said on December 16th, 2015 categorized under: Legal Stuff
Comments Off on Is Your Minneapolis Duplex A Rotten Tomato?
As many of you know, the city of Minneapolis (as well as many surrounding communities) require duplex owners to have a valid rental license.
This is true even if you or a family member live in the property.
But now, much like movie reviewers, the city is giving your a rating.
In 2015, Minneapolis instituted a rental property Tier system.
In an effort to improve the overall conditions, maintenance and management of rental properties city wide, they began rating and assigning properties to tiers based on their condition, management and maintenance.
Tier 1 is reserved for properties that are well maintained and use very little city services. Examples of city services may include police calls for noise, excessive nuisance conditions or housing code violations that require repeated visits from inspectors, police, and so forth.
Because these properties are in good order, the city will now require them to be reinspected for rental licenses every 8 years (unless ownership changes).
Tier 2 properties are those maintained to minimum standards. They tend to use some city services. As a result, they are now required to be inspected once every 5 years.
Finally, Tier 3 properties are considered poorly maintained and require excessive visits from city officials. These duplexes, triplexes and fourplexes will be subject to annual rental inspections.
Rental property owners may be able to get their properties Tier status changed. In order to do so, owners will need referrals from inspectors and other city departments, who use objective criteria to determine whether the property qualifies.
As this program becomes more commonplace, Minneapolis duplex buyers are sure to make investigating a property’s tier status part of their due diligence process.
In more ways than one, it pays to keep your duplex in good repair.
Comments Off on My Duplex Buyer Wants Me to Pay What?
It’s been a long time since many Minneapolis duplex owners have thought about selling.
With rising prices, changing life circumstances and age, however, many are starting to. With that, they are discovering much of the language involved has changed since the last time they sold property.
One thing many sellers may not understand is language in a purchase agreement that asks the seller to pay the buyer’s closing costs.
Closing costs are extra fees charged when ownership changes hands. They include things like the origination fee the buyer pays to the lender for the loan, prepaid property taxes and insurance, warranty costs, and various other state and county fees.
When a buyer asks a seller to pay for these costs, on the surface, it appears as if it reduces the net amount the seller takes home from closing. After all, 3 percent in seller paid closing costs on a $100,000 property is $3000. This essentially makes the purchase price to the seller $97,000.
As a result, many sellers tell me the buyer needs to pay those costs themselves.
However, it isn’t quite that simple.
It takes a considerable amount of time to save money for a down payment; especially if this is the buyer’s first home purchase.
And while many buyers have saved far more than the amount they need for the down payment and closing costs, they also want to be sure they have ample reserves in the event something needs to be repaired at the duplex.
This is where seller paid closing costs come in. When a buyer asks a seller to pay their closing costs, in a way, the buyer is simply asking to include their closing costs as part of their loan. By folding it in to the total purchase price of the duplex, and asking the seller to pay these expenses, they have, in effect, financed them.
There is a way to do this that doesn’t effect the sellers net at all. This is done simply by increasing the purchase price by the amount of closing costs the buyer is asking the seller to pay.
For example, rather than including the costs in the list price of $100,000, the purchase price is raised to $103,000. After the buyer’s closing costs are paid, the effective net price to the seller is $100,000, rather than the $97,000 cited above.
This scenario is a win for both the duplex buyer and seller. The buyer gets to preserve her savings, while the seller nets the amount they would have had the buyer paid the costs out of her pocket.