Archive for August, 2017

Comments Off on 3 Ways To Attract Buyers Who Will Pay More For Your Minneapolis Duplex

In today’s Minneapolis and St Paul duplex market, the buyers willing to pay the most money are the first time home buyer owner occupants.

This group is typically looking for a duplex that is in great shape, with some updates and a tenant paying enough rent to make their portion of the mortgage and expenses less than they are currently paying to rent themselves.

While cash flow is important to them, most of the time they are looking for a property that will at least break even if they ever move out.

If you are a Minneapolis or St Paul duplex seller, it stands to reason then that you would want to make sure of three things:

  1. Your property is in good enough condition that it would appeal to a first time home buyer.
  2. At least one unit is either on a month to month lease or vacant so a buyer can move in (this is usually mandatory for their financing).
  3. The unit(s) you have rented is at or near market rent. Many landlords are afraid if they raise the rent they will lose good tenants. What many owners forget, however, is if that tenant leaves, they will likely have to pay market rent to someone else. A buyer will still be interested in your property and keeping your tenant if your rent is 5-10 percent below the market rate. However, if the rent is 50 percent below market rate they are going to a) offer you less money and b) raise the rent to close to market value the moment they can.

If you’re thinking of selling your duplex in the spring, you may want to make improvements with owner occupants in mind over the winter. It’s the best way to ensure your duplex sells for the most money possible.

 

 

Why An FHA Duplex Loan Isn’t The Big Bad Wolf

said on August 22nd, 2017 categorized under: Financing, Selling A Duplex

Comments Off on Why An FHA Duplex Loan Isn’t The Big Bad Wolf

Just like you can’t believe everything you read on the Internet, you can’t believe everything you hear in real estate.

Take, for instance, the urban myth that Minneapolis and St Paul duplex sellers shouldn’t even consider an offer for a buyer using an FHA insured mortgage, even if, in multiple offers, it is for significantly more than an offer from another buyer.

An FHA mortgage is one in which the buyer may put as little as 3.5 percent down to qualify for a loan to owner occupy a duplex, triplex or fourplex. While the money is lent to the buyer by a traditional bank, the Federal Housing Administration (FHA) agrees to insure the loan against the buyer defaulting. Just like any insurance, there is a cost to this which is passed on to the buyer as a monthly premium.

Before agreeing to insure the loan, the FHA wants to know that the duplex is safe for someone to live in. So, when the lender sends an appraiser to the property, FHA sends along a checklist. They ask the appraiser to compare the property to their health and safety standards. If the property fails, the item or items must be repaired before they will agree to ensure the buyer’s loan.

Sounds scary, right? Here’s the deal. Almost everything they look for can either be seen by the buyer or their Realtor when they first look at the property or will be called out if the buyer hires a professional inspector.

I think you’ll be surprised when you see how minor the items on the FHA checklist are. They include:

  • The lot needs to be sloped away from the foundation. In other words, water shouldn’t be coming into the basement because the exterior grade drains toward the duplex.
  • All bedrooms need egress windows. (This is required in order for a room to be considered a bedroom anyway!)
  • If the property was built before 1978, it may contain lead-based paint. This can potentially be a health hazard. So, the appraiser makes sure it isn’t cracked or peeling anywhere.
  • All steps and stairways must have a handrail.
  • The duplex has to have a working heating system that’s big enough to heat the property.
  • The roof shouldn’t be leaking – or look like it will leak in the near future.
  • The foundation should be in good enough shape to support the duplex.
  • There shouldn’t be any cracked or broken glass in windows.

In my 16 plus year career, I have had an FHA appraiser have issues with a duplex or single family home less than a handful of times. They involved a cracked pane of glass, some peeling paint, and a handrail. I don’t think a single one of those repairs cost the sellers more than a couple hundred dollars or an hour or two of time; and they were all items that had come up during the buyer’s home inspection!

Refusing a strong clean offer that has an FHA loan because it might require the seller to do minor repairs seems rather ridiculous, doesn’t it?