Archive for January, 2009
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One of the things I like most about my job is that I learn something every day. Case in point? A client recently posed a question I hadn’t previously considered: is it possible to buy a duplex with a friend and use an FHA loan?
The answer is yes, which may seem obvious. But, doing so does have its own unique challenges.
My clients saw buying a Minneapolis duplex together as way for each to have her own place, but be in a neighborhood they individually couldn’t afford.
The only FHA restrictions, outside of the standard set used for single family homes, is the multi-family duplex has to have two distinctive entrances; no walking through one unit to get to the other.
Great idea, huh? Except for when it comes time to sell.
What if one person wants to and the other doesn’t?
Well, in real estate, there are two ways you can take title (ownership) of a property. The first is called joint tenancy. When two or more people own a property, and one passes away, this form of ownership allows the other to inherit the other person’s share of the property, without going to court. What’s more, this way of taking title requires that both or all owners agree in order for a property to be sold.
The second form of title is called tenants in common. Often referred to by the acronym TIC, this way of holding title allows each individual to will their interest in a property to whomever they chose. What’s more, his or her share may be sold without the permission of the other owner(s).
Of course one owner selling when both parties are on a loan may trigger some alarms at the bank. Not to mention that owning property with friends can be challenging.
That’s why it’s critical that the buyers consult an attorney before they venture in together. It’s better to have negotiated out clauses and understandings of individual and joint responsibilities up front.
It not only helps when it comes time to sell, it may help you keep a friend.
Comments Off on Let Uncle Sam Pay You to Buy A Minneapolis Duplex
If Uncle Sam offered you up to $7500 to buy a house, would you take it?
The U.S. House of Representatives thinks you might.
The $819 billion economic stimulus bill passed by the House yesterday essentially changes the terms of the $7500 tax credit that was part of the Housing Recovery Act passed by Congress last summer. That bill was, for all intents and purposes, a no-interest loan in the form of a tax credit that had to be repaid over 15 years.
The present stimulus bill would make it a tax credit that doesn’t need to be repaid.
To earn the credit, buyers cannot have owned a home in for the past three years, and the new property has to be used as a main residence. The credit phases out for single people who earn above $75,000 and couples who earn more than $150,000. Buyers who earn more than $95,000 as individuals or $170,000 as a couple are inelligible for the credit.
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Well, if you’re a silver lining kind of person, there continues to be a necklace or two of the stuff in MAR’s activity report for the week ending January 17.
In the duplex sector, there were 62 new listings; down just one from the same period last year. Of the 2009 entries, 74 percent are lender mediated. This is an increase of bank involvement of almost 25 percent over the comparable week in January in 2008.
In all, 49 duplexes and small multi-family properties received purchase agreements. Of these, 92 percent were bank owned, leaving the market at an average list price of just $82,719.59. For the same stretch in 2008, 21 properties sold at an average cost of $187,197.62. Of these, just 67 percent were lender mediated.
Of course, the average sales price for duplexes could be seen as discouraging. Then again, what are the odds of the average sales price being down another 66 percent next year?
Over in the single family home sector, new listings for the week were down 18 percent from last year, while sales were up 13.2 percent. Total inventory in the marketplace continues to shrink, as the number of total active listings on the MLS are down 10.5 percent from the same stretch in 2008.
Let’s hope the economy stumbles into a vein of gold soon.
Comments Off on Twin Cites Duplex Market Fares Well In Risk Survey
Last week two new national indexes that measure real estate risk came out last week, offering geographical clues as to where the market may well continue to topple.
The title insurance company PMI Group issues quarterly metropolitan area risk lists. The report covers 381 markets and ranks them according to the likelihood that real estate values will continue to decline in the next two years.
The good news is Minneapolis/St Paul is not one of the highest risk areas for continued values. Those honors go to snowbird destinations like Riverside, Calif., and the areas of Miami, Los Angeles, Las Vegas, Tampa, Orlando and Phoenix.
Meanwhile, the Twin Cities hovered in the middle of the top 50 risk areas at number 25 and earning a PMI label of Moderate as its risk rank.
According to PMI, the least risky markets for further price declines can be found in Texas. Dallas, Ft. Worth, Houston and San Antonio are all in the top five, with Pittsburgh, Charlotte, Cleveland, Denver and Indianapolis also looking like safe bets.
The ugly house people at Home Vestors also issued a quarterly real estate index. According to their figures which are based on volume of purchases in the final quarter of 2008, Dallas, Houston, San Antonio, Ft. Worth and Denver are among their top ten markets for the opportunity to profit this year.
While this mirrors the data from PMI, Home Vestors figures also project Milwaukee, Philadelphia, Minneapolis and Atlanta as top turnaround markets. Of course, this bodes well for us.
Let’s hope they’re right.
Comments Off on Twin Cities Duplex Owners – Time For Your CRPs
It’s January. In Minnesota, that means bitter cold, cabin fever and dashed Super Bowl hopes. And for Minnesota landlords, it also means it’s time for the annual ritual of filling out the Certificate of Rent Paid (CRP) for tenants.
The CRP is a means of giving tenants partial credit for the property tax they helped the Twin Cities duplex owner pay.
Any landlord with a rental unit where there was property tax payable in 2008 is required to fill out the required state CRP form
for each adult who lived in the rental unit, regardless of who made the actual rent payment. Married couples may receive a single CRP.
Basically, all the landlord is required to fill out on the form is the tenants name, location of the property, and the amount of rent received from that unit. Of course, this figure is based on the actual amount of time the tenant occupied the duplex and the landlord owned the property.
This worksheet must be given to tenants, past and present, no later than January 31, 2009. Failure to do so may result in a fine of up to $100 per incident, so it’s worth taking the time to get it done.
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released their weekly market activity report the other day, and while I’ve already shared the encouraging data from the Minneapolis duplex market, the single family home sector warranted some minor celebrating as well.
While the number of newly listed homes for the week ending January 10 jumped, as they always do after the holidays, they still trailed last years figure by 7.6 percent. In fact, over the last three months new listings are down 9 percent from the mark set in the same period the year before.
But here’s the really encouraging news. Pending sales for the week were up 19.4 percent week over week from their 2008 mark. Over the last three months, pending sales are up a whopping 17.9 percent from the mark set during 2008.
Again, don’t buy any party hats. But a half-hearted “Yea!” might be appropriate.
Comments Off on Minneapolis Duplex Market Thinks About Getting Trendy
Well, the folks at MAAR seem to be celebrating both MLK Day and the presidential inauguration, so we’re left with taking a look at the small multi-family market activity for the week ending January 10, 2009. The good news is there were some interesting shifts; not enough to label anything a trend, mind you, but interesting nonetheless.
First, 39 properties received and accepted purchase agreements in the week. Of these, 92 percent involved a lender-mediated transaction. For the same week last year, 78 percent of the properties that sold involved negotiations with a bank.
The average price for the nine properties sold the second week of January in 2008 was $115,620. The price for the same time frame in 2009? Drum roll please…$124,970.
New listings for the week continued their downward trend, with 53 new opportunities coming on the market. Last year, 76 small multi-family properties came on in the second week. Year over year, it appears the percentage of new inventory encumbered by lender mediations has increased slightly, from 61 percent in 2008 to 68 percent in 2009.
We’ll just have to keep watching for signs of a trend.
Comments Off on Stimulus Package Needs To Help Minneapolis Duplexes
The stimulus package introduced by the U.S. House of Representatives
and guided by president elect Obama
‘s administration proved somewhat disappointing for the real estate sector.
Realtors have repeatedly asked Congress to simply expand the $7500 first time home buyer tax credit; not only making it available to all home buyers, but also eliminating the requirement that it be repaid. The Realtors association believes this modification would be enough to create an additional 555,000 in sales in the next two years.
Meanwhile, NAHB has asked representatives for a much more aggressive approach. They have asked Congress to consider offering a non-repayable tax credit of up to $22,000 for all purchasers this year.
Last week’s House version of the stimulus package, however, simply made the first time home buyer tax credit non-repayable.
However, NAR has expressed support for the TARP Reform and Accountability Act
(H.R. 384) introduced by Chairman Barney Frank
last week. This bill includes many of NAR’s recommendations for the remaining $350 billion in bailout money earmarked by Congress last fall. Key provisions include mortgage buy-downs to reduce interest below prevailing rates, increased foreclosure mitigation and prevention efforts, and liquidity in mortgage markets.
The U.S. Senate
has yet to introduce its version of the stimulus package, with any differences between the two chambers brokered and resolved before the package’s anticipated passage in mid to late February. This leaves ample time for all of us to contact our Congressional representatives
and encourage them toward package modification.
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One of the challenges facing owners who occupy their duplexes is a common misconception about their home equity line.
While a home equity line was a terrific tool useful when it came time to making large repairs or improvements, what most people don’t realize is “home equity loan” is a pleasant term for a second mortgage.
What many homeowners don’t know is when it comes time to either sell or refinance the property, this loan has to be paid off. In other words, the amount you need to pay off your entire indebtedness on the duplex is the amount you owe on your mortgage AND your equity line.
While to some this may seem obvious, I have run into many people who hadn’t received the benefit of a clear explanation of this fact when they were granted the equity line. These owners are often surprised when it comes time to sell in today’s challenging market, that they owe more than they thought.
This presents a problem in that in all likelihood, they can no longer sell the home for the amount it was valued at when the line was granted, thereby resulting in a short sale (where you are short in the amount you owe the bank).
If you have a home equity line, and are thinking of selling, be sure to disclose this information to your Realtor. That way, your agent can position your property and work with both lenders for the best possible outcome.
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One of the many advantages for home buyers in today’s tumultuous housing market are the generous FHA loan caps for multi-family properties in the Twin Cities metro area.
Wait? You can get an FHA loan for an income property? You betcha (as they say around here).
While you and I may see a fourplex or a duplex as a multi-family home, the banking industry perceives any residential property with up to four units as a single family home. As a result, the FHA is willing to insure a loan on up to four units.
Why is this such a big advantage in today’s market? Well, FHA loans require as little as 3.5 percent of the purchase price as a down payment, while financing for investors presently commands 20 percent down and one to two points in fees at closing.
For example, in any of the major Twin Cities counties, the FHA will lend up to $407,800 on a duplex. On a $400,000 property, an investor will need to have a down payment of $80,000, as well as another $7000-8000 in fees in addition to the traditional three percent in closing costs. An owner occupant, on the other hand, can purchase the same property with a down payment of $14,000 and three percent in closing costs.
It’s important to note here that while the FHA no longer allows sellers to gift the down payment to a buyer, other parties, like parents, can. However, the seller may still contribute closing costs.
One Family – $318,550
Two Family – $407,800
Three Family – $492,950
Four Family – $612,600
Of course, there is no limit to the amount you can use as a down payment.