Duplex Chick

Comment

One of the most common phrases I hear when I visit with prospective Minneapolis duplex sellers is they “want to wait until the market comes back” to sell.

The trouble is, in our heads, most of us like to think that’s going to be in the next year or two.

There’s a flaw in our thinking.

According to the latest Case-Shiller housing report, Twin Cities real estate experienced a 5 percent loss in value between 2010 and 2011.

This brings our grand total, according to Case-Shiller, to a 31.35 percent loss in value since 2005. (It’s important to note there are some differences of opinion on this. A recent University Of St Thomas report suggests the decline in value is closer to 18.06 percent.)

In either case, we would need to see an immediate and dramatic turn-around in the housing market to start up the appreciation ladder again.

In fact, in 2012 alone, momentum would need to swing from a 5 percent loss to a 5 percent gain. After that, we would need to see anywhere from three to six years of steady, 5 percent annual appreciation just to get back to 2005 duplex values.

And that’s a big “if”.

For many of the Minneapolis duplex sellers I speak with, hanging on to their duplex means years of juggling young children, a full time job and landlord duties.

And that’s the optimist’s interpretation of the housing market.

With a rumoured 5-6 million more homes and duplexes in the foreclosure pipeline nationally, a more realistic forecast for full recovery of duplex values might be closer to a decade.

For some Minneapolis duplex owners, that might be too long.

If you would love to sell your duplex because your life has changed, call or email me. You have more options than you think.

Comment

When 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.

Comment

If you’ve been trying to weigh your options when it comes to hanging on to your duplex or having to sell it as a short sale, I have a tool that might help you work through the process.

To the lower right of this column, you’ll see a box that reads “Short or Sale Calculator”.  If you click on it, you’ll be lead to a form that will ask you some questions about your duplex, and offer some simple calculations about the cost of staying in the property long enough to earn back lost equity, vs. selling it as a short sale now.

Once you’re entered your data, the program will crunch some numbers and email you an estimate of how many years, at various rates of appreciation, it will take you to get back that lost ground.

As always, if you’re thinking of selling your duplex, and are either behind on your mortgage, or just upside down and stuck, please feel free to call or drop me an email. There are answers out there to your situation; and often more than you think. I’m always happy to try to help you find them.

Comment

If you’re thinking of selling your duplex, which is more important… the Realtor you list the property with or the company whose name is on their sign?

The other day, a Realtor in my office lost a listing because her prospective sellers thought the local company, named after a local community, had more cache than a Keller Williams agent who specializes in the neighborhood.

It seems they’d never heard of Keller Williams. Or, at least, they thought they never had.

With more than 80,000 agents, Keller Williams is the second largest residential real estate company in North America. In fact, it is the only company to have actually increased in size in the recent market downturn.

Regardless of a company’s size, most duplex sellers choose an agent they feel is competent to get the job done, regardless of the company they’re with.

After all, would you rather hire a Realtor who got her license last week and doesn’t know a thing about duplexes– but works with a company you know or, one with years of experience who specializes in duplexes, and has a name on her sign that indicates exactly that?

Research indicates, and Keller Williams believes you hire a Realtor based on that individual’s experience and expertise. As a result, you might not realize you’ve seen their signs, simply because they believe in the agent branding themselves, not the company.

Comment

Many duplex owners across the nation are required to obtain a pre-sale inspection of their property before their local municipality will allow them to sell their duplex. 

In Minneapolis, this report is called a truth-in-housing or T-I-H.

This inspection is required for all properties four units in size or smaller. So, not only would a Minneapolis duplex need to have one, but so too would a condo, single family home, townhouse, triplex or four unit apartment building.

It is also a requirement regardless of the way you sell your property; whether it be via a contract for deed, an all cash sale, whether you used a Realtor or sold the duplex yourself.

The purpose of this inspection is simply to see how the duplex measures up to current housing code. For example, current city of Minneapolis code is that all properties have a carbon monoxide detector within ten feet of any bedroom.

The pre-sale inspection is NOT as thorough as the kind of inspection a buyer might wish to have done prior to purchasing the duplex, and a clean T-I-H may or may not mean there aren’t issues with the property.

Failure to have one will result in what’s known as a Required Repair or RR. The seller may choose to make this repair before the property is sold. However, if the seller is unwilling or unable to make those changes,  the buyer may assume responsibility for them at closing, provided he or she agrees to complete them and have the property reinspected within 30 days.

So what happens if you don’t get a pre-sale inspection done? While penalties differ everywhere, in the city of St. Paul, for example, you may be charged with a misdemeanor, which is punishable by up to 90 days in jail and/or a $1000 fine.

That should be enough incentive to check with your city or county to see if a pre-sale inspection’s required if you’re going to be selling a duplex!

Comment

On the surface, it doesn’t seem like the holidays would be a great time to sell your Minneapolis duplex. And yet, nothing could be further from the truth.

Especially this year.

Here are 10 reasons to sell your duplex during the holidays:

1. Duplex inventory is down. While this is generally true during the holiday season, as has been noted here, the Minneapolis duplex market is currently in dire need of inventory. In short, you have less competition.
2. People looking to buy in the winter are serious. Come on, would you put on your parkas, boots or snowshoes to go look at property if you weren’t determined to buy?
3. Many duplex investors and owner occupants buy at year’s end for tax reasons.
4. If you close on the sale of your duplex early in the year (2012) and are facing tax consequences as a result, you have the rest of the year to come up with strategic ways to reduce your obligations.
5. January is typically the biggest transfer month. Many corporations move employees to new locations at the start of the calendar year. These buyers are motivated to buy and get settled before starting their new jobs.
6. Fewer buyers mean fewer showings. While this may sound like a bad thing, your duplex tenants will be disrupted less for showings and when they are, you will know it is so a motivated buyer can look at the duplex.
7. Buyers have more time to shop during the holidays. Motivated buyers spend days off with a Realtor, looking for duplexes. While most of the year this consists of weekends, during the holidays, it’s the down time between Christmas and New Year’s.
8. Your duplex looks better during the holidays. Whether you owner occupy your duplex, or have it as an investment property, tenants decorate for the holidays, which helps your units show better.
9. You may net more for your duplex, as you have less competition in the marketplace.
10. You can sell in the winter, and buy in the spring. While holiday duplex buyers don’t have much to choose from, sellers who want to reinvest can feel confident they will find more opportunities to do so as the spring market heats up.

Call me if you’re thinking about selling your duplex.  Doing so might be the best holiday gift you get this year!

Comment

We all remember the basic principle of economics that the amount of demand for a product like a duplex, determines value.

Following that thought, it would then stand to reason that  when you decide to sell a duplex, you should put it on the MLS to expose it to the maximum number of potential buyers (demand).

But what if you’re getting ready to sell your duplex and a Realtor brings you a qualified buyer before it’s even actively listed for sale? Does that mean since the property had less exposure, it’s not selling for as much as it might have?

No.

If you’re working with an agent who’s experienced in the duplex market, she will help you determine appropriate value for your property. Not only does she have a fiduciary duty to look out for your best interests at all times, but keep in mind, she also works on commission. The more your duplex sells for, the more she gets paid.

I recently took a fellow agent and his extremely qualified buyer to see three Minneapolis duplexes not yet on the market. Two were priced comparably to one another, and the third a full $100,000 higher.

When the buyers wrote an offer on the most expensive duplex of the three, what did my sellers say?

“Well, maybe we could get more if we put it on the MLS.”

Maybe.

However, both the buyers agent and myself have given them our professional opinions on value; his through his clients offer, and me through the market analysis I provided my seller.

And we both agreed, within a reasonable range, that their property would be the fifth most expensive duplex to sell in Minneapolis or St. Paul this year.

A huge offer. In a down market. No tenant interruption. No dragged out selling process.

Sounds like a pretty good deal to me.

Comment

No matter how long I work in the real estate investment and duplex sales, I am always surprised by duplex sellers who want to price their property according to “what they’ve got into it”.

They’ll say things to me like, “Well, I paid $300,000 for it ten years ago, and I put new boilers in last year. That cost $12,000. And I put a roof on the year before that, which was another $7500. And I’ve gotta pay the Realtors, and, well, I’d like to put a little something in my pocket…so adding it all up, I guess I’d want $375,000.”

Duplex pricing just doesn’t work like that.

After all, when’s the last time you bought a duplex without a roof? What’s a duplex worth that doesn’t have a source of heat?

Pricing a duplex according to what you’ve got into it is a little like replacing the alternator on your car and tacking the cost on to whatever the value is according to the Kelly Blue Book.

You would just never do such a thing.

After all, the Blue Book values are determined by what the market has been willing to pay for cars comparable to yours.

It’s assumed all of those vehicles came with things like alternators, transmissions and tires.

Kind of like duplex values (unless a condemned or seriously distressed property) are determined by similar properties in the neighborhood that have sold– and included the cost of shingles and heat.

A duplex isn’t worth what you’ve got into it.

It’s worth what the market says it is.

Comment

To my dismay, many distressed duplex owners don’t call a Realtor to help them avoid foreclosure simply because they believe they’ll have to scramble to find the money for her servies.

The real tragedy is because of this mistaken belief, they often lose their duplex foreclosure.

Realtors commissions are paid out of the proceeds of a successful sale. If you’re a traditional seller, with lots of equity in your duplex, then that commission is deducted from your check at closing or the close of escrow.

And if you’re facing foreclosure or a short sale, the Realtor’s fee is deducted from the money the bank gets. And believe it or not, all banks are willing to pay those fees.

So if it costs you nothing, why wouldn’t you call an experienced duplex and short sale expert to guide you through a difficult and often emotional process?

Comment

In the last several weeks, I’ve had several buyers and sellers ask me to give up all or part of my previously agreed upon commission on a duplex sale so they can either pay less or net more.

My answer was “no”.

Yes, real estate commissions are negotiable.

And I realize every get rich quick real estate seminar or web site encourages you to ask your Realtor to financially contribute to the sale. After all, the thinking goes, you’re going to be giving that agent “so much business” they’ll be glad to trade hundreds or thousands of dollars for the opportunity of your continued loyalty.

Besides, Realtors make so much money, they can afford to give up some or all of their commission, right?

Wrong.

In 2010, the average income for a Realtor was $34,100. This was down 4.5 percent from the average Realtor income in 2009.

Compare this to 2002, when the average Realtor earned $52,100; 34.7 percent than they do almost a decade later!

And that figure includes agents who’ve been working selling duplexes and homes for more than two years.

Realtors who’ve been in the business two years or less earned, on average, $8900.

Out of that income, Realtors pay for gas, car insurance, desk fees, errors and omissions insurance, marketing of their listed properties, mandatory continuing education, MLS dues, cell phone and Internet bills, open house signs, the installation of signs in yards, and a thousand other expenses associated with running a business.

All of this in the worst housing market in decades.

I absolutely love what I do. And I am happy to work long hours for clients who see the value in what I do; whether it be finding them a non-MLS duplex that suits their needs, or guiding them through the complicated process of a short sale.

But unfortunately, Duplex Chicks have bills to pay too.