Archive for the 'Selling A Duplex' Category
If you’ve ever asked your Realtor to list your duplex for more than the market says it’s worth, you’ve asked her to lie.
We all have a price we’d like to get for our properties. And, as it’s human nature, most of the time that’s a number that’s much higher than other people would like to pay for it.
And what someone is willing to pay for it is what it’s actually worth; not how much we’d like to have for it, how much the neighbors say it’s worth, or how much you have in to the property.
Even if you happened to find a buyer who agrees the value of your duplex is much higher than data suggests, unless that person can pay cash, the property must appraise for the agreed upon value. An appraiser is hired by the bank to give them an independent, objective opinion of value, which is formulated by comparing your duplex to others in the area sold for.
Sometimes, Realtors will agree to list a property at a higher price just to get the listing. Their hope is somewhere down the line the seller will agree to lower the price so it can sell. In the real estate industry, this is called “buying a listing”.
And while it might make you feel good as a seller, it will not cause your property to sell. In fact, data from the National Association of Realtors indicates properties listed for too much money ultimately sell for less than they would have had they been priced correctly from the start.
Don’t worry. Properties rarely sell for less than what they’re worth. The market recognizes a great deal, and buyers will rush to a duplex they perceive as undervalued. As a result, the price rises to where it should have been all along.
If you’re a Minneapolis or St Paul duplex owner who wants to sell, chances are you’re thinking you’ll do so in the spring.
And yet, judging by the countless owner I’ve spoken with, everybody has the same strategy.
In Minnesota, while most of us consider spring to be the months of April and may, in real estate the spring housing market generally begins the week after the Super Bowl. In other words, Monday, February 3.
For the last year, the Twin Cities duplex market has suffered from an acute lack of inventory. Prices have risen largely due to two factors: low interest rates and abundant competition for the few properties on the market.
If interest rates rise, or, everyone who wants to sell their duplex lists it when the tulips bloom, there may actually be downward pressure on prices. After all, one of the most basic laws of economics is supply and demand.
If you’re thinking of selling your duplex, the best possible strategy to maximize value is to beat the competition to the market. And that means listing in February or early March.
If you’re considering selling, give me a call or send an email (firstname.lastname@example.org). I’d be happy to give you an opinion on value.
You many not know this, but all homes and duplexes in Minnesota can have dangerous levels of Radon in them.
Radon comes from the soil. It is the result of natural decay and, since it’s a gas, can easily move into the air.
Radon is radioactive. As a result, long-term exposure can cause lung cancer. In fact, it is the leading cause of lung cancer in non-smokers. Estimates suggest it is responsible for approximately 21,000 deaths from lung cancer every year.
As a result, as of January 1, 2014, residential Minnesota real estate transactions are now required to include radon disclosures and education.
Prior to a sale, a seller must disclose in writing any knowledge he or she may have regarding radon in the building.
The disclosure must include:
- whether any radon tests have been done in the duplex
- the most current reports regarding radon concentrations in the property
- a description of any radon mitigation, remediation or concentrations
- information about any radon mitigation system if one has been installed in the building
- a radon warning statement
The age of your duplex has little to no impact on radon concentrations. It’s estimated that as many as 2 in 5 properties built before 2010 and 1 in 5 built since then have unacceptable levels of radon.
There are several kinds of radon tests available, which, in the event of a sale of the duplex, you should hire a Minnesota Department of Housing-listed professional for.
And if you have no interest in selling your home or duplex, there are over-the-counter tests available you can conduct yourself.
Radon is relatively inexpensive to mitigate compared to the emotional and financial costs of lung cancer. And it would probably be wise to know whether our homes or duplexes have put us or our tenants at risk.
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Many investment property owners have the mistaken belief the holidays are a terrible time to sell a duplex.
Here are 10 reasons the holidays are actually a great time to sell:
- Properties tend to show better when they are decorated for the holidays. In fact, your tenants may have decorated and even picked up their units for family gatherings
- Winter buyers are more serious than their spring/summer counterparts. After all, if you didn’t absolutely have to be out in the snow and cold looking at property, would you be?
- Duplex, triplex and fourplex buyers get tremendous tax advantages buying at the end of the year.
- There is less inventory for buyers to chose from, therefore sellers have less competition.
- Less competition means higher prices.
- January is a big month for moving. With job transfers and school calendar breaks, many people focus on moving specifically in January, rather than over the course of a summer.
- When you sell your duplex over the winter, there will be more properties available to chose a replacement property from when the spring market begins.
- Your rental property is occupied. To investors, not having to find tenants over the winter may be a bonus.
- Showings can be restricted so as not to interfere with tenant’s family activities.
- Buyers can be more emotional over the holidays. While this may not be a factor if your property lends itself primarily to being 100 percent tenant occupied, it may be a significant one if your duplex is currently or is conducive to being owner occupied.
If you’ve been thinking about selling your duplex, but waiting until spring, thank carefully. Now might be the perfect time to beat the competition and net more for your property.
We’ve all heard of pent-up buyer demand.
It’s what economists talk about when economic conditions prevent consumers from buying what’s usually durable good due like a duplex, house, washer, dryer, or new car.
What we hear far less about is pent-up seller demand. And while most in the housing market use it in conjunction with home owners who would love to sell and buy something bigger, it’s a phenomenon I have begun to see in the duplex owner market as well.
Many Minneapolis and St Paul duplex owners purchased their investment properties seven or eight years ago. The market was at its peak, prices at a premium, and it seemed like values would go up forever.
Of course, that didn’t happen.
However, thanks to fewer people being able to qualify for mortgages, rental demand rose and so too did rents. This meant many properties that previously had negative cash flows were suddenly putting cash in their owners pockets every month.
This allowed many owners to hang on until values rose.
I actively prospect for both duplex sellers and buyers. If I had a dollar for every Twin Cities duplex owner who said in the last eight years they intended to “wait until the market came back” or to “ride this out”, I could retire.
I haven’t heard that as much the last six months.
You see, life has changed in the near decade since the boom busted; for all of us.
And what many duplex owners who were either single or newly married when they invested are telling me is that life is suddenly in the way of being a landlord.
Kids are in sports.
Work promotions mean more responsibility.
And aging parents require more care.
Time and again, I am hearing, “If I didn’t have to come to the closing table with money, I would sell now.” Or, “I plan to sell in the spring.”
A lot of people have been waiting it out; and many aren’t sure they can take much more. They just want to move on.
If you are a duplex owner who’s been considering selling, this should get your ears up. You are not alone, and if you “wait til spring”, you may have a lot of competition.
And when supply exceeds demand, prices decline.
What’s the solution?
Remember, the spring housing and duplex market begins the week after the Super Bowl. In other words, to beat the crowds, it may be wise to consider selling now.
Yes, duplexes sell in winter, and over the holidays. In fact, some of the most serious buyers of the year — who are buying due to job transfers, to lessen tax burdens, or because life has simply dictated a change — are oblivious to snow and the elements and actively shopping now.
For sellers, there’s less competition. And that’s always good for prices– meaning it’s a great time to sell.
I work during the winter too, so feel free to call or email so we can get you out before the post winter crowds.
It may come as news to many, but many times, a duplex buyer wants to live in the property they’re purchasing.
And many duplex sellers lose the opportunity to sell their property to these prospective buyers simply because they forgot one simple thing: to put a clause in their lease that requires a tenant to move out in the event a buyer wants to live there.
This eliminates their property from consideration by a large portion of buyers in the marketplace. And it would have cost these sellers little, if anything, to simply use a lease that allowed for an owner to move in given proper notice and, possibly, appropriate compensation.
Perhaps you’re a duplex owner who can’t imagine selling. Maybe you don’t think your duplex is the kind of place any owner would want to live in. But in either case, does it hurt to simply use a lease that gives a buyer that option?
Sometimes duplex owners who are thinking about selling their properties are not only on the fence about selling, but also what to do with tenants who are either under month-to-month leases, or are about to expire.
After all, if both units are leased, doesn’t that eliminate the possibility of an owner occupant moving in?
Yes and no.
First, even if a prospective duplex seller hasn’t made her mind up as to whether or not to move forward, I suggest modifying the lease she uses to include language that in the event she chooses to sell, and a buyer wishes to occupy that tenant’s unit, the tenant will agree to do so given appropriate notice.
Of course, if you’re in a rent control neighborhood or city where such clauses are prohibited, or tenants must be compensated for relocation, you must abide by those standards.
A second option many duplex owners who are considering selling choose is to simply let the tenants continue renting on a month-to-month basis. Some owners feel this puts them in a precarious position; giving the tenant an opportunity to leave he might not otherwise seize. However, if the current happens to be at or below market rate, the fact is most tenants don’t seem too excited about the prospect of moving.
Both options are worth consideration, if you simply need more time when deciding to sell your duplex.
With recent news of rising duplex prices, many prospective sellers are holding off, thinking that with just a little more time, the market will catch up with 2006 prices.
Sounds perfectly reasonable. And yet, according to a recent report from Radar Logic, rising prices may ultimately attract more sellers, which will result in a slower or reduced rate of price growth.
As of April, the 25 metropolitan area the analytics firm tracks saw an average composite price of $205.46 per square foot, which is up 13.1 percent year-over-year, and represents a 23.7 percent gain from January 2012.
These gains are a result of several factors. First, “motivated sales”, which Radar Logic defines as REO or bank-owned properties, have gone from a 26 percent share of the market, to just 11 percent. In a normal market, foreclosures are just 5 percent of the market.
There are some who think rising prices may incite Fannie Mae, Freddie Mac and other lenders to release some of their shadow inventory into the market, and/or start moving many delinquent borrowers through the foreclosure pipeline at a more rapid pace.
It is estimated that Fannie and Freddie alone have an estimated 1.7 million delinquent properties on their books nationally.
Rising prices and interest rates will also deter real estate investors looking for high rates of return. As they have been responsible for as much as one-third of the market in recent years, their withdrawal from it could cause prices to decline. What’s more, many of these investors bought properties with the intention of selling when the market improved. Rising prices may move them to do just that.
Finally, traditional sellers who have been sitting on the fence may decide to sell. This too will increase the amount of inventory for buyers to choose from, creating more competition among sellers.
For now, it remains a great time to sell; before the competition heats up.
When pricing a duplex to sell, the biggest mistake many Realtors who don’t specialize make is calculating value based on the number of finished square feet in the property.
That makes sense with a single family home. After all, if two properties have exactly the same number of bedrooms, bathrooms and garage stalls and are in similar condition, isn’t a bigger house worth more than a smaller one?
What about a duplex?
Well, if you have a big duplex with two one bedroom units in it that rent for $800 a month each, and a total of $19,200 a year, is it worth more than a slightly smaller duplex where each unit rents for $900 a month and a total of $21,600?
Finished square feet only impact duplex value in two circumstances. First, if the size of the either results in the owner being able to charge more rent, then the property generates more revenue and is therefore, worth more.
In the second case, if the duplex would appeal to an owner occupant and therefore, a larger sized unit might be perceived as more desirable.
In neither case, however, should the duplex’s value be determined the number of finished square feet by the average cost per square foot comparable properties in the area have sold for.
Wow. I just did a Minneapolis and St Paul MLS search for duplexes, triplexes and four unit apartment buildings for sale in the metro area that are not sold subject to either bank approval or inspection.
There were just 175.
Talk about a shortage!
Properties are receiving multiple offers (even if they are short sales which will require buyers to wait for months), and unprecedented numbers of showings.
One recent listing of mine received four offers within two hours of being on the market. Another got 6 within a day. Yet another had 36 showings in the first week it was on the market alone!
It’s a great time to sell your Minneapolis or St Paul duplex, I can’t imagine a market like this will come along again any time soon.