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Archive for the 'Selling A Duplex' Category
I Sell St Paul Duplexes Too
February 5th, 2010 categories: Buying A Duplex, Selling A Duplex
I lost out on a duplex listing the other day because I “don’t specialize in St Paul”.
This made me chuckle.
The seller had the impression that because of the frequent appearance of the word “Minneapolis” in my blog headlines, I don’t know St Paul.
I explained to him I do this because according to Google Ad Words, far more people search the Internet for the term “Minneapolis duplex” than they do “St Paul duplex”.
I am, after all, in business. Part of my job as a business owner is to make sure I’m found where people are looking for the type of services I provide.
So, my headlines say “Minneapolis”, even though I list, show and sell St Paul properties just as often; simply because of the popularity of the search term.
The seller, in this case, hired an agent who specialized in his neighborhood. On some level, this is a concept I absolutely understand when it comes to single family homes. After all, there are thousands and thousands of single family homes, and most MLS districts have neighborhoods with wildly different personalities within their boundaries.
Duplexes, however, are another story.
See, there just aren’t as many of them out there.
As a result, duplex buyers I work with tend to cover 5, 10, or even as many as 15-20 MLS districts in their search.
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Two Halves Make A Whole In Minneapolis Duplex Market
February 4th, 2010 categories: Buying A Duplex, Selling A Duplex
What is the most common question I get asked in a duplex open house?
Is it, “What will the seller take?”
No. And even if it were, and I knew the answer (sometimes sellers surprise me), I couldn’t tell you. After all, the seller hired me to look out for her best interests, and by law, I have a duty to do just that.
The number one question is, “Is the whole duplex for sale or just one side?”
Many people don’t understand that while a duplex contains two residences, it has one Property Identification Number or PIN, with the county. It is considered one property.
In order for the two halves to be sold separately, each would need to have its own PIN. While that is possible, and certainly, many fourplexes and larger apartment buildings have been split up and sold independently as condominiums, there is some legal paperwork involved.
One of the challenges in doing this with a duplex is the formation of an association. With larger properties especially, developers who are selling the individual units, hire an attorney to form a homeowners association,.
In the bylaws, all the rules, regulations, dues, and means of resolving disputes are clearly spelled out in advance of the sale. This infrastructure helps prove a mechanism through which to collect and pay for maintenance, improvements and pursue delinquent homeowners.
Most of these associations have a board of directors which is populated by residents of the property. The board makes recommendations in terms of increased fees, exterior paint color schemes, etc., which residents then vote on.
What happens in a duplex if each owner wants the outside a different color? Who casts the deciding vote? Or if one owner stops paying her share?
Tough to resolve. Which is exactly why most duplexes never face being split up and sold separately.
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Minneapolis Duplex Owners Have A Theme
January 29th, 2010 categories: Buying A Duplex, Home Repair, Selling A Duplex
I don’t know whether to call it a trend or a theme, but this week my real estate business has had one.
First, the pilot light on the furnace in a buyer’s new property went out the day before closing. Next, the forced air furnace in one side of a duplex a buyer is considering came back with a yellow flame; which may or may not be the sign of a cracked heat exchanger (which can result in the unit producing unsafe levels of carbon monoxide).
Then I got a call from a rural tenant stating they had no water in the house or any of the outbuildings on the property.
The theme for the week could be ”things break”. However, there’s another one here; whenever possible, get a home warranty.
It seems like everyone from Best Buy to car dealers offer an extended warranty these days. And we’ve all had experiences where the coverage they provided were not worth the additional cost.
I haven’t found this to be the case with most home warranties, however; especially when a client is purchasing a foreclosed property.
Many foreclosures not only have deferred cosmetic maintenance, but the mechanicals like the furnace or boiler and water heater have been ignored as well. Most banks aren’t in the business or maintenance or repair, so whatever’s wrong with the property will most likely be the buyer’s responsibility.
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Once Upon A Time In Minneapolis Duplex Land
January 14th, 2010 categories: Buying A Duplex, Selling A Duplex
Once upon a time, in a land called the Twin Cities housing market, a duplex buyer could purchase a foreclosed or run-down property, renovate it, and turn around in short order and sell it for a profit.
It was a good thing.
Until, of course, Evil Fraud Doers saw it as an opportunity to artificially inflate the value of a property, conspire with an appraiser and sell it for an unreasonable profit.
In 2006, seeing a blight upon the land, along came the Department of Housing and Urban Development (HUD) . They decided to right this wrong by refusing to grant mortgage insurance on any FHA loan on a property where the seller had owned it for less than 90 days. This, they hoped, would keep the Evil Fraud Doers from pillaging and plundering.
It was then that a dark cloud formed and a cold wind began to blow, bringing with it the flying monkeys of foreclosure.
Suddenly there were properties everywhere that needed help. In an effort to encourage investors and rehabbers to fight the wounded inventory, in 2009 HUD briefly lifted it’s “anti-flipping” rules. This allowed properties to be fixed up and resold to first time home buyers who generally had neither the cash nor experience to undertake the battle.
The petulance continued. And yet, HUD ended it’s ban.
So what? If you’re a rehabber just wait three months to sell, right?
Well, the moratorium actually starts the day you close. And it isn’t waiting 90 days to close on a resale. Rather, it’s waiting 90 days before you can even look at a buyer using either an FHA, or often, conventional loan.
And since it’s likely to take 30-45 days to close on a resale, you’re actually looking at having to hold the property a minimum of four months. In other words, if you don’t have you’re rehab property in had by the end of this month, it’s likely you won’t get a chance to resell it.
On the other hand, if you’re a buyer who missed out in one of those multiple offer scenarios on a duplex ripe for renovation and we’re hoping to buy it once the repairs were done, you may have to wait until spring; when everyone else is wishing on stars too.
Wish I had a magic wand to use to lift that anti-flipping rule just one more time. There simply aren’t enough duplexes in good condition and a fair price out their for my clients to buy.
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Put On A Hat And Mittens To Buy A Minneapolis Duplex
January 4th, 2010 categories: Buying A Duplex, Selling A Duplex
I know. It’s ridiculously cold outside.
But if you put on your hat and mittens, you can save yourself thousands of dollars and have a better chance of living where you want to.
Why’s that?
Because I’m starting to get asked a familiar question.
“When do you think interest rates are going up?”
While this is an inquiry better put to a loan officer than a Realtor, the answer nonetheless has enormous consequences for all of my clients.
How so? Well, for every half-a-percent interest rates go up, buying power drops by $10,000.
In other words, if a buyer presently qualifies for a $200,000 mortgage, after a half-a-percent rate hike she would only be eligible for $190,000. A one percent rate hike would further reduce that to $180,000.
Those hikes would also cost the buyer an additional $5 to $10 per one thousand dollars she borrowed; every month.
How does this effect sellers?
If buyers suddenly have their home buying budgets slashed due to interest rates, they may be forced to change the types of property and neighborhoods they are considering. Ultimately, this will put downward pressure on average sale prices.
While I’m neither a loan officer nor an economist, the buzz in the real estate industry is that rates may tick up in March when the government’s $1.25 trillion program that bought mortgage backed securities expires.
While the feds have extended the program once before, indications are they will not do it again.
Call it yet another reason this may be the best year in ages to don your Carhartts and look at duplexes in January.
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Minneapolis Duplex Short Sales May Get Shorter
December 17th, 2009 categories: Selling A Duplex
One of the biggest obstacles to recovery in the real estate market is the glut of short sales on the market.
See, the very term, “short sales” is something of a misnomer. For while the lender agrees to accept less than what’s owed on the sale of a home, the amount of time it takes to successfully negotiate the transaction averages two to eight months.
As a result, many buyers avoid looking at those properties altogether. They simply haven’t got the patience.
In an effort to expedite the process, the Treasury Department announced a new program last week to “streamline” the short sale process.
Available only to home sellers who don’t have the income or debt levels necessary to qualify for the Making Homes Affordable program.
In order to qualify for the new program, the property must be the homeowner’s principle residence. He or she must have taken the loan out before January 1, 2009, and be delinquent or appear as if default is likely. Finally, the borrower’s mortgage payment for the month must be more than 31 percent of their pre-tax income.
The plan is designed to expedite agreements between lenders, buyers, sellers and Realtors.
Unfortunately, implementation of the plan may be slow. Mortgage companies don’t have to start the program until April, 2010.
Participation by lenders who hold second mortgages like home equity loans, however, is voluntary.
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Can A Vacancy Help You Sell Your Minneapolis Duplex?
December 7th, 2009 categories: Selling A Duplex, Tenants
The other day a seller received notice one of his tenants is moving out. As his property is on the market, he asked whether it was more advantageous to a sale for the unit to be vacant or full.
The answer is full.
But isn’t it easier to show the property with no one in it? Doesn’t it show better?
Yes.
However, the benefits of it being occupied far outweigh the consequences of a vacancy.
First, mortgage payments, taxes, insurance and utilities are all due whether the property is available for sale or not. As a result, it’s important the owner continue to generate revenue to cover those expenses.
Next, prospective buyers want to know not only that a property is appealing enough to attract tenants, but what the market value of that appeal is. If the rents are healthy, the property is a more desirable investment. The rents that are reflected on the MLS are therefore actual, not a fantasy concocted by the listing agent and seller.
Many buyers also like to know they are going to have a revenue-generating property the minute they take ownership. A 100 percent vacant duplex means a new owner has to scurry to fill two vacancies before the first mortgage payment comes due a month later.
What if a prospective owner wants to live in a tenant occupied unit? This takes some forethought, but if there’s a possibility you many sell your duplex some time in the future, it’s a good idea to have a clause in your lease stating the tenant agrees to vacate the property for an owner occupant provided they are given appropriate notice.
Of course, if your lease doesn’t have such a clause, you may need to visit with the residents to see if there’s an incentive that would entice them to move.
If they choose not to, the lease is a legally binding contract that both the seller and new buyer must honor.
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Why “The Best” May Not Get You “The Most” When You Sell Your Duplex
December 4th, 2009 categories: Selling A Duplex
Would you pay more for a duplex if the previous owner had installed shingles with a 50 year warranty instead of a 30? Or how about if she upgraded the appliances, like the refrigerator, to a professional grade?
If so, how much?
One of the things most sellers find difficult to understand, whether they’re offering a duplex or single family home for sale, is many of the things that add comfort to their lives don’t add value to their property.
With single family homes, price is determined by comparable sales in the immediate area, number of bedrooms, baths, garage stalls, finished square feet and condition.
Duplex pricing, on the other hand, is determined by comparable sales, bedrooms, condition and, if you’re considering the property as an investment vs. your own home, the amount of rent.
Of course, nicer amenities attract more prospective tenants, which in turn helps you generate more rent. More rent ultimately helps increase the sales price of your property.
A refrigerator with an ice maker, on the other hand, won’t. In all my years as a licensed Realtor, I have never once heard a buyer say, “Ooh! An ice maker. I’m willing to pay $5000 more for that!”
Be cautious when you make improvements to your property. Updated kitchens and bathrooms always bring a good return, as does landscaping and a fresh coat of paint.
A faster microwave, on the other hand, does not. That is, if such a thing even exists.
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How To Frustrate A Minneapolis Duplex Buyer’s Agent
November 16th, 2009 categories: Selling A Duplex
While it may seem like an easy job, buyers agents actually do a great deal of work in coordinating showings for their clients.
First, they coordinate windows of mutual opportunity with the buyer, which isn’t as easy as it may seem. Sometimes those opportunities are days away. Others they are merely moments away.
Once she and her client have agreed upon a time, she scours the MLS, trying to match their clients’ list of “must have’s” and “would love to have’s” with the inventory that’s available.
Next, the fact is, most duplex buyers are concerned with numbers. For owner occupants that may mean making sure their portion of the mortgage payment and expenses doesn’t exceed a specific figure. Investors, on the other hand, are often looking for a specific percentage of return on their investment dollars.
In other words, the agent does a lot of math.
Once she has a group of prospective properties, the agent puts them in some semblance of geographic order so neither she nor her client waste time doubling their tracks.
It’s at that point she either calls or goes online to set up showings. These days it’s not unusual for her to be informed almost immediately that a property has an offer at the bank awaiting their approval.
And, sadly, it’s far too common for her to be told the tenants didn’t receive ample notice.
As we’ve discussed here before, Minnesota state law does not require that a tenant be given 24 hour notice prior to any showing. The owner may enter the premises for business purposes provided he or she has made a reasonable attempt to notify the tenant. While it’s important to be respectuful of tenants, nowhere in Minnesota state law is “reasonable attempt to notify” defined.
So, because the tenant, duplex owner and listing agent are mis-informed about the law, the buyer’s agent doesn’t show the property. In all likelihood, it will take a lot to get her to try again.
Why? It’s just too hard to do all of that again. And chances are, the seller may have lost a sale.
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How Tenants Can Keep You From Selling Your Minneapolis Duplex
October 5th, 2009 categories: Selling A Duplex
I experienced a bit of frustration this weekend as a tenant stopped me from showing a duplex to a buyer.
The tenant was out of town and didn’t feel comfortable, even if the listing agent was present, letting anyone into her unit. As a result, the listing agent, my buyer and myself had to rearrange all of our schedules to accommodate her return.
Trouble is, the law said we didn’t have to.
While I’ve said it before, it bears repeating. In the state of Minnesota, tenants do not have the right to 24 hour notice if a landlord needs to enter their unit for business purposes. The law says “reasonable attempt to notify”. Nowhere in state law does it define reasonable attempt.
Of course, this doesn’t mean a landlord should be inconsiderate. Not only does notice keep tenants happy, it gives them the opportunity to tidy up their unit, which ultimately helps it show better.
Many tenants, however, not understanding the process, use this as an attempt to thwart any sale of the property. It’s important, before going on the market, to explain to them that all of the protections afforded them in their lease will remain in effect upon and after the sale.
Fortunately for this seller, it is not a pre-foreclosure situation. Had it been, he would have lost three valuable days on the market, which could have cost him considerably.
Worse yet, had my buyer been less interested, he might never come back.
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