Archive for May, 2011

Minneapolis Duplex Sales Beat Housing Market

said on May 31st, 2011 categorized under: Twin Cities Real Est

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minneapolis duplex market winsWe won! We won!

OK, so nobody wants to be the leader in year over year home price declines, but I’m looking for a silver lining.

If you haven’t heard, Standard & Poor’s/Case Shiller Home Prices Indices were recently released.

Of the 20 major cities measured, Minneapolis had the largest drop, with home prices down 10 percent in March compared to one year ago.

But hey, at least we’re in good company. Of the 20 cities measured, only Washington D.C. showed a gain.

Now here’s the good news. They’re measuring single family homes. I’m not seeing that kind of drop in the Minneapolis duplex market.

In fact, for the week ending May 21, the average listed price a duplex left the market at was $122,207. As the average property sells for 90 percent of the price it was listed at in today’s market, that means when these properties close, it will likely be at an average closer to the $110,628 achieved during the same week last year.

Of the duplex sellers who received and accepted purchase agreements on their property for the week, 28.57% did not have to consult with their lender before agreeing to sell. Last year, just 20% of the sellers had that same kind of freedom.

The number of new duplex listings for the week came in at 35, slightly trailing last year’s 37. Of these, 42.8% were offered by traditional sellers, down slightly from last year’s 48.6%.

If you’ve been thinking of selling your Minneapolis or St Paul duplex, it is a good time to sell; especially if your property would be a good fit for an owner occupant.

However, please keep in mind prices aren’t what they were in 2005, and probably won’t be for a very long time.

Case Shiller is out to prove it.

Why Duplexes Are Like Clothes On The Clearance Rack

said on May 27th, 2011 categorized under: Buying A Duplex

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Duplexes on SaleWe’ve all heard about the great deal a neighbor allegedly got when he bought a Minneapolis duplex for half of what it was listed on the MLS for.

And because the media’s told us that it’s a buyer’s market (it is), we think this means every investment property on the multiple listing service (MLS) is worth half of what the seller’s asking for it, right?

Wrong.

Right now, the duplex and single family home markets are like the day after Christmas sale at Macy’s.

In other words, while Minneapolis and St Paul duplexes are selling for a fraction of what they were bringing five or six years ago, the listing price is already half off.

Duplexes that sold for $300,000 in 2005, are now on the market for less than $200,000.

Asking for a 50% discount on top of that is pretty unrealistic.

Unless, of course, there’s a big hole in it.

In April, the average percentage of the original list price received at the sale of a property was 90.5%. That’s of the original price it came on the market at; it doesn’t reflect any price reductions the seller made to help generate interest and an offer.

That tells me that Minneapolis duplex sellers and their Realtors are pretty good at pricing their properties.

Buyers tend to want to try to write a low-ball offer hoping the seller, in a moment of desperation, will jump at their offer.

But they won’t.

They’ve been told buyers were going to that.

And they know market data backs them up.

Yes, it’s a buyer’s market. But remember, when it comes to duplexes, it’s already the week after Christmas sale at the mall.

Duplex Mortgage Defaulters Might Be Worth The Risk

said on May 26th, 2011 categorized under: Financing

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duplex foreclosure loansI saw an article in USA Today yesterday I thought might be of interest to Minneapolis duplex and single family home owners who have either already gone through foreclosure, or are facing the prospect of having to do so.

The article reported that according to credit monitor TransUnion, studies are finding people who default on their mortgages alone are not as risky to lend to as those who lost a duplex to foreclosure and either defaulted on credit card and or auto loan payments at the same time or filed bankruptcy.

According to the study, those who were mortgage only defaulters also saw their credit score rebound much more quickly.

The study reported that only 5.8% of mortgage-only defaulters were at least 60 days late on a car loan they opened after they defaulted on their mortgage. However, 13.1% of those who had defaulted on multiple loans were more than 60 days late.

The mortgage-only defaulters also had lower 60 day delinquencies on credit cards, at 11.4% vs the 27.1 percent of the multiple defaulters who were behind.

What does this mean to duplex buyers and those who’ve lost property to foreclosure? Well, at some point, these people are going to prove to be an opportunity for a lender.

And, the lender may find, there might not be a lot of risk in doing so,

Minneapolis Duplex Owners: Tell Your Tenants About Insurance

said on May 25th, 2011 categorized under: Tenants

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tornado damage ky 1aThe recent tornado in north Minneapolis reminded me of how important it is that duplex owners encourage their tenants to get renter’s insurance.

While the damage to a duplex or apartment building itself is covered under the owner’s insurance policy, coverage for the tenants belongings is their responsibility.

Many tenants not only don’t know this, but if they do, fail to understand that a building fire or destruction from a tornado can wipe out everything they own, without a means of reimbursement.

Most of the major insurance companies like State Farm and Allstate offer some form of renter’s insurance. Just like property or automobile insurance, rates vary according to location of the property, desired deductible and credit score. Most of the time, however, it runs about $25-35 a month.

This extra cost might seem impossible for some tenants, but opting whether or not to purchase it is ultimately their decision.

As Minneapolis and St Paul duplex owners, however, perhaps doing a better job of explaining what renter’s insurance covers to our tenants will mean less of them are wiped out financially in the event of another big storm.

Minneapolis Duplex Sales Offer More Of The Same

said on May 24th, 2011 categorized under: Twin Cities Real Est

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monotonySometimes it seems like the more things change, the more they stay the same.

Take Minneapolis and St Paul duplex sales, for example.  For the week ending May 14, 2011, there were 29 duplexes, triplexes or four unit apartment buildings that sold.

That’s exactly the number that sold during the same week last year.

Traditional, or equity sellers, contributed 34.5 percent of the accepted purchase agreements for this year’s number, while last year only 31 percent of the transactions did not involve negotiations with a lender.

The good news here is the average list price when this year’s group of investment properties left the market was $152,366. While this is sure to drop some when these sales close, it nonetheless is significantly higher than last year’s average sales price of $114,088.

Perhaps this higher average off market price is due to the lack of inventory noted in previous Duplex Chick posts. While there were 51 new duplex, and small multifamily property listings that came on the market for the week last year, this year there were just 33.

Of these 33 new Minneapolis and St Paul duplex listings, 42.4 percent were brought to the market by traditional sellers; slightly below last year’s 43.1 percent.

Single family home sales actually saw a jump in their numbers for the week, up 15.4 percent over the same week last year. However, the numbers may well be skewed due to last year’s rush to beat the tax credit deadline.

The number of new listings was up 7.7 percent, with numbers more in keeping with historical norms. However, the total amount of inventory on the market is still 10.1 percent below 2010’s figures.

Comments Off on Where Did I Leave My Minneapolis Duplex Vacancy Rates?

minneapolis duplex vacancy ratesMinneapolis and St Paul duplex vacancy rates are often harder to find than my car keys.

However, the commercial real estate brokerage Marchus & Millichap recently reported that according to their research, overall duplex and multi-family vacancy rates will fall below 3 percent this year in the Minneapolis/St Paul market.

This represents the lowest Twin Cities vacancy rates in a decade.

Why?

Marcus & Millichap thinks it’s a result of their belief that nearly all major employment sectors will add jobs this year.

Of course, as basic economics dictate, when demand exceeds supply, prices go up. This is true of rents also.

Asking rents are projected to increase 2.7 percent this year, and duplex and apartment owners will have to use fewer incentives to encourage tenants to lease.

This is great news if you already own a Minneapolis duplex or are thinking of jumping into the market. Not only will it cash flow when you buy it, but by year’s end, you could have an even greater positive cash flow!

Duplex Buyers Should Increase Savings

said on May 19th, 2011 categorized under: Financing

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Stack of $100 billsSometimes, federal banking regulators have some really bad ideas. Like the one they’re considering now; requiring a minimum down payment of 20 percent for any kind of duplex or home loan.

That should help the housing market rebound. (Sarcasm intended.)

It is estimated that if lending standards were changed to require home and duplex buyers to have a 20 percent down payment, rather than the 3.5 percent down payment presently required for FHA insured loans, it would take most Americans an average of 14 years to save enough for a down payment.

According to estimates by the National Association of Realtors (NAR), 60 percent of all recent home and duplex buyers had down payment that was less than 20 percent.

Some members of Congress, including housings best advocate, Sen. Johnny Isakson (R) of Georgia, this tightened standard would eliminate 17 to 28 percent of all home buyers from the market.

So, if you’re thinking about buying a Minneapolis duplex or home in the near or not too distant future, a phone call or letter to your congressional representative expressing your oposition to higher down payments might be wise.

As for now, however, the minimum down payment on an owner occupied Minneapolis or St Paul duplex remains 3.5 percent.

Minneapolis Duplex Foreclosures Slow

said on May 18th, 2011 categorized under: Short Sales/Foreclosure

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Housing market collapseLast week you may have heard that duplex and single family home activity nationwide was at a 40 month low.

This would explain why there are so few duplexes on the Minneapolis/St Paul market to buy.

Don’t dance in the streets just yet. According to RealtyTrac CEO James Saccacio, “This slowdown continues to be largely the result of massive delays in processing foreclosures rather than the result of a housing recovery that is lifting people out of foreclosure.”

In fact, data provided by the Mortgage Bankers Association suggest there are still about 3.7 million properties with loans that are seriously delinquent.

In Minnesota, one property owner of every 882 is either delinquent on their mortgage or somewhere in the foreclosure process. While this looks stellar compared with the one homeowner out of every 97 in Nevada, it loses some of its luster when measured against the one homeowner out of ever 17,580 in North Dakota who is facing foreclosure.

Saccacio said there are two different stretches where they’re seeing the delays; between delinquency and the start of the foreclosure process, then again when the process has started and lenders are taking more time to complete the process.

These delays are due in part to the lenders desire to give duplex and homeowners more of an opportunity to get a loan amodification, complete a short sale, or find some other solution.

Nationwide, the average length of time for a foreclosure to be completed as of the first quarter of 2011 was 400 days. At the same time last year, that number was 340 days.

At some point, the log jam will clear. Until then, see this as a window of opportunity to sell your Minneapolis duplex if you’re considering doing so.

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Crazy Duplex WomanIn the last week, I’ve been calling traditional Minneapolis and St Paul duplex sellers — you remember them, they’re the people with equity in their properties, and asking if they were interested in selling.

In light of the media headlines about a down real estate market, many of them have laughed and implied I was nuts. That was until I explained there’s very little active inventory on the market for duplex investors to choose from.

As if to help me prove I’m not crazy, the data for the week ending May 7, 2011, backs me up.

There were just 26 new listings that came on the market. Many of these have already been on the market for a while. They just showed up as new listings because it was time to refresh the paperwork between the real estate broker and seller. One half of these duplex offerings will not involve a lender’s opinion in the negotiation of a sale.

During the same week last year, there were 60 new listings. That’s 56.7 percent more new listings than there were for the week this year.

Unfortunately, duplex purchases were down week over week too. Just 12 properties had accepted purchase agreements. The good news is a whopping  67 percent of these belonged to traditional sellers.

Of course, this translated into a higher average off market price than last year. Duplexes left the Minneapolis and St Paul market at an average list price of $168,217 (sold prices are likely to be somewhat lower).

Last year, when 31 properties pended on the Multiple Listing Service (MLS) and just 29 percent belonged to equity sellers, the average sold price was $136,131.

In the single family home market, there were 27.7 percent fewer accepted purchase agreements than at this time last year. Interestingly, however, the number of new listings was up 14.5 percent from their mark one year ago.

Again, if you’re a duplex owner who’s thinking about selling, this may be a great time to do so. There’s not a lot of competition out there.

Comments Off on Why A Duplex Foreclosure Can Haunt You For 26 Years

Fear of Duplex ForeclosureOne of the biggest fears any of us face in life is fear of the unknown. I see it almost every day in myself, as well as the Minneapolis duplex owners, sellers and buyers I work with.

I believe it’s this very fear that keeps duplex owners who are facing foreclosure from going forward with a short sale.

At first, they tell they don’t want to go through the process, and would prefer to just let it go back to the bank.

And yet, when I question them further, I always discover they simply don’t know the facts about a short sale.

Last week I had the opportunity to visit with Jeff Nycklemoe, a short sale and foreclosure attorney who has helped a number of my duplex sellers through the short sale process. And he told me something that should scare distressed property owners even than their fear of the unknown; a second mortgage or home equity line of credit on a property not only survives the foreclosure, but can haunt the former owner for as long as 26 years.

When a duplex goes back to the bank, the lender who held the first mortgage on it is given the keys. The lender who had the second mortgage is left with nothing.

As a result, most second mortgages contain language that allow them to pursue the amount they are owed, in full, for as long as six years after the default happens.

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