), these programs free up funds for other goals, like furnishing your home or saving for emergencies. However, success requires diligence—verify eligibility, budget for all costs, and choose the right professionals to guide you.

For personalized advice or a USDA eligibility map, reach out to a trusted real estate agent or loan officer. They can assess your situation and help you leverage these programs to buy a home with confidence, setting you on a path to financial security without overextending your finances.

Uncategorized • June 3, 2025

How to Avoid Overpaying for a Home

by Tom Sommers

How to Avoid Overpaying for a Home

No one wants to overpay for a home, and as a real estate agent with over 20 years of experience, I’ve seen this fear surface whenever the market shifts. Buyers often worry about paying too much, especially in fluctuating conditions. Trying to time the market perfectly is nearly impossible—even industry insiders like me, who track data daily, can’t predict exact bottoms or peaks. Markets can change in weeks, while media reports often lag months behind. Chasing the “perfect” moment will only lead to frustration. Instead, focus on strategies that minimize the risk of overpaying and build confidence in your purchase. Here are five key steps, plus additional insights, to help you buy smart and avoid financial stress.

1. Tour Multiple Homes to Understand Value

The best way to gauge a home’s worth is to see many properties firsthand. Some buyers fall in love with the first house they visit and rush to make an offer, but this can lead to uncertainty about market value. By touring multiple homes, you’ll learn which neighborhoods command higher prices, how upgrades like renovated kitchens or bathrooms impact cost, and what features matter most to you. I tell my clients to view at least five homes in a session and pick their favorite as a baseline. Later, compare new homes to that benchmark. This process sharpens your understanding of the market, helping you recognize a fair price and avoid emotional overbidding. For example, you might notice that homes with updated HVAC systems sell for 5–10% more than those needing repairs, giving you a clearer sense of value.

2. Leverage a Professional Market Analysis
Before making an offer, work with your real estate agent to conduct a comparative market analysis (CMA). This involves reviewing sales of similar homes—matched by size, bedrooms, bathrooms, and amenities—within a close radius (e.g., two miles) over the past six months. A CMA reveals what buyers are paying per square foot in different areas, helping you craft a data-driven offer. For instance, if homes in one neighborhood average $200 per square foot while another is $250, you’ll know where your target property stands. This factual approach ensures your offer aligns with current market trends, reducing the risk of overpaying. It also strengthens your negotiating position, as you’ll know when a seller’s price is inflated.

3. Insist on a Home Inspection.

A professional home inspection is non-negotiable. It uncovers hidden issues—such as a failing roof, outdated mechanicals, or a leaky basement—that could lower the home’s value or require costly repairs. If significant problems are found, you can negotiate a lower price, request repairs, or walk away during the inspection contingency period without penalty. For example, discovering a $15,000 roof replacement need could justify a price reduction or seller credit. This step protects you from overpaying for a home with undisclosed defects and ensures you’re investing in a property that matches its listed value.

4. Rely on the Appraisal Process
When you secure a mortgage, your lender will order an independent appraisal to confirm the home’s value matches the purchase price. Appraisers use detailed data, including recent sales and property condition, to assess fairness. If the appraisal comes in lower than your offer, you have options: negotiate a lower price, cover the difference in cash, or exit the deal (depending on your contract’s appraisal contingency). For instance, if you offer $400,000 but the appraisal is $380,000, you can renegotiate or walk away, safeguarding against overpayment. This lender-required step adds an extra layer of protection.

5. Build a Strong Homebuying Team
Surround yourself with experienced professionals—a real estate agent, loan officer, home inspector, and title company representative. Each plays a critical role in protecting your interests. A skilled agent provides market insights and negotiates effectively. A loan officer ensures you get the best financing terms. An inspector identifies issues that affect value. A title company verifies a clean title, preventing costly legal disputes (e.g., from unknown liens or ownership claims). Interview candidates to ensure they’re knowledgeable and aligned with your goals. A strong team empowers you with information, helping you make confident decisions and avoid overpaying.

Additional Insights to Avoid Financial Stress

Understand Market Dynamics: Markets vary by location and timing. In a seller’s market, competition may push prices higher, but a well-crafted offer based on a CMA can keep you grounded. In a buyer’s market, you may have room to negotiate below asking price. Stay informed about local trends through your agent or online data.
Factor in Total Costs: Don’t focus solely on the purchase price. Account for closing costs (2–5% of the home price), property taxes, insurance, and maintenance (1–2% of home value annually). Overlooking these can stretch your budget and make a “fair” price feel unaffordable.
Avoid Emotional Decisions: Falling in love with a home can cloud judgment, leading to overbidding. Stick to your budget and the data from your CMA and appraisal to stay objective.
Consider Future Resale Value: Even if you plan to stay long-term, think about the home’s resale potential. Properties in desirable areas with good schools or amenities tend to hold value better, reducing the risk of overpaying relative to future market trends.
Protect with Title Insurance: Title issues, like undisclosed liens or ownership disputes, can lead to financial loss. Title insurance (a one-time premium at closing) covers legal fees and losses from such claims, ensuring you don’t overpay for a property with hidden risks.

Why This Matters
These steps—touring homes, analyzing the market, inspecting thoroughly, relying on appraisals, and building a trusted team—create a safety net against overpaying. They provide data-driven confidence and protect you from costly surprises. Information is power: the more you know about the market and the property, the better your decisions. In a competitive or shifting market, these strategies are your playbook for securing a home at a fair price, minimizing financial stress, and ensuring your investment is sound. For personalized guidance, consult a trusted real estate professional to navigate the process with confidence.

Uncategorized • June 3, 2025

Title Insurance: Where Does Your Dollar Go?

by Tom Sommers

Title Insurance: Where Does Your Dollar Go?

When buying a home, you’ve likely heard of title insurance, but do you know what it covers and how your payment is used? Understanding where your title insurance premium goes can clarify its value in protecting your investment.

How Title Insurance Differs from Other Insurance
Unlike property, casualty, or medical insurance, which pool premiums to cover anticipated losses based on actuarial data, title insurance operates on a risk-elimination model. Title companies invest heavily in collecting, storing, and analyzing public records to identify and resolve issues that could affect your property’s title before closing. These issues might include recorded liens, legal disputes, easements, or other encumbrances. The goal is to clear any unwanted claims so you take ownership with a clean title.

This approach contrasts with other insurance types, which prepare for unpredictable future events. Title insurance requires only a one-time premium at closing, unlike property or medical insurance, which involve recurring payments. By focusing on prevention, title companies aim to minimize claims, though no process is foolproof due to human error or evolving legal interpretations.

What Your Premium Pays For
Your title insurance premium funds a labor-intensive process to ensure your property’s title is clear. Here’s where your dollar goes:

Title Plants and Record Maintenance: Title companies maintain extensive databases, or “title plants,” often spanning over a century of property records. These are updated daily with recorded documents, such as deeds or liens, to ensure accurate, up-to-date information. Building and maintaining these systems requires significant investment in technology and skilled personnel.
Title Search and Examination: Trained experts review public records to identify any issues—liens, legal actions, or disputed interests—that could cloud your title. This thorough process ensures risks are addressed before you close.
Risk Elimination: If issues are found, the title company works to resolve them, such as clearing liens or settling disputes, so you don’t inherit problems.
Claims Handling: In rare cases where claims arise after closing (e.g., an unknown heir contests ownership), professional claims teams manage them per the policy terms, covering legal fees and potential losses.

This proactive approach means most of your premium supports upfront research and risk mitigation, not claim payouts, unlike other insurance models.

Why Title Insurance MattersTitle insurance protects both you and your lender from financial loss due to title defects. An owner’s policy safeguards your ownership rights for as long as you or your heirs own the property, while a lender’s policy ensures the lender’s interest takes priority. The one-time premium provides peace of mind, knowing potential issues have been addressed and you’re covered if challenges arise.

Additional Benefits and Considerations
Title companies offer more than just insurance. Many provide services like escrow management, closing coordination, or document preparation, which streamline your transaction. Since rates vary between companies, shop around and compare costs with help from your real estate agent. Ask about additional services that might add value to your homebuying process.

Avoiding Financial Stress with Title Insurance

Title insurance is a key tool for minimizing financial stress when buying or owning a home. By addressing title issues before closing, it prevents costly surprises, such as unexpected liens or legal disputes, which could jeopardize your investment. For example, a hidden lien from a previous owner’s unpaid taxes could lead to significant legal fees or even loss of the property. Title insurance ensures these risks are identified and resolved upfront or covered if they emerge later, protecting your financial stability.

Choosing the Right Title Company

To maximize value, select a reputable title company with a strong track record. Your real estate agent can recommend options and help compare rates and services. Ensure the company maintains robust title plants and employs experienced professionals to handle complex title searches. This diligence reduces the likelihood of issues and enhances your confidence in the transaction.

By understanding where your title insurance dollar goes, you can appreciate its role in securing your homeownership journey. For personalized guidance, consult your real estate professional or title company representative to ensure your investment is protected.

Uncategorized • June 3, 2025

Avoiding Financial Stress When Buying or Owning a Home

by Tom Sommers

Avoiding Financial Stress When Buying or Owning a Home

Purchasing or owning a home is a major financial commitment, but with careful planning and informed decisions, you can minimize stress and secure a mortgage that fits your budget and goals. By asking the right questions, understanding your needs, and exploring your options, you can avoid common pitfalls and save money. Here’s how to approach the process wisely, along with additional strategies to maintain financial stability as a homeowner.

1. Know Your Budget Before You Borrow
To avoid financial strain, determine the monthly payment you’re comfortable with before speaking to a lender. This figure should account for your income, expenses, and other financial goals, such as saving for emergencies or retirement. When discussing mortgage pre-approval, share this amount with your lender to identify a loan that aligns with your budget. Avoid being swayed by a “dream home” that pushes you beyond your financial limits, as overextending can lead to stress and potential default. For example, aim to keep housing costs (mortgage, taxes, insurance) below 28–36% of your gross monthly income, a common guideline for affordability.

2. Understand How Qualifications Impact Rates
Your financial profile—credit score, income, debt-to-income ratio, and down payment—directly affects your mortgage interest rate. Strong qualifications typically secure lower rates, saving you thousands over the loan’s life. However, mortgages are available for a wide range of borrowers, including those with lower credit scores or smaller down payments, though these often come with higher rates or stricter terms. Check your credit report for errors and improve your score if possible before applying. Even a small increase in your score can lower your rate significantly.

3. Research Mortgage Types for Your Needs

Not all mortgages are created equal, and choosing the right one depends on your circumstances. Consider these factors:

Market Conditions: Are interest rates rising or falling? In a rising-rate environment, locking in a fixed-rate mortgage can provide payment stability. In a falling-rate market, an adjustable-rate mortgage (ARM) might offer lower initial rates.
Fixed vs. Adjustable Rates: A fixed-rate mortgage ensures consistent payments, ideal for long-term stability. An ARM may start with a lower rate but can increase over time, suiting those planning to sell or refinance soon.
Loan Term: Shorter terms (e.g., 15 years) often have lower rates but higher monthly payments, while longer terms (e.g., 30 years) lower monthly costs but increase total interest paid.
Your Goals: Are you staying in the home long-term or planning to sell within a few years? Short-term owners might prefer an ARM or a loan with lower upfront costs, while long-term owners may prioritize fixed rates.

Research options like FHA loans (for lower credit scores or smaller down payments), VA loans (for veterans), or conventional loans, and compare their requirements, rates, and fees. Online tools or a mortgage broker can help you evaluate options tailored to your situation.

4. Shop Around for the Best Deal
Don’t settle for the first lender you contact. Compare offers from multiple lenders—banks, credit unions, and online lenders—to find the best rates and terms. Small differences in interest rates or closing costs can add up over time. Ask for a Loan Estimate, a standardized form that outlines fees, rates, and terms, to make comparisons easier. Also, inquire about lender credits or discounts for automatic payments, which can reduce costs.

5. Plan for Ongoing Homeownership Costs
Financial stress doesn’t end with securing a mortgage. Homeownership includes ongoing expenses that can strain your budget if you’re unprepared. To avoid surprises:

Build a Maintenance Fund: Set aside 1–2% of your home’s value annually for repairs and maintenance, such as fixing a leaky roof or replacing an HVAC system.
Account for Property Taxes and Insurance: These costs can rise over time. Ask your lender for estimates and check if they’re included in your monthly payment (via an escrow account).
Prepare for Rate Changes: If you choose an ARM, model potential payment increases to ensure you can afford them if rates rise.
Create an Emergency Fund: Aim for 3–6 months of living expenses to cover unexpected events like job loss or medical emergencies, preventing reliance on high-interest debt.

6. Avoid Common Mistakes

Overbuying: Don’t let emotions drive you to buy a home beyond your means. Stick to your pre-determined budget.
Skipping Pre-Approval: Getting pre-approved clarifies your borrowing power and strengthens your offer in competitive markets.
Ignoring Total Costs: Look beyond the monthly payment to include closing costs, property taxes, homeowners insurance, and potential HOA fees.
Neglecting Future Goals: Consider how your mortgage fits into long-term plans, like starting a family or saving for retirement, to avoid financial strain later.

7. Leverage Professional Guidance
A trusted real estate agent, financial advisor, or mortgage broker can provide clarity and help you navigate complex decisions. They can explain loan terms, negotiate on your behalf, and connect you with reputable lenders. If you’re a first-time buyer, look into homebuyer education programs, which often provide valuable insights and may qualify you for down payment assistance or better loan terms.

8. Protect Your Investment with Title Insurance
When buying a home, title insurance is a critical safeguard against financial stress. It protects you from unexpected claims against your property’s title, such as liens or ownership disputes, that could arise from issues predating your purchase. An owner’s policy covers you for as long as you own the home, while a lender’s policy protects your mortgage provider. The one-time premium, paid at closing, can save you from costly legal battles or financial losses, providing peace of mind.

By taking these steps—knowing your budget, researching loans, planning for ongoing costs, and protecting your investment—you can buy or own a home with confidence, minimizing financial stress and building a secure future. For personalized advice, consult a financial professional or lender to ensure your decisions align with your goals.

Uncategorized • June 3, 2025

What Is a Living Trust?

by Tom Sommers

What Is a Living Trust?

A Living Trust is often recommended by estate planners as an effective way to hold title to real property. When property is held in a Living Trust, title companies have specific requirements to ensure a smooth transaction. Below are answers to common questions about Living Trusts, though this is not an exhaustive guide. For specific concerns, consult your title company representative or seek legal counsel.

Who Are the Parties to a Trust?
In a typical Family Trust, the Trustors (or Settlors)—often a husband and wife—establish the trust and transfer their property into it. They typically serve as Trustees, managing the trust during their lifetime, and are the primary beneficiaries. Their children or grandchildren usually become beneficiaries after their passing, either receiving distributions or continuing the trust, depending on its terms.

What Is a Living Trust?
A Living Trust, also known as an Inter-vivos Trust, is created during the Trustors’ lifetimes, unlike trusts formed through a will after death. It typically terminates after the Trustors’ deaths, with the trust’s assets distributed to the beneficiaries.

Can a Trust Hold Title to Real Property?
No, the Trustee holds the property on behalf of the Trust, managing it according to the trust’s terms.

Is a Living Trust the Best Way to Hold My Property?
This depends on your situation and should be discussed with an attorney or accountant. Common reasons for using a Living Trust include minimizing or delaying estate taxes, avoiding lengthy probate processes, and protecting assets from certain unsecured creditors.

What Taxes Can a Living Trust Help Avoid?
Married couples may exempt significant assets from taxation and delay taxes after one spouse’s death. Always consult an attorney or accountant before making decisions, as tax rules vary.

Can I Homestead Property in a Trust?
Yes, if the property meets homestead qualifications.

Can a Trustee Borrow Against Property in a Trust?
Yes, if the trust agreement allows it, which most do. However, some lenders may hesitate to lend on trust-held property, so confirm with your lender beforehand.

Can Someone Else Hold Title for Me “In Trust”?
While some arrange for a third party to hold title as a Trustee, this can be risky and potentially illegal. Only the Trustee of record can legally convey or borrow against the property. Private agreements with a Trustee may not be honored, and title insurance cannot protect against a Trustee acting against your wishes. Always seek legal advice for such arrangements.

For further guidance, contact a qualified professional to ensure your trust aligns with your estate planning goals.