Archive for August, 2008

Comments Off on Minneapolis Duplex Short Sales: Can You Wait For A Great Deal?

St Jude 2One of the most frustrating transactions in today’s real estate market for buyers, sellers and Realtors is the short sale.

As discussed here before, a short sale is when a property is being sold for less than the amount owed to the bank. The seller may or may not be behind in payments. Due to the decline in market values over the last year, he or she simply can’t sell the house for what he bought it for.

In many cases, properties receive strong offers, which are accepted by the seller. Then everyone involved has to wait for the bank or banks with mortgages on the property to respond as to whether or not they will accept less than the amount they are owed. This can take months. Many, many months.

I have a buyer who wrote such an offer on Mother’s Day. The bank who holds the second mortgage on the property has refused to negotiate in any way. So we sit and wait for something to happen. That buyer has the patience of a saint. Others do not.

LyndaleThat’s the case on a gorgeous Mediterranean duplex in southwest Minneapolis. It’s been on the market for a while, and had numerous offers on it, which have been accepted by the seller. Months passed, and still no response from the bank. With built-ins, fireplaces, coved ceilings, three bedrooms on each floor and separate utilities, it’s a no-brainer in any other market. In fact, it sold for well over $100,000 more than it’s presently on the market for just two years ago. But none of the buyers have been able to outlast the bank.

If you’re patient, call me and we’ll take a look. It’s a terrific deal, and an even better long-term value.

Twin Cities Duplex Market Continues Mighty Swim

said on August 5th, 2008 categorized under: Twin Cities Real Est

Comments Off on Twin Cities Duplex Market Continues Mighty Swim

SalmonThe Minneapolis Area Association of Realtors released its weekly Market Activity Report last night. And once again, there are encouraging signs in the Twin Cities single family home market.

The inventory of available single family homes is down 5.5 percent  from the same time last year. There are presently 32,978 homes available on the market, which is about 2000 less than there were at this time last year.

MAAR attributes this decline to a 16.5 percent drop of new listings, as well as an increase of newly signed purchase agreements (pending sales) of 5.1 percent for the same year-over-year comparison.

These numbers create yet another promising barometer. The present Supply-Demand Ration indicates 8.68 homes for sale per buyer. This is a decrease of 4.2 percent over last year. A balanced market is one with an average of 5 homes available for every buyer active in the marketplace.

Meanwhile, the small multi-family market continues its salmon-like behavior, running upstream compared with the rest of the market. Newly signed purchase agreements for the week ending July 25 were up 410% over the same time last year (41 in 2008 to 10 in 2007).

While 40 percent of last year’s transactions involved a bank owned or short sale property, this year’s figure reflected 90 percent lender-involved activity.

It’s too soon to predict anything. We’ll continue to wait and see.

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Money HouseThe Housing and Economic Recovery Act passed by Congress and signed into law by President Bush , contains a provision for a $7500 tax credit for first-time home buyers. The law defines a first-time home buyer as someone who has not owned a home in the past three years. As always, this law applies to any owner-occupied property up to four units in size.

According to Dean Schiffler of Burnet Home Loans, home buyers who file as single head of household taxpayers can claim the full $7500 credit if their annual gross income is less than $75,000. For married couples, the full credit may be claimed if their annual gross income is less than $150,000.

There is some wiggle room. Single taxpayers who earn between $75,000 and $95,000 are eligible to receive a partial first-time buyer tax credit. Married couples who earn between $150,000 and $170,000 are also eligible for the credit.

First-time home buyers would receive a $7,500 tax credit for the purchase of any home on or after April 9, 2008 and before July 1, 2009. The purchase of the home must close in this window of time.

The tax credit is refundable. This means if you owe taxes, they would be deducted from this $7500 credit. On the other hand, if you are due a refund, the $7500 would be added to the total.

Buyers can take the tax credit in their 2008 or 2009 tax refund. If the home was purchased in 2008, the credit is taken on your 2008 tax return. If you buy in 2009, you may take the credit on your 2008 or your 2009 tax return.

This program is not limited to areas plagued by high foreclosures. All homes will qualify, provided it will be used as a principal residence and the buyer has not owned a home in the prior three years.

Again, there’s a catch. The tax credit essentially serves as an interest-free loan to be repaid over 15 years. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. If the home owner sold the home, then the remaining credit would be due from the profit of the sale.

If there was insufficient profit, then the remaining credit payback would be forgiven.

Overall, it could be a terrific incentive to buy now; especially before the down payment assistance programs are eliminated.

Comments Off on Twin Cities Duplex Buyers Impacted by Housing Bill

ChargeThe Housing and Economic Recovery Act passed by Congress and signed into law by President Bush on Wednesday is a mixed bag for first time home and duplex buyers.

The most dramatic and immediate impact will be felt by those who needed to avail themselves to down payment assistance programs like Ameridream, Nehemiah and Futures. These programs allowed sellers to make contributions toward a buyer’s down payment, with that contribution folded into the buyer’s loan. Essentially, it was an FHA version of a no money down loan which helped millions of first time home buyers.

Why did Congress do this? Well, the thinking was since most of these transactions involved inflating the purchase price of the property by three percent, then obtaining financing in that revised amount, property values were artificially inflated. This, theoretically anyway, helped create the crisis we are in now.

On a personal note, this has not been my experience.

Most first time homeowners in the Twin Cities are uncomfortable buying a home or a duplex in which their payments are greater than the equivalent of a $150,000 mortgage. Three percent of $150,000 is $4500. Buying a $150,000 house for $154,500 isn’t the kind of grossly inflated pricing that has caused this crisis. Most appraisals fall in a range anyway, and an honest appraiser will be frank as to the property’s true value.

After October 1, 2008, no one with a financial interest in the sale of a property may contribute toward a down payment. It does not, however, prohibit buyers to receive assistance from other programs provided by nonprofit agencies or gifts from family members. In other words, until the smoke clears, no raising the purchase price by three percent for the down payment. The buyer will need to have that money saved.

However…

The new requirements for an FHA loan will raise the required down payment for all borrowers (FHA loans are available to all buyers, not just those purchasing a home for the first time) from three to 3.5 percent.

Historically, FHA loans have been capped at an amount roughly equivalent to the median home price of an area. The bill makes permanent the temporary FHA loan limits which were increased earlier in the crisis. These loan limits are the greater of $271,050 or 115 percent of the local median home price, which cannot be greater than $625,000. This should help more owners and buyers take advantage of FHA loans, which typically are easier to qualify for and at a lower interest rate than a jumbo loan.

A bit of good news in the bill is it contains a Homebuyer Tax Credit of $7500 which would be available for first time buyers who purchase a home between April 8, 2008 and June 20, 2009. This credit is repayable over 15 years.

Of course, the hope is that this helps stimulate the lower end of the market, the momentum of which would help pull the rest of the housing train forward.

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