Archive for the 'Selling A Duplex' Category
If you’ve been thinking about selling your Minneapolis or St Paul duplex, you may have heard they seem to be the hottest thing going in the real estate market. And, well, if they’re selling like crazy, you may even have thought about selling it yourself.
Of course, I’m a Realtor, so you may not be surprised to learn I think that may be a really bad idea. And you probably think my beliefs are because if you sell it yourself, a Realtor won’t get paid a commission.
The facts, however, tell a different story.
In fact, here are 10 Reasons It’s a Bad Idea To Sell Your Duplex Yourself:
- According to the National Association of Realtors, last year the average for sale by owner netted 9 percent less on the sale of their property than they would have had they used a Realtor. That’s net – in other words, after they paid commissions.
- Serious buyers work with Realtors. If you’re serious and in a hurry, or serious and cautious, are you going to be driving around looking for for sale by owner signs? Or are you going to be working with a Realtor in order to see as many properties quickly or have as much protection and guidance as possible?
- Realtors are free to buyers. The only reason a buyer would want to purchase a for sale by owner is to save the same commission the seller hopes to keep.
- If you’re willing to pay a Buyer’s Agent a commission, remember, the Realtor only represents the Buyer’s best interest. As such, you’re negotiating with someone who’s studies the market and negotiates deals daily.
- If the appraiser questions the value of your property, you’re on your own. In a hot market, properties often appraise for less than a buyer is willing to pay. An appraised value for an FHA loan stays with your property for six months and is difficult if not impossible to contest. A Realtor knows the market and can discuss specifics of comparable properties with the appraiser.
- 89 percent of all buyers search online for properties. An experienced listing agent has a proven marketing plan to maximize your duplex’s Internet presence and exposure.
- Contracts. While the legalease in real estate contracts isn’t too bad, it is, nonetheless, a legally binding contract.
- Lawyers cost money, whether you sell or not. If your plan is to have an attorney review your contracts, remember, they charge by the hour. And their fees are payable whether you close on the sale of your duplex or not.
- For Sale By Owner companies charge whether you sell or not. Sure, you can pay as you go for the services a Realtor provides. And like an attorney, that money is paid whether your duplex sells or not.
- The only time you pay a Realtor is when your duplex sells. Realtors work on commission. That means they aren’t paid unless they succeed in selling your duplex. And if we don’t? We are out all of the money we spent marketing your property.
If you’re thinking of selling your Twin Cities duplex, and want to net as much money as possible in the least amount of time, call or email me. I’d be happy to help you maximize your return.
If you’re thinking of selling your Minneapolis or St. Paul duplex, you’ll be required to have what’s known as a Truth In Sale of Housing report before the property goes on the market.
This report is not the same as a buyer’s inspection. This is a city required inspection the seller is required to pay for which simply measures the property against current building code and requires that certain minimum standards be met to ensure consistency in the community’s housing stock.
The most common items labeled as “Required Repairs” by city licensed inspectors seem to be items like making smoke detectors operable, installing carbon monoxide detectors and back flow prevention device.
What’s a back flow prevention device? It’s a brass fitting that attaches to any faucet you normally would attach a hose to – whether it be outside the house or in your laundry room.
So what’s it for and why is it important? If there would suddenly be a drop in water pressure as a result of high demand, a burst pipe or frozen pipes, the drop in pressure could result in unclean water being sucked back in to the city’s water supply.
This simple little brass fitting keeps that from happening.
To put them on before the inspector tells you that you must, simply run to your nearest hardware store. They’re a few dollars each – which isn’t much compared to the fee the inspector may charge to come back and see that you installed them after he told you to.
In the 9 years since the real estate market crash of 2007, many Minneapolis and St Paul duplex owners who lived in their properties found a reason to move.
It may have been the result of a job, a growing family, a much-needed life change– regardless, life brought new opportunities, and thanks to duplexes being worth less than what was owed, many found it necessary to rent their properties out.
With vacancy rates as low as two percent in some areas of the Twin Cities, this turned out to be a good thing. Rent is high, causing many duplexes to produce more cash flow than they ever have before.
Now that the market’s rebounded and there’s very little inventory for duplex buyers to chose from, it’s a great time to sell your Minneapolis duplex.
There may be a snag in your plans, however. If you haven’t lived in your duplex two of the last five years, your proceeds from the sale may be subject to capital gains tax.
Now that the duplex market has fully rebounded, it’s important for duplex sellers to be aware of all of the ramifications of having made money on their property. There is no one, sweeping rule as to who owes what, so be sure to check with your tax professional before the duplex is active on the Multiple Listing Service.
Keller Williams Chairman Gary Keller
Last week 15,000 Keller Williams agents descended on New Orleans for the company’s annual Family Reunion convention. I was one of the thousands who experienced three days of intensive training from among the real estate industry’s best trainers and most accomplished Realtors.
For me, the highlight of this annual gathering is always our Chairman of the Board and co-founder Gary Keller’s annual Vision Speech. In this yearly 90 minute lecture, he analyzes the previous year in real estate, current economic trends and factors that may influence the coming year, and what impact he believes this may have on the current real estate market.
This year, Keller pointed out that 2015 was the third best year in real estate history. That seems tough to believe compared to the boom years of the mid 2000′s, but the data bears it out. And, as we know from our experience over the last decade, what goes up must come down.
While not forecasting a market crash of historic proportions like the decade we just experienced, Keller did believe we are facing a coming shift in the market. In other words, what currently may be labeled a sellers market may morph into a balanced one, or, perhaps even a buyers market.
His reasoning for this is twofold. Historically, real estate runs in 7-10 year cycles (he believes we are in year 8 or 9 of the recovery cycle), and there are several economic factors which if they change at all, could speed change in the market.
The chief contributor in this prediction is low interest rates and the Federal Reserve’s quite public position that as soon as the economy appears healthy enough, they intend to raise interest rates. After all, interest rates are basically the only tool they have in their toolbox to stimulate the economy in a crisis. If those rates are already low, there’s no place for them to go.
These low interest rates are the very thing that has helped housing remain affordable in spite of a rising median sales price. A one percent increase in interest rates reduces a buyer’s ability to qualify for a mortgage by $10,000.
More importantly to duplex buyers, it changes the annual cash flow by one percent of the annual mortgage. That’s enough to turn a very good investment to a mediocre or even bad one.
A second economic factor Keller cited was the large amount of student loan debt many potential first time home buyers are carrying. The national average is nearly $30,000, with monthly loan payments of $333 per month. This expense, along with high rent have made it difficult for first time home buyers to save enough for a down payment or make have a budget for a mortgage at all.
First time home buyers are the engine on the housing train. Without them, home owners can’t move up to bigger housing.
Normally, first time home buyers are responsible for 40 percent or more of annual housing sales. Last year, they accounted for just 32 percent. This may ultimately put a drag on the market.
Keller added that economic uncertainty in global economies, losses suffered by businesses in the oil industry and an anemic gross domestic product may hasten a coming real estate market shift.
If you’ve been thinking about selling your Minneapolis or St Paul duplex, this may mean it’s time to investigate selling. I’d be glad to sit down and talk with you about your duplex’s value and what your options are. Just give me a call.
To see the Powerpoint of Kellers speech in its entirety, click here.
In an effort to prove to myself I’m not hallucinating that there’s a lack of duplex inventory, I looked up the number of newly for sale duplex, triplex and fourplex properties that came on the Minneapolis and St Paul Multiple Listing Service in January.
Last month, there were 80 listings that were new to the market in the Twin Cities and their surrounding suburbs. (I excluded listings in places like Eveleth and Waseca.)
Looking back, in January of 2015, there were also 80 new listings that came on the market. So perhaps I am imagining monsters in the closet after all.
Then, just for fun, I thought I’d take a look back at 2006; a year which most experts believe was the peak of the duplex market.
There were 338 new listings; at a time when real estate was thought to be a sellers market.
Here’s where things get really interesting. In January of 2006, there were 206 duplexes, triplexes and fourplexes that sold for an average price of $275,737.
In January of 2016, there were 59 multifamily properties that sold. Their average sales price? $271,641.
And since we currently have so little inventory compared to 2006, what do you imagine will happen if you sell now?
Ever heard the urban myth about alligators in the sewer system?
It’s not true.
How about the one about being required to give tenants 24 hour notice before entering or showing a rental property?
It’s not true either. And yet, many duplex owners continue to believe it.
Unless your lease specifies that you must give your tenants 24 hour notice, the state of Minnesota requires only that you make a reasonable attempt to notify your tenants that you will be entering their residence for business or maintenance purposes.
State law does not define “reasonable notice”.
This becomes especially important when you are considering selling your duplex.
Duplex buyers are busy people, just like the rest of us. Often times, they get a window of opportunity to look at property at the last minute. And if your duplex requires them to give 24 hours notice, they may have to postpone their visit for several days.
Tenants do not have to leave the property. And the fact is, most of the time buyers are not in the units any more than 5 or 10 minutes.
Sometimes, one of the fastest ways to sell your duplex quickly is simply to explain this to tenants.
After all, as soon as you accept an offer the showings will come to a stop.
In recent months, you’ve probably heard from countless Realtors and national media talking heads that it’s a great time to sell your house or duplex.
If you’re like me, you kept waiting for the pundit, or the agent, to provide some statistic; some snippet of data, to back it up. And it never came.
Well, here it is.
The last moment of the great real estate market of the mid 2000′s was 2007. It was in late spring of that year that lending standards changed and everything came crashing down.
In other words, the month of January that year was still a great time to sell real estate. In fact, it was so great that there were 935 active duplex, triplex and fourplex properties available for buyers to choose from in the seven county metro area.
What about a more recent comparison? In January of 2015 there were 241 active multifamily listings; that represents the equivalent of a 12.8 percent decline from one January to the next.
In other words, duplex sellers are becoming an endangered species.
In the last two weeks I’ve had a call a day either from consumers looking for duplexes, or other Realtors trying to find properties for their buyers who can’t find anything on the MLS.
Combine the two phenomenon and you have a market where duplex sellers aren’t facing a great deal of competition from other properties in the area.
In fact, the only competition is between buyers trying to beat each other to write an offer on the property!
If you’ve been thinking about selling your Twin Cities duplex, triplex or fourplex, but aren’t sure what it’s worth, give me a call or send an email. I’d be happy to let you know where you stand.
By now, you’ve probably heard it’s been a little bit of a duplex sellers market.
And perhaps you’ve been thinking if duplexes are selling so quickly, maybe you could try selling it yourself.
Many duplex owners would like to “save the commission” charged by Realtors. After all, an average commission may run around 6 percent. On a $200,000 house, that’s $12,000, right?
You may even have heard there are services out there that, for a fee, will help you get your duplex on the multiple listing service (MLS), and help you on an a la carte basis.
This is true. But have you ever totaled all their fees and charges up? Let’s compare an average Realtor’s commission, with the cost of selling it yourself.
Here in the Twin Cities, there’s a service that has a sliding scale for “For Sale By Owner” services. To put your property on the MLS, enter the description, “share” it with top websites (which the MLS shares automatically) and upload six photos to the MLS, this company charges $399.
$12,000 – $399 = $11,601.
Now, if your property is on the MLS, then you are advertising for agents to bring buyers. If an agent does, then their broker expects you to compensate them for helping sell your house. On average, the payout for a buyer’s agent’s commission on the sale of a $200,000 house is $5,400.
$12,000- $399 – $5400 = $6201.
Now let’s imagine you want a few more photos on the MLS, and even 25 color brochures, a yard sign, and some open house signs. For that, the service will charge you $698.
So, $12,000 – $698 – $5400 = $6102.
Better yet, let’s imagine you want a lockbox, signs, twice as many brochures, a professional photo shoot, listing in the open house directory and even a duplex market analysis. How much is that? $2895.
$12,000- $2895 – $5200 = $3905.
So, in exchange for doing all of the leg work yourself to sell your duplex, you save $3905. That’s pretty good, right?
Absolutely, except for two key points.
1. If your duplex doesn’t sell, you paid $2895 for nothing. An agent and all the services he or she provides is absolutely free to you until your property sells. No upfront money to take out of your savings account or add on to your credit card.
2. One of a Realtor’s most important jobs is to negotiate on your behalf. As an experienced agent, I am confident I can negotiate $4000 more for your duplex than you can pocket on your own. And if I don’t, you don’t even have to pay me for it.
According to a National Association of Realtors survey, in 2013, only 9 percent of all houses sold with the owners selling it themselves. These properties typically had a lower median selling price. In fact, it was 13 percent lower.
Have you ever tried to save a little, and it ended up costing you a lot?
This could too.
One of the questions I get most frequently from Minneapolis duplex sellers is whether or not they should have their property fully leased before making it available for sale. After all, wouldn’t it make sense for a buyer to not have the stress and worry of finding a tenant the moment they buy the property?
The answer is both yes and no.
On the one hand, if your property lends itself to an owner occupant, having it fully leased will prevent a buyer from moving in. How do you know if it’s that kind of duplex, triplex or fourplex? If you’ve lived there in the last decade, it’s most likely suited for an owner occupant.
Owner occupants typically are willing to pay more for a property than an investor, who is looking to maximize his or her return.
Most of those buyers use FHA, VA and American Dream financing. Those loans require the buyer to move in no later than 60 days after closing.
As these are the only loan programs available to buyers that do not require a 20 percent down payment. Leases follow the property. Therefore, if your duplex is fully occupied by tenants who have a valid lease for more than two months from closing, the buyer can’t move in, as they will be unable to obtain financing.
On the other hand, if your property has always been occupied by tenants, current and valid leases can help you net more for your duplex. However, it’s important to remember the amount of revenue your investment property generates is such a large part of its value, it is critical the amount of rent you’re charging is at or near market rates.
While none of us wants to see tenants leave as a result of rent increases, low rent locked into long term leases will result in your property selling for less. If you don’t want to contend with changing tenants, then it is best to leave them on a month to month basis.
This allows the new owner to raise rent after closing.
As of today, there are 209 active duplex, triplex and fourplex properties actively listed on the Minneapolis and St Paul MLS within the seven county metro area.
To put things in perspective, in the peak years of the market, there was at or above 1000 properties available for sale.
In other words, there is a severe shortage of investment properties available for buyers.
This shortage may be the result of several factors; high rents, low vacancy rates and the sudden, dramatic absence of distressed properties on the market.
In fact, for the week ending February 14, 2015, 100 percent of the 13 listed duplexes that either sold or whose sellers accepted offers did not involve negotiations with a bank whatsoever. This resulted in an average off-market list price of $210,823.
Last year, 16 properties went off the market during the same week. Just 62.5 percent of these belonged to traditional equity sellers. Oddly, the average sold price for these properties was $216,050; higher than this year’s pended price. It’s probably simply a result of the collection of properties that were available each week as opposed to an actual market reflection.
While the difference between the number of new listings coming on the mark was just one; 17 last year and 16 this, it’s interesting to note that 87.5 of this year’s are being sold by traditional sellers. Last year, 76.5 percent were, meaning banks were bigger contributors to inventory.
Over in the single family market, the number of New Listings was up 12.1 percent over last year. Pending sales were also up 15.6 percent. This meant the total amount of available inventory was down 3.7 percent.
If you’re thinking of selling, give me a call. You may not have a great deal of competition.