Archive for September, 2008

Comments Off on Minneapolis/St Paul Duplex Sales Provide Ray of Light on Dark Day

 
A bit of good news would be nice today, wouldn’t it?
 
Well, in spite of all of the doom and gloom about the economy and the real estate market in the media, the Twin Cities housing market continues to push rays of sunlight through the clouds.
 
For the seventh week in a row, home sales posted huge gains from the same time one year ago. In fact, for the week ending September 20, pending sales were up 42.8 percent. Over the course of 49 day run, there have been 1500 more sales than there were for the same stretch in 2007.
 
Of course, it’s important to bear in mind that with the tightening of lending standards in August 2007, September was abnormally low. It is also possible that this burst of activity is the result of buyers taking advantage of seller-assisted down-payment programs.
 
In the single family home market, 39.1 percent of the September 20th sales were lender-mediated, as compared to 13.4 percent of those in the week last year.
 
Lender-mediated sales actually seem to be diminishing in the multi-family market, however. While the 84.6 percent of the September 20 sales week transactions were lender-mediated, this is a drop of as much as 10 percent from just a few weeks ago. Last year’s transactions included 71.4 percent lender mediations, which represents a significant jump from the single digit statistics reported in early summer.
 
Overall, multi-family sales for the week were up a staggering 278.57 percent over the same time in 2007.
 
The dark clouds remain in the sky and don’t show signs of clearing; but for a moment perhaps, we can try to at least remember where we left the sun screen.
 

Will the Bailout Help You With Your Minneapolis Duplex?

said on September 29th, 2008 categorized under: Financing

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The United states Capitol building in Washington, DC.

The United states Capitol building in Washington, DC.

While I planned to talk about the process of filing an eviction action today, more pressing matters came up over the weekend in Congress. Consequently, I’ll pick up that discussion later in the week.
 
One of provisions Congress insisted on being in the Emergency Economic Stabilization Act of 2008, or the bailout bill, was a provision requiring Secretary of the Treasury Hank Paulson, to implement a plan for the mortgages and mortgage-backed securities the government acquires that encourages mortgage servicers to modify the terms of the loans through programs like Hope for Homeowners.
 
Hope for Homeowners was a 300 billion dollar provision of the Housing and Economic Recovery Act signed by the president in July. It was hoped that up to 400,000 homeowners struggling to make their payments due to bad loans would, with permission of their lender, be able to refinance into FHA backed mortgages at a significant discount.
 
Sounds like a great opportunity, right?
 
But of course, there’s a catch. While the underwriting guidelines for the Hope for Homeowners program won’t be unveiled until the program goes live October 1, as of now it appears that investors and investor properties that are not owner-occupied will not qualify for renegotiation. This would make sense, as only owner-occupants of one to four unit properties qualify for FHA backed loans.
 
Steve Linnin, a loan officer with Hopeforhomeownersprogram.org, told me he believes that if an owner originally purchased and owner-occupied a multi-family property using an FHA loan, then later purchased another property for their primary residence, they too would be ineligible to refinance the mortgage on the first property under this program, as they no longer owner-occupy it.
 
This is not a panacea for everyone. The FHA has caps and limits as to the amount of the loans it will back for various geographic areas. 
 
It promises to be an interesting week.

Four Reasons to Evict Your Minneapolis Duplex Tenant

said on September 25th, 2008 categorized under: Legal Stuff

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The single biggest concern I hear when someone is considering whether or not to purchase their first income property is, “Yeah but, what if I get a bad tenant?”
 
Granted, “bad tenant” means different things to different people. To most, however, it is someone who either doesn’t pay rent, or is damaging a property.
 
Now, we all fantasize about the easy ways of getting someone out. In Minnesota, there are rules against acting out those fantasies. In other words, a landlord may not change the locks, keep the tenant entry into the building, forcibly remove the tenant or cut off utilities.
 
So, what do you do? You begin an Eviction Action procedure. You may begin this process for several reasons.
 
1. Non-Payment of Rent – The first and most obvious reason to evict a tenant is non-payment of rent. It is important to note, however, that once you’ve begun the eviction process, the tenant may cure their default at any time prior to your regaining possession of the unit by paying all of the past due costs, including your court costs. After they have done so, they are legally entitled to continue living on the premises.
 
2. Lease Violations.
As a property owner, it is of paramount importance that your lease have a “right of re-entry clause”. This gives you the ability to evict a tenant for damaging the property, disturbing other residents, or having unauthorized roommates or pets.
 
3. Illegal Activities in Minnesota
Again, examples of this are obvious, but they include prostitution, criminal gang activity, the manufacturing or possession of controlled substances, the unlawful use/possession of a firearm and of course, having stolen property on the premises.
 
4. Holdover Tenant
This is a someone who has either given proper notice they were moving out, or their lease has expired and you gave them notice, but for whatever reason, the tenant stays.
 
Next time, I’ll talk about the process.

Twin Cities Duplex Market Hangs On

said on September 23rd, 2008 categorized under: Twin Cities Real Est

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While the nail-biting news continues over on Wall Street, the Twin Cities real estate market continues to hang on by its strong fingertips.
 
MAAR released its weekly report of buyer activity last night, and the trend of the previous five reports continued into a sixth. In the week ending September 13, pending sales rose 23.3 percent over the same week in 2007. In fact, in the last six weeks, 1269 more purchase agreements were signed than in the same span last year.
 
New listings of single family homes also continued their downward trend, signaling a tightening of inventory. New listings for the week were down 13.4 percent over the corresponding week last year; with the annual total down 9.3 percent from the 2007 mark.
 
The multi-family housing market fared equally well. New listings for the week were down 8.6 percent from last year, while pending sales were up 41.18 percent.
 
Of the properties with accepted purchase agreements, 85.29 percent of the 2008 mark were lender-involved transactions. This figure is 13.8 percent higher than the level of bank involvement last year.

First Aid for the Accidental Landlord

said on September 22nd, 2008 categorized under: Paperwork, Paperwork, Paperwork!

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First Aid for Frustrated Sellers

First Aid for Frustrated Sellers

Many sellers in today’s slower real estate market find themselves hemorrhaging severely as a result of either an unsold home after they’ve relocated, or the deep wound of covering two mortgages. In an effort to stop the bleeding, many sellers find themselves unintentionally becoming landlords.
 
While it is perfectly sensible to rent a vacant property, as I’ve often detailed here, there is more to being a landlord than simply sticking a “For Rent” sign in the yard. And the costs of being uninformed can often be even greater than even the initial wound. 
 
In an effort to help some of the people who’ve found themselves in this situation, the Minnesota Multi-Housing Association is offering a seminar on Saturday, September 27, that they’re calling “The Accidental Landlord“.
 
For $29 and two hours of your time, you can not only learn many of the ins and outs of being a landlord, but also get a free MMHA start-up kit. These kits usually retail for around $35, and they contain every possible form you could need, from leases to pet deposits. They’re so great to have, that I often give them to clients who are new to multi-family housing.
To sign up, just click on the hyperlink above.

It’s Wait And See for the Duplex Market

said on September 19th, 2008 categorized under: Twin Cities Real Est

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The Alternative

The Alternative

I’m neither an economist nor a psychic. As a result, I can’t tell you what I think this morning’s proposed government intervention in the nation’s financial crisis will mean to the real estate market.

In its coverage, the media is making a lot of references to historical entities like the Resolution Trust Corporation (RTC) of the late 1980’s, and the Great Depression entity, the Home Owner’s Loan Corporation (HOLC).
Both organizations were created by the Federal Government in response to banking crisis’ in the financial and real estate mortgage markets. The former bailed out failed savings and loans which had failed largely due to risky real estate lending. The latter focused on renegotiating home loans to prevent foreclosure.
 
I suspect whatever entity Congress creates over the weekend will be some hybrid of the two. And ultimately, we will pay for it in the form of higher taxes. Not happy news, but certainly better than the alternative.
 
We’ll see what the weekend brings.

Minneapolis Duplex Sales: Are We Happy Yet?

said on September 16th, 2008 categorized under: Twin Cities Real Est

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Real Estate Market Forecaster

Real Estate Market Forecaster

I don’t know about you, but after Wall Street’s news yesterday, I’m watching my economic mood ring, looking for any change in color. Is it turning red?

As it does every Tuesday, MAAR released its weekly market activity report today. And, just like last week, this week’s report shows a substantial leap in pending single family home sales over the same period from last year.

Should we be happy?
 
Home sales rose 49.8 percent over their 2007 same week mark. It’s important to keep in mind that the screeching halt of home sales in August and September of 2007 was unusual. What’s interesting to note, however, is that the Twin Cities metro area home sales are currently slightly ahead of the pace set in 2006; which was a time when most of us thought everything was right with the real estate world.
 
Duplex sales continued at an equally healthy clip, being 240 percent ahead of the same week last year. While only 20 percent of last year’s sales for the period were lender-owned, 79 percent of this year’s transactions involved a bank. While that seems high, 79 percent is down significantly from the figures we’ve seen all summer, which have been in the 89 to 95 percent range.
 
Why the flurry of activity? Speculation is that buyer’s have been scrambling to take advantage of the closing window on seller-assisted down-payment programs like Nehemiah, Ameridream and Genesis. Of course, reduced interest rates and the new $7,500 federal tax credit may also be at play.
 
Another noteworthy statistic is that the supply of the number of homes for sale is presently down 9.0 percent from the same time last year. Again, these figures are in keeping with those of 2006; when we all were in a much better mood.

Comments Off on Is There Light at the End of the Tunnel for Seller Funded Down Payments?

Light in TunnelThere’s reason for a bit of cautious optimism in Washington. On Tuesday, the House Financial Services Committee, which is chaired by Rep. Barney Frank, will review HR 6694. The bill would allow the Federal Housing Administration to continue to allow the use of seller-funded down-payment assistance on FHA-backed loans through non-profit agencies like Genesis, Ameridream and Nehemiah.

In a tough economy, few first time home buyers have saved the 3.5 percent required for a down payment in order to qualify for an FHA loan. First time home buyers will be the engine that leads the train of any housing recovery, so it would seem at this dark hour the prudent thing to do would be to give them not only a $7500 tax credit, but help in qualifying for the loan in the first place.

The department of Housing and Urban Development (HUD), argues that these programs artificially inflate home prices and ultimately increase the risk of the loan going into default. In 2007, the default rate for seller-funded loans was 28 percent; three times the rate of conventional FHA loans. As a result, these programs are presently scheduled to end on October 1, when the recently passed Housing Bill takes effect.

To compensate for the increased risk, HR 6694’s bi-partisan team of sponsors, Rep. Al Green [D- TX], Rep. Christopher Shays [R – CT], Rep. Maxine Waters [D- CA] and  Rep. Gary Miller [R- CA], drafted the bill to allow HUD to implement risk-based pricing on FHA insurance premiums. In other words, much like more conventional loans, the better your credit score down payment, the better your interest rate. If you have a lower credit score and little to no down payment, it would be reflected in a higher interest rate on the loan.

Two of Minnesota’s representatives sit on the committee; Rep. Michelle Bachmann [R] and Rep. Keith Ellison [D]. Be sure to write or call their offices and express your support for the bill. Believe it or not, they do listen. It is an election year after all.

Comments Off on Bank Foreclosures and Short Sales: The Best Thing to Ever Happen to Minneapolis Duplex Owners

WalletIt’s not news that there are a rash of foreclosures and short sales in the real estate market. Some of this is due to fraud. Some due to spikes in interest rates in adjustable mortgages forcing monthly payments into the stratosphere.

But what might be news is that many foreclosures and short sales are the result of normally responsible people either going to refinance or sell their homes and discovering due to the plethora of foreclosures on the market, their home can no longer appraise for what they bought it for.

If you’re a homeowner and have to move, what do you do? Odds are you opt for a short sale. Or, if things are really dire, a foreclosure.

But here’s what the national media isn’t saying. Once you have a short sale on your credit report, you can’t buy another home for anywhere from three to five years. Foreclosure? Try seven years minimum. Not pretty either way.

What does this have to do with the Minneapolis and St Paul duplex markets?

Well, where are those short sale and foreclosure folks going to live? They’re going to need to rent. As many of them as there are, demand for rentals should soar, which due to that old supply and demand law, will force metro rents to increase. Of course, that means more money in landlords’ pockets.

Makes it seem like a pretty good time to buy rental property; whether a duplex, house or apartment building, doesn’t it?

Twin Cities Housing and Duplex Sales Soar

said on September 9th, 2008 categorized under: Twin Cities Real Est

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WowWow! MAAR released its weekly activity report for the week ending August 30, and sales are up exponentially over the same period last year. Duplex sales were up an almost unbelievable 714.29 percent over the same week last year.

Of the 50 duplexes that received offers last week, 94 percent involved a lender-owned or short sale property. This stands in stark contrast to last year’s figure, where five of the seven sales were not bank owned.

Meanwhile, single family home sales, also exploded; showing a 51.3 percent increase in activity. That figure represents the highest year-over-year jump in pending sales in the last four years.

Why? It could be the end of FHA’s seller-funded down payment assistance programs through Nehemiah, Genesis and Ameridream. Or, it could be that first time home buyers are trying to take advantage of the $7500 tax credit.

The average Months Supply of Inventory was also down to 9.9 months. What does this mean? Well, if no more properties came on the market, it would take 9.9 months to sell every property currently on the MLS. Believe it or not, this is the same figure it was at this time last year. Were the figure higher, it could be interpreted to mean conditions are creating even more of a buyer’s market.

For now anyway, it looks like things may be stabilizing.

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