Archive for the 'Buying A Duplex' Category
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When I work with a duplex buyer, one of the things I require is that they agree to give me the exclusive right to represent them.
After all, I work hard to find my clients great duplexes to buy; both on and off the Multiple Listing Service (MLS).
And if I’m willing to put all of that work in, I want to be sure that buyer isn’t going to bring some other Realtor in at the last moment who will get paid for my efforts.
When I discuss the terms of the exclusive representation contract is that the buyer understand I have other potential buyers I may be working with, and it’s possible that some or all of those clients might be interested in the same properties.
In the decade I’ve been a licensed Realtor, I’ve shown many duplexes to multiple clients. Believe it or not, it is extremely rare that more than one buyer has been interested in the same property at the same time.
Every now and then, however, it happens. Especially if a duplex is a very good deal.
When it does, I am honest with both parties. I give both my opinion of market value on a property, and what terms I believe the seller might be willing to accept.
I never disclose the amount of one buyer’s offer to the other.
In fact, if one or both buyers are uncomfortable with the situation, I even offer the services of another Realtor in my office who has experience in investment property.
This agent helps the duplex buyer fill out the price and terms of their offer, and, if the client wishes, either sends the offer to the listing agent or presents it in person. This agent represents the buyer only for this period of time, and if the offer is either accepted or rejected, I step back in as their Realtor.
I do my very best to treat everyone fairly and equally. I want everybody to get a great deal on a duplex, and change their financial future forever!
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Last night, I was reminded why I think HGTV bears some of the responsibility for the current duplex market.
My clients and I went back for a second showing of a bank owned duplex where the previous home owner had clearly undertaken some do-it-yourself home renovations.
Trouble was, he didn’t know what he was doing.
Oh, the refinished hardwood floors and exposed brick chimney looked really cool.
Unfortunately, however, the homeowner also forgot to install a heat source on the third floor.
The kitchen cabinets looked good too. I just wish that duplex owner had also bought glass for the broken windows instead of using masking tape.
Fortunately, my clients were wise enough to invite a FHA 203k approved contractor along to the showing so that they could get an accurate and professional opinion of what repairs were going to cost them; before they put in an offer.
After all, if the cost of rehabbing the duplex, when added to the cost of purchasing it, was more than the finished property would be worth in today’s market, they would find themselves upside down once they were finished with the repairs. Just like the previous homeowner.
When you’re looking at buying a duplex that needs either a little or a lot of work, it’s important to remember that big repairs and improvements aren’t as easy as they appear on HGTV.
If you’re considering using a FHA 203k loan to finance those repairs, it’s not a bad idea to get one of their approved contractors to give you a professional opinion before you even put ink on a page.
There are always unexpected surprises and expenses, that can leave you frustrated and broke. And if you’re ambitious enough to take that kind of work on, you also deserve to be compensated for your time and energy in the form of equity.
Remember to build all of those expenses into your thinking when you write an offer to buy a duplex.
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If you’re looking to buy a duplex, chances are you’ve looked at a few on the Internet.
Odds are also pretty good that you’ve stumbled into a duplex listing or two that were on the web so long and were such good deals that you simply had to call the listing agent to see when you could get in to see it.
At that point, you learned it already had an accepted offer on it.
So why, then, was it still on the Internet?
When someone writes an offer on a duplex, they usually do so with a couple of contingencies. In other words, they are offering to buy the duplex provided a couple of things happen.
They may make their offer contingent on conducting a home inspection, and determining that the property’s mechanical condition is satisfactory to them.
If it isn’t, then their purchase is also contingent on coming to terms with the seller about how to remedy any health and safety imperfections they find in the property.
Unless the buyer is paying cash, the purchase may also be contingent on the buyer’s ability to qualify for a loan, as well as the duplex’s ability to appraise for a value equal to or greater than the price the buyer and seller have agreed on.
However, in this market, the duplex seller may also have a contingency. For example, if the duplex is worth less than the amount they owe their lender, they must make the sale contingent upon their ability to come to a reasonable settlement with the bank.
Read the rest of this entry »
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Amidst 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.
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We’ve all seen duplexes listed for sale on web sites like Realtor.com or Zillow and thought to ourselves, “Wow, that’s a really good deal!”
And yet, that duplex doesn’t seem to sell. It just sits there, week after week.
Many first time duplex buyers are certain if they call their Realtor and rush right over to the property, they’ll be able to snap up an opportunity they’ll be able to brag about to their friends for years to come.
The trouble is, most of these buyers don’t realize there’s a reason it hasn’t sold. If the price is low enough, odds are the duplex has already been passed on by experienced buyers and Realtors.
Why?
More often than not in a real estate market filled with duplex foreclosures and short sales, it’s highly likely the reason is the condition is so bad that the price isn’t justified.
As in, making this duplex right is going to take more than stripping some wallpaper and picking up a paintbrush; which are exactly the kind of repairs and improvements most first time home buyers are willing to take on.
Now this doesn’t mean this duplex is hopeless.
There are financing options for duplex repair like an FHA 203k loan or a Rental Rehabilitation loan from the Minnesota Housing Finance Agency.
However, it’s important to know your appetite for projects before you shout to the world that you’ve found the Holy Grail.
I realize there’s not a lot of duplexes for sale in Minneapolis right now.
Be patient. The right one will come along.
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By now, you’ve probably heard it’s a duplex buyer’s market.
You’ve also probably heard there are so many houses and duplexes for sale that it’s difficult to make a decision. So, as you consider buying a duplex, you want to see everything that’s on the market– so you’re sure you find the very best one.
So you look at 20. Or even 30.
Then you change your mind and decide you want to move in with your girlfriend and see how that goes before you buy a thing.
Believe it or not, this happens a lot.
And that’s why many of the Realtors I know are requiring clients to put up a retainer fee before they take them out to look at duplexes. In turn, the agent agrees to give them a credit for that amount when they purchase a property.
Realtors are independent contractors. They are not paid a salary, nor are they reimbursed for their expenses. They earn a check only when one of their clients successfully buys or sells a duplex.
Now, buyers don’t usually have to pay a Realtor a thing. Their agent is compensated through a commission that comes from the seller’s real estate broker.
However, because there is the perception that there is so much on the market, and so much more coming, buyers are less motivated and committed than they’ve been in the past. And they’re costing Realtors much more time and money; especially if they change their minds.
What do you think? Would a retainer fee keep you from buying a duplex?
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When a duplex buyer asks me about the crime rate of a neighborhood, or what the quality of a school system is, I have a standard answer…
“I don’t know.”
While I realize this isn’t very helpful, Federal Fair Housing laws prohibit me from discriminating agains a number of protected classes, or disclosing anything even remotely related to those classes.
I’m also not a policewoman. I truly don’t know the crime statistics of a neighborhood.
Even if I did, what I personally find to be an acceptable level of crime may not be what yours is.
I’m also neither a parent nor a teacher, meaning I am equally unqualified to render an opinion about the quality of a neighborhood school or school system.
If you’re new to an area, or are thinking of moving into a new neighborhood, don’t despair. There are people who can help.
To determine the “safeness” of a neighborhood, feel free to call the local police precinct. If you’re in Minneapolis or St Paul, you may ask to speak with the ”safe” officer, who is in charge of sharing that information with the public. They can tell you down to the block what the criminal activity (or lack thereof) not only has been historically, but was last week.
You can also scroll down to the useful links section on this web site and get Internet access to both Minneapolis and St Paul’s online crime reports.
If a neighborhood clears your personal safety threshold, but you’re unsure about the educational standards in the schools, you can get the latest statistics, personal reviews and test scores on web sites like greatschools.org.
It’s packed with all sorts of great information that I couldn’t possibly know.
Of course, I’ll always try to answer questions about duplexes themselves!
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Let’s face it. Many of us would love to buy a duplex.
That is, if we could get a loan for one.
Tightened lending standards, however, mean a lot of us can’t qualify for a bank loan.
And that’s why we’ve begun to see the re-emergence of the contract-for-deed.
A contract for deed or CD, which is also known as a land contract, carrying a note, or owner financing, is a duplex sale where the present duplex owner acts like the bank for the buyer.
While I wrote about this a while back, it certainly is worth revisiting.
So what are the advantages of buying a duplex using seller financing?
- There are no loan origination fees.
- The sale can close quickly.
- There are no limits to the number of duplexes you can buy this way.
- Owner financing doesn’t show up on your credit report.
- The seller may be willing to accept an offer from a buyer with less than perfect credit.
- The seller may accept a higher down payment.
Of course, there are disadvantages to buying using owner financing as well, including: Read the rest of this entry »
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Many duplex buyers I work with are first time home buyers who intend to start a family in the near future.
Their goal is to live there until their family is of the size that a single family home is more suitable for their needs. At that time they will buy a house, and keep the duplex and its cash flow as the college fund.
So what if your kids are already in junior high or high school and you’re lookiing down the barrel of college tuition without a duplex in your portfolio?
What about buying a duplex near a university now?
Many parents know in advance their children are leaning toward a specific college, or, that they can only afford to help with tuition at a local university.
And yet, regardless of the cost of tuition, one of the most expensive components of higher education is on or near campus living.
What if you already owned a property with enough bedrooms for your children to have rent-paying roomates, allowing your child to live rent free?
University communities have not been unscathed by the foreclosure crisis. Whether it’s a duplex by the University of Minnesota or a condo just blocks from Arizona State University, there are many distressed property opportunities for forward-thinking parents and investors alike.
During the boom, these university duplexes tended not to cash flow.
And now?
Not only do they pay for themselves, but the cost of a Golden Gopher sweatshirt or Sun Devil window sticker or two as well.
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When I tell a duplex buyer we can’t see a property because the seller has already accepted an offer, I am often asked how much it sold for.
My answer is always the same.
”I can’t tell you.”
I’m not trying to be secretive or evasive. It’s just that even if I know the answer, the law prohibits me from telling anyone until the sale of that property is complete and title has changed hands.
Realtors who list duplexes for sale have a responsibility to the sellers they represent. And that is to act in their best interest at all times.
Imagine for a moment that the duplex agent and seller have agreed to put a property on the market for $200,000. The seller is extremely motivated, and so when an offer comes in at $150,000, he accepts it immediately.
The buyer has a few contingencies, or conditions, that have to be met in order for the contract to be fully executed. He has, essentially said to the seller he will buy the duplex provided everything checks out OK in an inspection, and of course, provided he can get a bank loan.
While the buyer and seller are negotiating any issues that may have come up during the inspection, you tell your Realtor you love the duplex and would pay $200,000 for it all day long.
Read the rest of this entry »
