Archive for October, 2010

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VisaMastercardLOGODuring real estate’s boom years, many duplex and single family home owners tapped into their property’s rapidly escalating equity through the use of a Home Equity Line of Credit or HELOC to pay debt, remodel the kitchen, or take a long dreamed of vacation.

Many other duplex buyers availed themselves of easily available bank credit, financing purchases of duplexes through the use of two mortgages; a first and second. The intention was to pay off the latter in a couple of years; when, as a result of appreciation, they would have earned the equity to refinance and pay off the second.

Kind of like credit cards.

But now, years later, we’re discovering that second mortgages (which is what an equity line is) are a lot more like MasterCard and Visa than we ever imagined.

Many duplex owners owe more on their property than it’s worth. Some, due to job loss, health issues, divorce or relocation can no longer afford to pay either their first or second mortgage. As a result, they face either foreclosure or a short sale.

Minnesota is a non-recourse loan state. As such, the first lien holder or bank may not, following a short sale or foreclosure, chase the duplex owner down and require them to pay the amount they were shorted on the loan.

But guess what?

The second lien holder can.

Why? A clause in the mortgage papers signed when the duplex was purchased.

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Glass Half Full In Minneapolis Duplex Market

said on October 5th, 2010 categorized under: Twin Cities Real Est

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Glass Half FullI try to be an optimist; to see the bright side of a slower duplex market.

To that end, let’s call the sixteen duplexes that had purchase agreements signed in the week ending September 25, 2010, the glass half full.

Trouble is, nearly twice that many (31) pended the same week one year ago.

Traditional sellers contributed 31.25 percent of those transactions, compared with 2009 when they offered 22.5 percent of the pended sales.

The average off market price for the week was $86,412.50. This represents a 15.5 percent drop from last year’s average sold price of $102,232.

The good news is the number of new listings also dropped by nearly half, 34.4 percent coming to the market with traditional sellers. This just edges the 32.8 percent contributed by them one year ago.

In the single family sector, listing activity dropped 19.9 percent from the same week last year. This wood be good news had there not been 41.7 percent fewer purchase agreements signed than last year.

The sharp decline in buyer activity means housing inventory is swelling, with the current 26,915 active single family home listings on the MLS being 9.8 percent higher than last year’s offerings.

Of course, whenever supply exceeds demand, prices fall. This represents a golden opportunity for buyers; especially multi-family property investors who are seeing double digit returns on rental property.

There has never been a better time to buy.

Why Duplex Down Payments Are Like Shoe Sizes

said on October 4th, 2010 categorized under: Financing

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big shoes, little feetI often get asked, “What’s the down payment on a duplex these days?”

I never have an answer.

The reason is duplex down payments are like shoes: one size doesn’t fit all.

I suppose I could offer generalities; 3.5 percent down if you’re an owner occupant using FHA and 20-25 percent if you’re an investor. But that’s a little like looking at your foot from afar and saying you need a size 8 when you failed to tell me you have seven toes.

In that case, you probably would need a bigger shoe, right?

The amount of a down payment depends on a number of things; what your credit score is, what your debt ratios are, how many loans you already have, whether or not the property is occupied, how much rental income a property generates, what program or lender you’re planning to use and any number of other factors.

In other words, the best way to find out what kind of down payment you as an individual will need to buy one or more duplexes, is to speak with a reputable loan officer in your area. He or she can then look at your specific situation, and make recommendations as to the type of financing that’s best for your situation.

It’s a good idea to speak with a loan officer before you begin your duplex hunt anyway; it will help both you and your Realtor avoid wasted time and energy.

Comments Off on Minneapolis Short Sale Duplexes: Who Gets The Rent?

home on a stack of cashBelieve it or not, some distressed duplex sellers have told me they would rather suffer the potential tax consequences and black mark of foreclosure on their credit report than save taxes and lessen credit damage through a short sale.

Why?

Because they want to pocket their tenants rent money until the property goes back to the bank.

The irony is, just because you’re selling your duplex as a short sale, or it’s in the foreclosure process, you’re still the owner of the property. As such, you are entitled to all the rights associated with it, including the collection of rent.

That is, unless the bank decides otherwise. See, when you signed your mortgage at the closing where you took title to the property, you likely signed an addendum that said in the event you defaulted, the bank resereved the right to collect rents from the tenants.

But this is true whether you’re being foreclosed upon or doing a short sale.

I’m getting mixed reports from sellers facing duplex short sales. Many are reporting their lender hasn’t requested the rents be assigned to them. Other(so far those who own bigger properties) report that they are.

Until you receive notice from the bank, however, you can use the rental income as you see fit; which may include continuing to pay for the utilities and maintenance of the property, or perhaps even trying to get caught up with the bank.

Of course, if you sell your duplex as a short sale, you will likely be responsible for transferring any tenants damage deposit to the new owner at closing. That money belongs to the new owner.

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