Duplex Chick

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I added a new duplex to my “Five All-Time Favorite Duplexes” list yesterday. It probably also ranks as one of the nicest foreclosures I’ve ever seen.

The duplex is located in the sought-after Prospect Park neighborhood in Minneapolis, meaning it’s just blocks from the river walking trails and the University of Minnesota.

Built in the 1920s, it has two rare 3 bedroom units and all the character you’d expect from the era like built-ins, fireplaces (3), arched doorways and even an original Murphy Bed.

However, the previous owner added all the important upgrades like updated kitchens, a studio apartment in the basement, screened porches off the dining rooms, air conditioning and even an observation deck on the roof.

Still more rare is that it actually has a fenced yard big enough for a swing set or dog too big to ride in a purse.

The only problem with the place is it’s not my listing.

At $369,900,  it’s probably priced too high for an investor and feels much more like a duplex suitable for an owner-occupant. Nonetheless, it’s a terrific opportunity for somebody, because it’s truly special.

Call me if you’d like to see it. But hurry. I can’t imagine it will be on the market long.

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The other day a duplex owner facing a short sale confessed he didn’t think he’d be able to continue to make his mortgage payment.

He then asked if he couldn’t make the mortgage, did he need to bother with the insurance payment?

The answer, according to Frank Culbertson at Farmer’s Union Insurance, is yes.

While many duplex owners have their premiums escrowed as part of their monthly payment, some pay the insurance company directly.

According to Culbertson, several missed payments result in the insurance company notifying the lender. Guess what happens then?

Since the lender has a stake in the property, namely the money they lent toward its purchase, they would like their asset protected. And, by law, they have the right to buy insurance on the property, and they will.

These insurance premiums are typically at a rate three to four times higher than the rates the property owner was paying. And the cost of them is then passed on to the duplex owner.

So what does it matter if you can’t pay them back anyway?

Well, unless your Minneapolis duplex or duplexes are vacant, you still have tenants. Now let’s imagine there’s a fire where one or more of them is seriously injured while payments aren’t being made.

Do you think the tenant or his family will not pursue legal recourse simply because you were in the foreclosure process?

Personally? I’m not that optimistic.

And even though it’s possible you may not ultimately have any liability, your attorney will charge you to prove just that. Even if you’re broke.

Had you maintained your insurance policy, odds are, your policy would have covered the costs of attorney’s fees.

Just something to think about.

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OK, would everybody PLEASE put your duplexes on the market?

Call me crazy, but I have a long list of buyers and, believe it or not, there’s not enough good duplexes out there for them to chose from.

Now before you accuse me of having lost my marbles, the market data for the week ending August 28, 2010, backs me up. That week alone, the amount of new inventory that became available for sale was down 46 percent from the year before.

Of those new listings, 58 percent were offered by traditional sellers,  compared to just 35 percent for the same week in 2009.

Pended sales were down too, though at a 10 percent decline, not as dramatically. Of those property owners who accepted purchase agreements, just 7.4 percent did so without a lender involved in the negotiations. Last year for the week, 13.33 percent of the sellers could say the same.

Perhaps the decline in inventory contributed to the higher average off market list price for duplexes of $121,264.81; which is significantly above last year’s sold price of $86,228. Of course, the list price and sold price are rarely one in the same these days, so the gain may not be as significant as it first appears.

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Have you ever noticed that many Minneapolis duplexes sell for as much as a fourplex?

Why? After all, if there are more people paying rent, shouldn’t the property be worth more?

Not necessarily.

See it all boils down to that law we all learned in our first economics class: the law of supply and demand.

There are simply more prospective buyers for duplexes than there are for four unit buildings.

In the years I’ve been a Realtor, I would say that on average, at least 50 percent of the duplex buyers I’m working with at any given time are owner occupants.

Some are looking as a duplex as an affordable way to move into a neighborhood that’s out of their price range as single family home buyers.

Others are looking to owner occupy the property for a time, before moving on to a single family home while keeping the duplex as an investment.

While the prospect of having a single tenant to manage is palatable to most of these owner occupants, the idea of having three sets of tenants to respond to is overwhelming.

As a result, these owner occupants tend to relegate themselves to duplexes, where they compete with investors who are simply looking to earn a specific rate of return on a property.

More buyers in the market for a property always results in a higher price.

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I’ve been finding a lot of wolves in s Sheep’s clothing lately.

Not in my dreams, but rather, on Craigslist.

Every now and then I scan the list of duplexes for sale on Craigslist. As I’m familiar with most of the ones listed by Realtors and active on the MLS, I narrow my search to those properties offered for sale by owner.

I do this for several reasons, one of which is finding that elusive “perfect” property for a client who’s seen everything on the MLS.

But lately when I contact these sellers I am surprised to learn the seller herself is a Realtor.

Now there’s nothing wrong with an agent selling her own property without listing it on the MLS. S he has the same rights to sell it herself and advertise it anywhere she chooses that a seller who does not hold a real estate license has.

The difference is she has a legal responsibility to disclose this information from the start. In other words, her ad should say something like, “owner/agent”.

The reason this is required by law is to protect the consumer. It is assumed the agent has specialized training that makes her an expert in her field, thereby giving her an advantage over someone who doesn’t have the same training.

It’s kind of like walking into a fight with a black belt when all you’ve done is watch Jackie Chan movies.

If you’re aware you’re doing this prior to seeing the property, you have the ability to find competent representation to look out for your best interests.

And you should.