Archive for January, 2012

Why Your Minneapolis Duplex May Not Qualify To Be Sold

said on January 6th, 2012 categorized under: Selling A Duplex

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bad duplex appraisalWhen you sell a duplex in Minneapolis, St Paul, or any other location, most buyers make the purchase of your property contingent upon their ability to obtain financing.

In other words, if they can’t qualify for a loan under the terms they outline, then they are not obligated to buy your duplex. (Of course, cash buyers don’t need a loan.)

However, it’s important to note that the financing contingency doesn’t mean only the buyer needs to be able to borrow the money. It also means your duplex needs to qualify too.

Before any bank will lend property on a Minneapolis duplex, they send out an appraiser. This is someone they hire (using the buyer’s money) to give them an independent opinion of value on the property.

Back in the real estate boom, this figure was often higher than the amount the seller agreed to sell the duplex for, which meant, theoretically anyway, the buyer immediately made money through equity.

These days, however, exactly the opposite is true. More and more duplex sellers are discovering appraisers, and therefore, the buyer’s bank, doesn’t think their property qualifies to be sold for as much money as is on the purchase agreement.

In other words, the bank sends the message to the buyer of “We think you’re paying too much.”

And, after seeing the appraisal, the buyer always tends to agree.

Duplex values are determined by a couple of things; the amount of rent they generate, and, more importantly, how much similar properties in the immediate area have sold for.

While duplexes that were sold as short sales or foreclosures are not supposed to be compared to those offered by traditional sellers, appraisers often must include them simply because there isn’t anything else. And while appraisers do take this into consideration, sometimes they simply aren’t generous enough in atoning for the discount found in distressed duplexes.

Unfortunately, as a duplex seller, you are left with very few choices. You can find a buyer using conventional financing who is willing to pay more, you agree to sell the property to the original buyer for the appraised value, or you can simply remove it from the market and wait for real estate prices to go up.

It could be a long wait.

Why A Bad FHA Duplex Appraisal Is Like Being Dumped

said on January 5th, 2012 categorized under: Financing

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prince duplex buyerIf you’ve ever been broken up with by someone you love, you know the heartache afterward can last a long time; sometimes, it even long after you think you’re healed.

A bad FHA appraisal is kind of like that. Now, when I saw “bad”, I don’t mean the appraiser was abusive, or cheated on you, or anything like that.

What I mean is he didn’t think your duplex was worth what you and the buyer thought it was.

Let’s say, for example, you agreed to sell it for $225,000, but the appraiser said it was only worth $200,000. And the buyer, who intended to live in your duplex, doesn’t want to part with her cash

So the bank won’t lend the buyer any more than $200,000, less whatever down payment she needs for the loan.

This leaves duplex buyers with three options: coming up with the difference out of their own pockets, asking you for a price reduction to match the value determined by the appraiser, or walking away altogether.

Now, in my experience, most buyers aren’t willing to pay more than the place is worth.

So what if you truly believe your duplex is worth what you’re asking for it and refuse to alter your price?

Odds are, the buyer is going to fall out of love and break up with your duplex; leaving you to find another buyer.

Perhaps you’re thinking, “Well, I can do better anyway.”

And, well, maybe you can.

But here’s the deal. Even if Prince Buyer rides up two months later on his perfect white horse and says he loves your duplex so much he’s willing to pay you twice what you’re asking (provided he can get an FHA loan for it, of course), the bank won’t let him.

Because sooner or later, his lender is going to find out about your broken hearted bad appraisal.

FHA appraisals stick with a duplex for six months, regardless of who buys the property. So, the minute the new buyer goes to his bank for the money, his banker will refuse to give him a loan.

It’s a dead giveaway.  Kind of like crying over your ex on a first date.

And unfortunately, the only way to fix either a bad FHA duplex appraisal or a broken heart is time.

Comments Off on Duplex Mortgage Delinqencies Increase, Improve In Minnesota

deliinquent duplex mortgagesAmidst the noise of the holidays, Lender Processing Services (LPS) somewhat quietly issued a news release detailing performance statistics about the 40 million mortgage loans their company helps service.

Perhaps they did so deliberately, as much of the data their report contained wasn’t necessarily cause for celebration.

A full 8.15 percent of their 40 million loans, which represents 3,260,000 mortgages were 30 days or more past due, but not yet in foreclosure.

This figure, while down 9.6 percent from the year before, nonetheless represented an increase of 2.7 percent over November.

According to LPS, they have mortgages on 4,144,000 properties that are 30 or more days past due, but not in foreclosure. Of these, 1,809,000 are actually 90 or more days delinquent, but not yet in foreclosure.

Their inventory of properties in foreclosure but still in the pre-sale process, stands at 2,116,000.

In all, they report they have 6,260,000 properties with mortgages that are 30 days or more delinquent or in foreclosure.

The states with the highest number of contributers to this mess are Florida, Nevada, Mississippi, New Jersey and Illinois. Those with the least are Alaska, Montana, North Dakota, South Dakota and Wyoming.

Minnesota foreclosure numbers actually appear to be improving according the report. In fact, the number of non-current mortgages they service in Minnesota dropped 12.9 percent year-over-year, with 7.9 percent in all not being current.

Looks like we have a ways to go before this is all over.

Minneapolis Duplex Sellers Work Through The Holidays

said on January 3rd, 2012 categorized under: Twin Cities Real Est

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minneapolis duplexes sell over holidaysBefore we dash into 2012, we need to take a look or two over our shoulders at exactly what happened in Minneapolis duplex sales at the end of 2011.

For the weeks ending December 17 and 24, for example, it’s interesting to note pending duplex sales were up over the same weeks in 2010.

The week ending the 17th saw 22 Minneapolis duplex, triplex and four unit apartment building owners receive and accept purchase agreements. Of these, 18 percent did not have to consult with anyone at a bank in order to come to terms with the buyer.

For that week in 2010, just 13 duplex owners accepted offers. Slightly more of these sellers (23 percent) were people with equity in their duplexes.

For the week ending December 24, 14 Minneapolis and St Paul duplex sellers accepted offers on their investment property. While this total is just one higher than the same week the year before, the good news is 36 percent of these sellers have equity in their property. For the same week in 2010, just 15 percent of the pending transactions were not distressed duplexes.

The amount of new inventory on the market continued to decline, with just 26 new listings appearing on the MLS the week ending the 17th. Of these, 31 percent were offered by equity sellers. In the same week in 2010, there were 41 new duplexes for sale in the marketplace, with just 10 percent being neither foreclosures or short sales.

During the week ending December 24th, there were 19 newly listed Minneapolis duplexes for sale on the MLS. Of these, twenty percent were offered by traditional sellers.

For the same week in 2010, there were 22 new duplexes for sale. Nine percent of those listings were not foreclosures or short sales.

As we start the New Year, it’s important to note there is a continued shortage of duplex inventory. This does not mean, however, that we are seeing any sort of price increase. In fact, for the week ending December 24, the average off-market price was $140,270.

For the same week in 2010, the average sold price was $140,330.

As most MLS-listed properties are currently selling at approximately 92 percent of list price,  odds are we are continuing to see a downward trend in value.

With a lender-promised spring acceleration of backlogged foreclosures on delinquent duplex owners, 2012 promises to be yet another interesting year.

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