Archive for August, 2011

FHA Tells Minneapolis Duplex Buyers Not To Spend So Much

said on August 31st, 2011 categorized under: Financing

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duplex chick crying wolfAt the risk of becoming the Duplex Chick who cried “wolf”, FHA loan limits on Minneapolis and St Paul duplexes are about to change. A lot.

It’s important to remember that the amount of the loan you’re allowed to obtain is determined by where you live.

So, if you’re buying a duplex in Los Angeles or New York, you’re loan limit is likely to be higher than someone buying a duplex in, say, Mankato, Minn.

As of October 1, the five major counties that comprise the Twin Cities will see their FHA insured loan limit on a duplex drop from $467.250, to an amount no greater than $407,800.

Triplex buyers will see their limit decrease from $564,800 to $492, 950.

And those who hope to put just 3.5 percent down on an owner occupied FHA insured four-plex will find the maximum amount they can finance drop from $701,900 to $612,600.

While only a handful of duplexes, triplexes and four-plexes have sold this year for amounts too high for the property to qualify, these figures are important to keep in mind if you’re planning on owner occupying a duplex.

After all, sooner or later, somebody’s bound to have their heart broken by these new restrictions.

Most likely, however, it’s going to be the single family home buyers who will see their outer limits shrink from $365,000 to $318,500.

Of course, there’s always the possibility Congress can intervene and extend the higher FHA ceiling in order to help stimulate the housing market.

But that would require them all agreeing on something.

Yeah, right.

Minneapolis Duplex Prices Stay The Same

said on August 30th, 2011 categorized under: Twin Cities Real Est

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Reading News on Tablet PC with clipping pathWell, I can’t tell you Minneapolis duplex prices were up for the week ending August 20, 2011.

In fact, the average off-market price of $119,548 was just $66 shy of the average sold price for the same week last year.

However,  according to the folks over at Standard & Poor’s, the average price for a single family home in Minneapolis in late spring was up  3.2 percent, which is good news.

Of the 25 Minneapolis duplex sellers who received and accepted purchase agreements for the week, 20 percent were traditional equity sellers.  Last year, 14.3 percent of the pended duplex sales did not involve a bank in the negotiations.

New duplex inventory continued to be a problem, as the 28 new listings for the week  were 9 less than came on the market during the same week one year ago.

Of these new listings, 53.6 percent were offered by traditional sellers this August, as compared to 32.4 percent last year.

Single family homes also saw a continued trend of less new inventory, down 11.8 percent from the same week in 2010. In all, there are 20 percent fewer homes available on the market to choose from than last year.

As we finish round the corner and head for the end of the year, keep in mind that sooner or later, as supply decreases, there won’t be enough to meet the demand for Minneapolis duplexes…no batter how few duplex buyers are out there.

Why Buying A Duplex Is Like Asking Someone Out

said on August 29th, 2011 categorized under: Buying A Duplex

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you can see my heartHave you ever wanted to ask someone out, and by the time you finally got up the nerve, discovered they’d just started dating someone else?

Buying a great duplex investment can be exactly like that.

Because great duplexes don’t stay on the market for long, just like all the attractive, smart, funny, kind, financially secure people who are actually interested in dating don’t stay single for long.

I am constantly amazed that buyers think the greatest duplex deal in the world will last the 5 to 7 days it takes them to decide to write an offer.

Even in a down real estate market, the great duplex deals are snapped up quickly.

And when they’re gone, no amount of shoulda, coulda, wouldas will bring them back.

If you’re thinking of buying a Minneapolis duplex, be ready to act quickly. Have your mortgage pre-approval letter ready to go, be committed to a Realtor who specializes in duplexes, and don’t be afraid to write an offer.

And remember, if it’s rejected, it’s not because you dress funny or smell weird.

It’s because the seller wanted more money, more time, or simply changed her mind. However, if the answer is yes..

Just be sure to make your purchase contingent on an inspection. That will give you, and if you choose, a qualified inspector, an opportunity to go over the property thoroughly before you go forward with the purchase.

And if you and the seller can’t come to an understanding about how to fix any problems, whether physically or financially, you can break up with the duplex.

Just like dating.

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Business Couple workingIf you’re thinking about buying a duplex with a friend, spouse or family member, the single most important thing to discuss isn’t cash flow, rate of return, or how rich you’re going to get from investing in duplexes.

The single most important thing to discuss is how you’re going to get out.

But why? Nobody ever fights, changes plans, gets sick or loses a job, right?

Haha.

No matter how well intentioned we are, or how much we love the person we’re buying a duplex with, the sad fact is things happen. And the only chance we have of preserving not only our investment, but far more importantly, our relationship, is to have a pre-determined understanding of how we can exit if we need to.

It’s the conversation none of us wants to have. Nonetheless, it needs to happen.

Be sure to talk about how you’re going to take title or ownership. Will you be joint tenants, where if one party passes away, the other automatically inherits the deceased person’s half? Or will you take tile as tenants in common, where you can sell or will your share to an outsider or your heirs?

What if you get a job in another state? Will you sell? Trust your partner to manage the duplex in your absence?

What if one of you just needs her money out? Will the still interested duplex owner agree to list the property? Buy your share?

Once you’re ironed out the details of duplex ownership, it will cost you several hundred dollars to hire an attorney to put your agreement in writing. Always put it in writing. It will help each of your remember what your undertanding was when you bought the duplex, and preserve your friendship when it comes time to sell.

Minneapolis Duplex Sales Need A Kardashian

said on August 23rd, 2011 categorized under: Twin Cities Real Est

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minneapolis duplex sales need a kardashianMinneapolis duplex sales numbers are tough to write about.

In fact, if the weekly statistics were a reality show, this week they’d be the most boring hour on television. 

For the week ending August 13, 2011, 19 duplex sellers received and accepted purchase agreements. Almost 32 percent of these sellers had equity in their properties and didn’t need a bank’s permission to say “yes” to the sale.

This paltry number, 19, was actually up 4 transactions from last year. Just 20 percent of the pended sales for the same week one year ago belonged to equity sellers.

Of the 40 new Minneapolis and St Paul duplex listings for the week, 42.5 percent were brought to the market by traditional sellers.  This isn’t much of a market share increase over the 39.4 percent traditional seller new listings one year ago. However, in all, the number of new listings week over week was up 11.8 percent.

The average list price when the sale pended was up as well, finishing at $123,684. While on the surface this appears to be well ahead of last year’s sold price of $109,250, it’s important to note most properties in today’s market are selling for around 90-93 percent of the price they were originally listed on the MLS for.

There was good news over in the single family home market, where there were 47.4 percent more purchase agreements signed than during the same week last year.

Meanwhile, there were 13.7 percent fewer new listings for the week, bringing the total supply of homes for sale to 24,232; down 19.7 percent from last year.

Overall, both the Minneapolis duplex and single family home markets appear to be moving toward balance.

Why I Love Buying At Duplex Estate Sales

said on August 22nd, 2011 categorized under: Buying A Duplex

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estate_saleI love duplex estate sales.

Not the kind where there’s a bunch of stuff displayed in the driveway and if you’re lucky, you’ll find something you can buy for a dollar and score big with later on Antiques Roadshow.

I’m talking about duplexes that were owned by people who have passed away, and their heirs are now trying to sell the place.

I don’t mean to sound morbid.

Really, I don’t.

But here are three great reasons to buy duplexes from dead people:

  1. America’s Greatest Generation Took Care Of Things – Having survived the Great Depression, there was a generation of people who grew up knowing the importance of maintaining what they had rather than buying more of something new. For example, while their 1950’s-installed linoleum may not be the latest product featured on HGTV, it often looks like it was installed yesterday. The roof, the furnace, the windows– all of the expensive items– however, are likely to be new or in perfect working order.
  2. Rents Are Usually Low – If a seller has owned a property for a long time, odds are he or she no longer has a mortgage payment, and has become friendly with the tenants. And if they’re good tenants who have always paid on time, odds are the owner didn’t increase rent for fear of them leaving – for years.  The good news with income property is that banks lend on the current revenue a property generates (unless it’s vacant, when market rents are projected) vs. the revenue the property could or should bring in.
  3. Rehabbing Is Easy- Because the big things, like furnaces and roofs, have been maintained, most improvements these duplexes need are cosmetic. The carpet might need to be removed (revealing pristine hardwood floors), or the wallpaper. You may find the kitchen cabinets are so old they’re actually wood and can be painted or stained rather than replaced.

There’s only one problem with duplex estate sales. You can’t predict where or how you’re going to find them!

Why Buying A Duplex Is Like Senior Photos

said on August 18th, 2011 categorized under: Buying A Duplex

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bad duplexesBuying a duplex can be a lot like having your senior photos taken in high school.

Selecting the right outfit and photographer is a bit like getting pre-qualified for a loan and selecting a Realtor.

And if you decide you want to see every duplex on the market,  it’s kind of like digging through all the proofs where your eyes are half-closed or you had a hair sticking up on the back of your head.

What would that experience be like if, instead of weeding through 80 proofs (like I had to) in order to find the one or two good ones, you just saw the good ones?

And what if instead of seeing the duplexes with mold in the basement where the light fixtures had been ripped off the walls, you just saw the ones that were right for you?

There are a lot of duplexes listed for sale all over the Internet. And, if you’re anything like me, it’s easy to write a mental story of how wonderful the property is based on a few good or bad photos.

It’s easy to get discouraged when time and again, those stories don’t come true.

I used to show buyers a lot of duplexes. The more they saw, the more disappointed they became.

So I don’t do that anymore.

I ask my duplex buyers a lot of questions. And then I do my very best to run out and find properties that match their answers.

It saves us both a lot of time. And disappointment.

Why It’s Now Cheaper To Buy A Duplex Than Rent One

said on August 17th, 2011 categorized under: Buying A Duplex

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Buying Vs Renting A Minneapolis DuplexWith the slide of  real estate values over the last five years and declining vacancy rates, it is now cheaper to buy a duplex than rent one in most U.S. cities.

According to our friends over at the real estate web site Trulia, in 74 percent of the country’s 50 biggest cities,  buying a duplex or home was cheaper than renting.

Of course, there were the usual exceptions in cities like New York  and San Francisco, where renting was still the lower cost alternative.

A number of factors have conspired to make this a terrific real estate buying opportunity, like interest rates at or below 4 percent (as of last Friday), and the tax benefits of property ownership like the mortgage interest deduction and ability to write off the part of the duplex you don’t live in.

Leading the way as the best city to buy a property rather than rent was Las Vegas, where the median price of a two bedroom, two bath condo or townhouse was around $60,000.  This translates to monthly mortgage payments of $256 on a 30-year fixed loan at 5 percent interest. Throw in additional expenses like association fees and property taxes of around $300 a month, and the $556 total is still well below the market average for a comparable rental of $810 a month.

While Minneapolis and St Paul duplexes didn’t win the national affordability index, the Twin Cities nonetheless did finish with a ranking that indicated it is better to explore the option of owning rather than renting.

For a complete list of results, click here.

And of course, no matter where you live, if you’re interested in buying a duplex, I will be happy to help you find a qualified Realtor to guide you through the process.

Minneapolis Duplex Sales Trends Continue

said on August 16th, 2011 categorized under: Twin Cities Real Est

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duplex sales trendsFor the week ending August 6, 2011, the trends we’ve seen for most of the summer in Minneapolis duplex sales continued.

There were 20 duplex listings whose owners received and accepted purchase agreements for the week. While this is three less than the number that did one year ago, thirty percent of the pended duplexes belonged to equity sellers.

Last year, 26 percent of the pended sales did not involve banks giving their permission for the property to be sold.

The average Minneapolis duplex, triplex or four unit listing left the market at an average list price of $114,692. This is down substantially from the $153,205 average sold price for the pended listings for the same week last year. However, it’s important to note that last year’s tally included a single sale for $600,000.

The scarcity of new duplex listings continued as the week saw just 27 properties hit the market. This represents a 44.9 percent decline from the same week one year ago.

This continued new duplex inventory drought may well be the reason behind the string of multiple offer situations my clients have recently found themselves in.

Meanwhile, over in the single family home market, pended sales for the week increased 40 percent over their 2010 mark. On the surface this looks like reason to celebrate, it’s important to remember much of last year’s activity occurred earlier in the year so buyers could avail themselves of expiring tax credits.

There were also 18.7 percent fewer new listings than at this time last year, which has helped home prices increase nearly 18 percent between March and June of this year.

Comments Off on Why Duplex Short Sale Lowball Offers Get Rejected

half off duplexesSome of the best duplex deals out there are short sales.

Not only are they often in better shape than the foreclosures, but there tends to be a better selection of duplexes to choose from.

Some people even think they are such good deals that you can outright steal them.

This is such a common belief that I’ve been getting lowball offers on my Minneapolis duplex listings all summer long.

I understand the impulse. After all, the seller may need to get out, no matter what, and the buyer has to wait a long time for an answer. So heck, that’s worth a good deal, right?

Except there are some problems with that thinking.

First, the seller may be required by the lender, especially if the duplex has a second mortgage, to bring money to the table to keep the mortgage holder from pursuing a deficiency judgment even after the property has been sold or lost to foreclosure.

Needless to say, the bigger the offer the seller receives, the greater the likelihood is there will be some money available to give the second lien holder.

So don’t be surprised if the seller gives you a counter offer.

Second, not every short sale owner is in foreclosure or behind on payments. Many need to sell their duplexes due to a job relocation, marriage, divorce, death or any number of other legitimate reasons.

“Short sale” is NOT synonomous with foreclosure, it simply means the seller owes more than the property is currently worth, and is “short” in the amount he or she owes the bank.

Third, the banks aren’t stupid. Well, not always. They hire Realtors to do something called a Broker’s Price Opinion or BPO before they agree to any sale. Essentially, they retain an agent who doesn’t represent the buyer or the seller, for independent opinion of what  a property is worth.

These agents are familiar with the market, and have access to not only data on duplexes that have recently sold, but also those currently for sale. If an offer on a duplex seems way out of line with the market, they will advise the bank to respond to the purchase agreement with either a counter offer or an outright rejection of the price.

All of this doesn’t mean you can’t simply make an offer on a duplex listing. Just know the odds and be realistic.

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