Archive for July, 2009

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rosetta stoneAnyone know if they make a version of Rosetta Stone for Truth In Sale of Housing Reports?

Because one of the most commonly overlooked and misunderstood documents by first time duplex buyers and sellers is the pre-sale inspection report.

These reports were originated by municipalities as a way to make sure the city’s housing met a certain set of minimum health and safety standards.

Prior to putting a property on the market, sellers in 14 metro cities are required to have an independent inspector come evaluate the single family home, condo, townhouse or duplex and determine the properties overall condition and level of code compliance. 

The inspector will then rate each item in accordance with city guidelines.

In Minneapolis, the items both the seller and a potential buyer should be concerned about are those described as “Required Repairs”.  While this sounds ominous, the “to do’s” on this list can be as simple and inexpensive as putting a backflow preventer (a brass attachment available at any hardware store for just a few dollars) on a laundry tub faucet  to repairing or replacing plumbing.

These “RRs” may be repaired by the seller prior to the property going on the MLS, thereby earning her a new and clean Truth In Sale of Housing report or, as is the case in many foreclosures or estates, the seller may ask the buyer to assume the responsibility for making these repairs within 30 days of closing.

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Minneapolis Duplex Market Shrinks

said on July 28th, 2009 categorized under: Twin Cities Real Est

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Open-gearing clock on a tableIf you’re considering taking advantage of the $8000 first time home buyer tax credit to buy a duplex, you’d better hustle.  Not only is time running out, but so is the inventory.

Wait? A housing shortage? Well…

According to MAAR, there are 21.4 percent fewer homes for sale in the Twin Cities market than there were at this time last year. In just the week ending July 18, there were 12.1 percent fewer new listings than there were for the comparable week in 2008.

Meanwhile, pending sales the week ending July 18 jumped 18.2 percent. Of course, most of these transactions involve homes in the first time home buyer price range.

As a result of shrinking first time home buyer single family inventory, frustrated buyers may be opting for duplexes. Pending sales for the week were up five percent from last year, with 15 percent of those properties did not involve a lender in the negotiations.

Sadly, the 2009 average off market price of the pended properties was just $104,927, as 16 percent drop from the same week in July in 2008.

There were, however,  18.9 percent fewer new listings year over year. While 70 percent of these continue to involve a short sale or foreclosure property, 67.57 percent of the 2008 properties did. In other words, we haven’t seen a dramatic leap in the percentage of foreclosures hitting the market.

A word of caution. In late 2008 and early 2009, there was a moratorium placed on foreclosures by the government. Word is those properties where the seller was not able to successfully renegotiate the terms of their loans will begin hitting the market August 1.

What’s more, numerous real estate reporters like Diana Olick of CNBC are talking about a “shadow inventory” of bank foreclosures; properties the lenders have already seized, but are holding on to in order to not flood the market, causing further declines in home values.

While I have no statistical data to support this assertion, I do personally know of several properties that were foreclosed on as much as a year ago that have yet to hit the market.

Why Working With A Realtor Is A Lot Like Dating

said on July 27th, 2009 categorized under: Legal Stuff

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relax in my heartWorking with a Realtor is a lot like dating.

But with a contract.

And without those perks.

Once you’ve reached a certain point in your relationship with your agent, she may ask you to sign what’s known as a Buyer Representation agreement. There are many types of representation, but most often, she’ll ask you to sign a document that gives her the exclusive right to represent you.

If you think about it, this document makes sense. Agents work long and hard to find the right properties for our buyers.  And once we do, we want to have the legal assurance we’ll be paid for our efforts. After all, we don’t get paid a thing; not a salary, not mileage, not base pay…nothing, until you buy your duplex.

So it makes sense that you should be committed to your agent. And, your monogamous relationship with that agent is considered so sacred you may even walk into an open house and have other Realtors ask whether you’ve signed a buyer representation agreement.

Why do they ask? Because the state of Minnesota says if you have, they’re not allowed to talk with you in any way that could be perceived as a violation of that pact. This law is so thorough that even if you’ve successfully negotiated a purchase agreement, but have yet to close, you aren’t allowed to speak with the agent representing the seller unless it’s through your Realtor.

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Comments Off on How A Minneapolis Duplex Can Help You Beat The Multiple Offer Blues

sax and the musicianI stumbled into a story on MSHNBC the other day that reminded me why there has never been a better time to become the owner-occupant of a Minneapolis duplex.

The story chronicled the struggles of a pair of first time home buyers in Phoenix, Ariz. who had written no less than 15 offers on single family homes only to be outbid in multiple offers every time. In several cases they hadn’t even lost to other potential home owners. Instead, they’d lost out to investors; with cash, no need for appraisals and fast closing dates.

Needless to say, they were getting pretty down about it.

While Minneapolis isn’t Phoenix, it’s happening here too. The most affordable homes in desirable neighborhoods are being scooped up either as potential rehab and sell properties, or to be held as rental units. 

But aren’t investors buying duplexes as income properties?

Yes and no.

With tightened lending practices now requiring duplex investors to have a minimum o Read the rest of this entry »

Minneapolis Duplex Owners Should Head For The Basement

said on July 23rd, 2009 categorized under: Tenants

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real airport weather mapThe Minnesota Multi-Housing Association should hire Belinda Jensen.

I don’t think she knows a thing about renting or owning duplexes. But I think a storm’s a comin’, and somebody needs to forecast it.

So I will.

There’s a tornado on the horizon for Minneapolis/St Paul duplex owners and landlords.

It’s a great big, dark, ominous-looking vacancy rate resulting from the $8000 first time home buyer tax credit.

I can’t even tell you how many people I’ve spoken with in open houses and general conversations who a) are planning on taking advantage of the tax credit and b) are on month-to-month leases.

As the tax credit expires November 30, 2009, how many move-out notices do you think landlords will receive on October 30?

I’m guessing about 17 inches worth.

While it’s always wise to keep your tenant’s leases current, it is especially important to make sure you have them under contract now.

If you don’t, I’m predicting a long, cold winter.

Minneapolis Duplex Sales Go Retro

said on July 21st, 2009 categorized under: Twin Cities Real Est

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retroThere’s something vaguely familiar about what’s going on in certain sectors of the Minneapolis housing market right now. I’m starting to get a vibe that  feels like old times.

If you’re out shopping for your first single family home in the Twin Cities, it’s likely that you’ve either wanted to see a house that just came on the market only to find it already sold in multiple offers, or, of the 10 listings you’d like to see, only one run-down, over-priced foreclosure is still available. Everything else on your list had already sold.

Worse yet, you may even find you’re starting to get priced out of the market.

What does this have to do with duplexes? Everything.

For the week ending July 11, the number of small multi-family properties that received purchase agreements in the Twin Cities was actually down 21.6 percent from the same time last year. However, the average pended price of these duplexes leaving the market was actually more than $6000 higher than those that did so in 2008.

This is only the third time this has happened in the last year.

But here’s what’s interesting. Of those that pended, 31.03 percent did not involve a lender in the negotiations. In other words, the properties were owned, and often even occupied by people, not corporations. This is more than twice the 13.5 percent human owned that sold for the same stretch in 2008.

OK, this isn’t science, but experience. Back in the boom years, say 2004-2006, the duplex market exploded. This was partially a result of readily available, low down payment financing that inspired many to buy their first rental property.

However, this was also due to many first time home buyers could no longer afford to live in a single family home in the neighborhoods they liked.  In many areas, a two bedroom home went for more than $200,000. Meanwhile, a duplex in the same neighborhood, could be bought for somewhere in the mid to upper $200,000 range. With tenants paying half the mortgage, a $280,000 duplex was akin to buying a $145,000 – $150,000 house.

So those first time home buyers “back in the day” moved into the duplex market.

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The Minneapolis Duplex Tax Credit Race Is On

said on July 20th, 2009 categorized under: Buying A Duplex, Tax Credits

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horse racingI keep wondering when people will notice summer’s almost over.

OK, so it’s not exactly over. But we’re a week a week and change away from the first day of August. Summer might as well be over then, as it’s when we all start thinking “time to get ready to go back to…”.

Summer’s end promises the onset of fall. And fall means the end of the $8000 first time home buyer tax credit.

Yes, the credit expires on November 30, 2009. But that doesn’t mean you have to have picked out a duplex by then. It means you actually have to have closed on it. In other words, the key and the mortgage need to be yours.

Sounds easy enough, right?

Well, there’s the fact that it usually takes anywhere from two weeks to a month for the bank to give you the mortgage you applied for to buy the place.

No worries. That means you have to have found your first home by November 1, right?

Guess again.

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FHA Wins Minneapolis Duplex Financing Wars Again

said on July 16th, 2009 categorized under: Financing

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Twenty percent. Gold. 3dIt sounds presposterous, but a client actually had a computer glitch significantly delay his purchase of a duplex the other day.

As he was using FHA financing, the glitch involved a software problem in the computer system of the federal government. Basically, he had written an offer earlier in the year on a different property, which we were unable to successfully close on.  And somehow, the “case number” assigned to the loan he never got remained in the system.

When he went to get a loan for a different property, the government’s software prevented it. After all, you can only have one FHA loan at a time. And the computer said he was applying for a second one. The computer is always right (sarcasm intended).

So I went about looking for alternatives. After all, there are no limits to the number of conventional loans a buyer can have at one time. And I hoped there was a loan product out there with perhaps a down payment of just a little more than FHA’s mandatory 3.5 percent. Perhaps we could find him a conventional loan that required just 5 percent down.

And then I learned something.

While conventional loans on single family homes presently require the buyer to have a minimum of 10 percent down, duplexes are another matter entirely.

We all know investors are required to put 20 – 25 percent down in today’s market. So it should be something less if you’re buying the duplex to live in, right?

Nope. Owner occupants who use conventional financing for their multi-family properties are required to have a 20 percent down payment.

Sadly for my client, it looks like FHA is still the best game in town.

Comments Off on Minneapolis Duplex Sales Experience Holiday Countdown

TimesSquareBall2007Holidays have a big impact on MAAR‘s Weekly Market Activity Reports.

It doesn’t matter whether it’s the 4th of July, Christmas or Thanksgiving. Sales always seem to drop like the ball in Times Square on New Year’s Eve.

As a result, the number of pending home sales for the week ending July 4 fell to just 989. The good news is for the same holiday week in 2008, only 735 properties received purchase agreements. In easy figures, 2009 sales were up 34.6 percent.

The number of new listings for the period also fell from the year before; down a full 8.3 percent.

Duplex and small multi-family property sales, also suffered a bit of a fireworks falloff, with just 36 receiving purchase agreements. This number, however, is up 33 percent from comparable 2008 figures.

While 79.2 percent of last year’s transactions were lender mediated, 80.6 percent of this year’s were. Neither number is encouraging for traditional sellers, however, they do appear to be indicative of a leveling off of bank transactions.

New inventory dropped as well week over week, down 24.6 from 2008. While 52 percent of this year’s new listings will involve lenders in negotiations, that figure is down 23.4 percent from the number that did last year.

Of course, the bad news continues to be that the week’s average off market price of $152,521 also dropped from the $185,119 set in 2008.

Is A $10 Rent Increase Worth The Hassle?

said on July 13th, 2009 categorized under: Selling A Duplex

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While talking about rent increases in tough economic times might be like pining for summer in the midst of a Minnesota January, it is nevertheless important to remember the enormous impact on value that even the slightest increase in revenue can make.

There is no greater illustration than this than the gross rent multiplierUS Quater from both sides. As I explained a while back, this figure is simply the price or value of the house, divided by the amount of money it takes in annually.

How do rent increases, or, for that matter, even more laundry revenue, impact the GRM?

Let’s pretend, on average, duplexes in your area are selling at an average GRM of 10.

Your duplex grosses $10,000 per year in rent and laundry income. Therefore, your property is most likely worth $10,000 x 10 GRM = $100,000. (Bear in mind that condition and location always contribute to value as well.)

The economy is bad, so you feel you can’t increase rent. But what would happen if you simply upped it by $10/month for each unit. That would result in an additional $20/month in income, for $220 per year.

What if you could generate $10 more a month in laundry income by increasing the charge for each was by 25 cents? This would result in $110 more for the year.

Combined, you would have increased your annual income by $330.

It doesn’t seem like much, I know. Until, of course, you use it to determine the market value of your property. Multiply the $330 by the GRM of 10 and those minor increases suddenly translate into your property increasing in value by $3300.

Times are tough for everyone, but there are still fair, compassionate ways to increase your bottom line.

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