Comments Off on 8 Things To Consider Before You Sell Your Minneapolis Duplex Yourself
You may have heard there’s a shortage of inventory on the Minneapolis and St Paul duplex market and as a result, it’s a sellers market.
As a result, the thought may have crossed your mind to sell your duplex yourself. After all, if investment properties are such a hot commodity, why not save the commission and sell it yourself, right?
Well, have you ever tried to save a little and it ended up costing you a lot? I sure have. And selling your duplex yourself may be like that time.
Here are 8 things to consider before deciding to sell your duplex yourself:
- Pricing your property – Unfortunately, the value of your duplex is not determined by the amount of money you have into it, or by the amount you’d like to get out of it. Rather, it is determined by the amount someone else is willing to pay you for it. And even if you found a buyer willing to pay what you want or need, if it’s more than what the market believes it’s worth, a bank won’t lend them the money for it. Value is determined by comparable sales in the neighborhood.
- Sold properties include Realtors commissions – When determining the value of a property, both buyers and appraisers typically look at comparable sales on the Multiple Listing Service (MLS). All of these sales included commission. So, the true value of your property is the price, minus that commission.
- Buyers hope to save the commission too – When a buyer works with a Realtor, they are not responsible for paying that agent commission. Rather, it is taken out of the sales price of the property. Buyers benefit from an agents knowledge of the market, experience in negotiations, and guidance throughout the process without paying a thing. Why would they work with a For Sale By Owner unless: a) that owner agreed to pay their agent or b) agreed to pass the savings on to them.
- You’ll probably pay a buyer’s agent anyway – Chances are a Realtor may see your ad on Craigslist or Zillow and ask if you’d agree to pay a commission if they sell the property to their buyer. This may be somewhere in the range of 2.5- 3 percent, meaning rather than saving 6 or 7 percent, your saving half that amount.
- You’ll have out of pocket fees even if your property doesn’t sell – Realtors pay the costs of putting a sign in your yard, putting it on the MLS, hiring a professional photographer, creating a virtual tour and all other marketing expenses, regardless of whether or not the property sells. These costs will become yours if you sell the property yourself. What’s more, you may choose to hire an attorney to help you with the paperwork. Attorneys charge by the hour regardless of whether or not your property actually sells. Realtors don’t get paid unless the sale closes.
- Time wasted with discounters and tire kickers – If someone calls on an ad you placed, you have no way of knowing whether or not they can actually afford your property. And yet, you leave work or your family to show it to them anyway. Sadly, there are a lot of people who can’t afford a property, but simply enjoy looking at real estate who end up wasting your time. Others are discounters, looking to save money by dealing directly with you. They hope either you don’t know what you’re doing, or are desparate enough to simply give them a deal in exchange for being done with it.
- 92 percent of all for sale by owners don’t sell on their own – According to statistics from the National Association of Realtors, only 8 percent of all for sale by owners are successful. The rest either listed their property with a Realtor, or decided not to sell.
- Properties sold using a Realtor actually net the seller 13 percent more than if the owners sold it on their own. Again, according to a NAR study, sellers actually net more money if they use a Realtor than they do on their own. That’s NET; which means after commissions and other costs of selling!
If you’ve attempted to sell your duplex on your own, incurring the costs of lost time and money, then end up listing with a Realtor anyway, you may have cost yourself more than you hoped to save?
Contact me if you’re thinking of selling your Minneapolis or St Paul duplex.
Comments Off on Vacant or Full? How Should You Sell Your Minneapolis Duplex?
I am often asked by Minneapolis and St Paul duplex sellers who are thinking about putting their property on the market whether it’s better to have the building leased, or a vacant unit when it goes up for sale.
The best answer is, it depends. If your property is one an owner occupant may find appealing, know that it is a requirement for FHA insured mortgages that the buyer be able to move in within 60 days of closing. If both your units are leased, you have made it difficult for any owner occupant to consider your duplex; and right now, that’s a large percentage of today’s duplex buyers.
So should you just leave it vacant? This certainly makes showings easier and gives you a chance to put it in tip top shape. It also provides a new owner with an opportunity to lease it at market rent,. However, if it’s a financial burden to you, it isn’t necessary.
One option may be to have a tenants or tenants on month to month leases. This may concern residents, as they frequently believe that if the duplex goes up for sale, they won’t have time to find a place to live.
Clearly explaining the process to tenants may help alleviate these fears. Most lenders are taking 30-45 days to complete the funding of a loan on a property. Additionally, standard lease language usually requires tenants to receive 60 days notice before being required to move.
Duplex sellers should never agree to give a tenant notice until the day of closing. After all, if you tell a tenant to leave early, and the buyer fails to perform on the purchase, you’re left with a vacancy!
Simply explain to your tenants that at minimum, they will have 90 to 100 days or more between the time you accept an offer and having to move — that is, if they are even asked to do so. Any amount of time you’re on the market before your property sells will add give them even more time.
And of course, there is always the possibility they won’t be asked to move at all and can stay right where they are!
Comments Off on Three Reasons Minneapolis Duplex Prices are Soaring — And Why That May Be About To Change
By now, you’ve probably heard that duplex prices in Minneapolis and St Paul have rebounded to at or near the healthy highs of 2005.
This price rebound is the result of three things:
- Historically low interest rates – One of the rare silver linings of a slower economy is interest rates are often kept low by the Federal Reserve in order to help stimulate economic activity. The economic downturn resulted in nearly a decade of inexpensive loans, which helps duplexes cash flow better than at higher rates.
- Lack of inventory – Low interest rates gave many would-be duplex sellers an opportunity to refinance their loans, which made their duplex cash flow like never before. This resulted in fewer owners putting their properties on the market. If you think back to high school economics class, you’ll recall the law of supply and demand. When supply is low, prices go up.
- Low vacancy rates – During the economic crisis, many would-be homeowners lost their homes to foreclosure or sold for less than what they owed. With their credit tarnished and perhaps even a job loss, many became renters. Meanwhile, many would be first time home buyers found themselves burdened by large student loan debt or simply unable to get a job. Others came to view home ownership as risky. They too chose to rent, rather than buy.
All of this has resulted in a giant shortage of Minneapolis duplexes, triplexes and fourplexes on the market in the Twin Cities.
In fact, there are currently just 195 small multi-family properties available for sale on the Multiple Listing Service. This includes the seven county metro area, as well as western Wisconsin and out state locations.
To put this in perspective, in December of 2007, there were 1104 properties on the market.
In other words, it’s a great time to be a duplex seller, because you won’t have as much competition.
That is, until spring.
You see, many long term duplex owners have told me they are ready to make a change in their lifestyle, and for the first time in more than a decade, are thinking of selling. And if they do, then the lack of inventory part of the rising price equation goes away.
You may also have heard that the government’s economic report has been entirely positive since September, leading many to believe the Federal Reserve will raise interest rates when they meet later this month.
And if interest rates go up one percent, that changes the cash flow on a $300,000 duplex by roughly $3000 a year. That can make a duplex that was a good investment to one with negative cash flow in a hurry.
If you’re thinking of selling, please contact me. Even if you decide the time isn’t right, I’ll be sure to give you my thoughts on how you can make sure your property is a good investment for you for years to come.