Archive for August, 2010
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The Minneapolis real estate market is like someone who just can’t stop eating.
No matter how much it needs to not put another piece of chocolate in its mouth without also working out, it just can’t seem to keep itself from reaching for another piece.
For the last 12 weeks, the number of single family homes for sale in the market has been higher than it was a year ago; 8.1 percent higher to be exact.
And it’s growing because buyers aren’t out there to help work off the pounds of excess inventory.
For the week ending August 21, there were 601 purchase agreements signed. That’s 40.6 percent less than a year ago.
Duplex and small multi-family sales fared better however. While pended sales were down 10.7 percent year over year, the amount of new inventory also declined by 9.75 percent.
Of those properties that received purchase agreements, just 20 percent were signed by traditional sellers. This is down slightly from last year’s 25 percent. While the average off market price was $119,492, faring better than last year’s sold price of $113,148, it’s important to remember we won’t know until the sales have closed how near list price those transactions were for. In this market, odds are the “getting” price was below the “asking” price.
Traditional sellers brought 32.43 percent of the new inventory to the market for the week; a healthier showing than last year’s 22 percent of the new offerings.
said on August 30th, 2010 categorized under: Tax Credits
Comments Off on Is The Duplex Tax Credit About To Make A Comeback?
If you blinked over the weekend, you missed what might be the summer’s biggest news in the U.S. housing market.
There was actually a conversation on CNN‘s “State of the Union” program yesterday morning where Housing and Urban Development Secretary Shaun Donovan said it was too early to say whether or not the $8000 first time home buyer and $6500 repeat buyer tax credits would be revived.
Home buyers could purchase a single family homes, duplex homes, triplexes or apartment building to earn the credit; so long as they deemed the property their principal residence.
On the surface, that doesn’t sound like good or exciting news. However, it is the first time that I can recall a revival of the tax credit being discussed at all.
What prompted Donovan’s statement?
It was last week’s report of that sales of existing U.S. homes in July fell to their slowest pace in 15 years. It was worse than everybody, including the Obama administration, anticipated.
Of course, many fear an extension of the tax credit would increase the deficit. Others don’t see the economy improving until the housing market stabilizes.
I can’t tell you whether another tax credit will solve anything or not. I do know there seemed to be a greater sense of urgency to get something done among both my buyers and sellers when the extension was in place.
Without it, while many are planning to buy and want to sell, nobody seems in a hurry to do anything.
said on August 27th, 2010 categorized under: Tenants
Comments Off on MLS Now Makes It Easy To Find Tenants
Starting September 1, duplex home owners looking to lease their units will be able to list them on the Minneapolis/St Paul MLS.
This will help more property owners expose their vacancies to a greater number of prospective tenants, as well as provide a centralized destination for people to find places to live.
It will also help duplex sellers who are having difficulty finding a buyer market their property for rent until market conditions improve.
The rental section of the MLS will feature single family homes, condos, townhouses, apartments, duplexes, triplexes and fourplexes.
Listing your rental on the MLS can be done through any Realtor who’s a member of the MLS. The listing must include an offer of compensation; an amount that will be a flat dollar amount rather than a percentage.
Rental listings will look much like those for properties that are for sale, including a list of amenities, length of the lease, rent amount and one or more photos.
Properties being actively marketed for sale may also be listed separately as rentals; resulting in two listings and two MLS numbers.
If you’re interested in getting your property rented, call me. I’d be happy to help you get it on the MLS.
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I subscribe to a web site that tells me which duplexes in the Twin Cities are facing a Sheriff’s Sale.
Every now and then, I see a property listed where the Sheriff’s Sale has been delayed because the property owner is filing for bankruptcy.
I don’t know if the duplex home owners are doing this with the hope of avoiding foreclosure or not. But if they are, it won’t work.
Declaring bankruptcy may temporarily halt foreclosure proceedings, giving the property owner an opportunity to reorganize debt. However, it will not stop the foreclosure process.
Both bankruptcy and foreclosure stay on your credit report for a minimum of 7 years. Imagine giving yourself the double whammy of both.
For many property owners, mortgage payments are the biggest portion of their debt. So when considering filing for bankruptcy, it may be useful to consider whether or not the financial strain would be eliminated or reduced if it were eliminated or reduced.
Duplex owners who can demonstrate a monthly financial shortfall may qualify for a short sale. While this too has some impact to credit, it is nowhere near as damaging or enduring as a foreclosure.
If you’re considering bankruptcy because of overwhelming debt, including your mortgage payments, give me a call. As a CDPE agent, I can help you explore your financial options.
You may discover bankruptcy isn’t inevitable after all.
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Some days, it’s tough for Realtors to get out of bed.
Today was one of those mornings, knowing as I did that the National Association of Realtors would be releasing their report for July existing home sales.
The news was worse than expected. Nationally, sales fell by more than 27 percent; the largest decline in 15 years.
Worse yet, Minneapolis lead the nation in declines, with sales down 42 percent from their mark one year ago.
August doesn’t appear to be faring any better. For the week ending August 14, pending single family home sales were down 38.5 percent from last year.
In fact, over the last three months, there have been 5,812 fewer pending sales than there were one year ago over the same stretch of time.
Pending duplex and small multi-family property sales also declined 24 percent from the same week last year. Of those property owners who accepted purchase agreements, 74 percent were or had to involve lenders in their negotiations.
Traditional sellers eased ahead of foreclosures and short sales in the new listing category, bringing 53 percent of the listings to market.
The silver lining may be that while duplex and small multi-family sales were down, the average off market price of $126,742 was 11.9 percent higher than the sold price of last year.
Somebody wake me when this is over.
Comments Off on What Does Donald Trump Know About Real Estate?
The New York Times published an article today with the headline announcing “Real Estate Fading As A Means To Build Wealth”.
I’m sure this came as news to Donald Trump.
While the article focused on single family homes, it also quoted Zillow’schief economist Stan Humphries, who stated, “There is no iron law that real estate must appreciate.”
Well, that’s exactly why duplexes and small multi-family properties are good investments. If you and your Realtor are doing your math correctly, the cash flow can give you a good return; without appreciation.
Anyone who encourages you to buy an investment property that doesn’t cash flow because “it will go up in value” doesn’t know what they’re doing. How much something will appreciate is entirely speculative.
Successful real estate investors buy properties because they know, going in, what the rate of return on their money will be.
Sure, we all got used to rapid appreciation during the years of the boom market. But savvy investment property buyers were sitting on the sidelines, because the numbers didn’t work.
If a duplex house, triplex or fourplex either pays for itself, or makes your portion of the mortgage affordable, something like appreciation should be seen as a bonus.
After all, if the property never went up in value, at the end of the mortgage term you would have equity equivalent to the amount you paid for it, as well as monthly cash flow.
Small multi-family properties in the Twin Cities are averaging better rates of return than they have in years.
They can be a pretty nice way to supplement your income, even if your last name isn’t Trump.
Comments Off on Duplex Owners May Not Have Recourse
If you’re a duplex home owner facing a short sale or foreclosure, one of the most important items to consider in your decision-making process is whether your state is a recourse or non-recourse loan state.
A recourse loan is one in which the bank can obtain a deficiency judgement for any amount they can’t recuperate through a short sale or foreclosure.
For example, if you sell your duplex and are $25,000 shy of what you owe the lender, they can pursue you for the difference. Of course, if you lose the property to foreclosure, they can come after you for the total loan balance.
Sadly, most states are recourse loan states.
However, Minnesota, California, Mississippi, Montana, North Dakota and West Virgina are what’s known as non-recourse loan states. There, the property is the only collateral the bank can come after. Once it’s sold or foreclosed upon, they can’t pursue further judgements.
Of course, for duplex owners, that may not mitigate tax liabilities and it’s important that you consult with your accountant before making any decisions.
Comments Off on An Unnecessary Fourplex Tragedy
I looked at a familiar fourplex this morning.
I knew the building because I showed it to a client two or three years ago when the owner was trying to sell it herself. At that time, my client liked it well enough to write an offer.
The offer was for $260,000.
The building is now on the market as a foreclosure for $135,000.
Sadly, I had another buyer for the building last summer. I’d called the owner and she never called me back.
She chose to be foreclosed upon. She had the option of a short sale. The latter would have greatly reduced her tax liabilities and alleviated many long-term credit issues.
But pride got in her way.
If you’re upside down in a duplex, triplex, or fourplex, remember you do have options. And almost all of them are better than foreclosure.
If you’d like help finding a way out, call me. As a Certified Distressed Property Expert, I can present you with options you may not have considered.
And remember, you’re not alone. We’re all in this housing crisis together.
Comments Off on Twin Cities Housing Market Needs Hair Of The Dog
If the first time and repeat buyer tax credits were a housing party, then it’s fair to say the post tax credit hangover continued in the Twin Cities housing market for the week ending August 7.
Pending sales of single family homes continued stay in bed; down 36.5 percent from their mark one year ago.
With fewer sales, it’s natural that the amount of inventory would continue to swell. In fact, there are 7.4 percent more homes available for sale than there were last year at this time. This month, there will be 8.64 homes available for every buyer in the marketplace. Last year, there was an average of just 5.28 for each buyer to choose from.
Duplex sales fared no better, with week over week sales dropping 25.6 percent from their 2009 mark. Of those duplex houses went under contract, just 13.79 percent were offered by traditional sellers. While this is an improvement over the 10.26 percent sold by parties other than banks for the same week last year, neither number is reason to celebrate.
However, it could be argued that the $118.224 average off market price for the pended sales is an improvement over last year’s sold price of $86,334, neither number is worthy of a party announcement.
Unlike single family homes, new duplex and small multi-family listings were down year over year by 31.8 percent.
While less inventory should ultimately put upward pressure on prices, and 7 percent more of the week’s new listings were offered by traditional sellers than last year’s figures, we’re a long way from anything resembling either price stability or appreciation.
Comments Off on How The IRS Can Be A Minneapolis Duplex Seller’s Best Friend
I’ve recently met with several prospective duplex home sellers who, facing a slower real estate market, were surprised to find the IRS could save the day.
In each case, the property owners had owner-occupied their duplexes at some point in the last five years, ultimately moving out and renting their old unit.
Of course, one of the benefits of owner occupying a duplex is the ability to avoid any capital gains tax on the unit that wasn’t leased; provided the owner lived in the premises two of the last five years.
While I encouraged all of these sellers to consult a qualified tax professional, most reported back by selling now and avoiding capital tax on their half of the duplex, they would be saving thousands of dollars.
This was a bit of a silver lining for them, as it was as if they’d found some of the money they thought they’d lost; in the sofa.