Archive for the 'Short Sales/Foreclosure' Category

Distressed Duplex Owners Can Share Secret

said on June 24th, 2011 categorized under: Short Sales/Foreclosure

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foreclosure duplexesNot long ago I spoke with a Minneapolis duplex owner who was upset I’d spoken with his tenants in order to reach him.

The duplex owner was facing foreclosure, and feared I’d mentioned this to them.

While I knew his property was distressed, and I was, in fact, trying to reach him to see if I could help him find a solution, I would never tell a tenant anything one of my sellers or prospective sellers would not want shared. I always assume mortgage delinquency is confidential.

Here’s the irony. The tenants already knew.

In Minnesota, banks deliver a copy of the notice of default to the tenants. It includes the date of the sheriff’s sale, as well as other important information about the foreclosure process.

It does not, however, absolve the tenants from paying rent, abiding by the terms of their lease, nor reduce or eliminate their rights.

Until the end of the redemption period, (which is six months after the sheriff’s sale in Minnesota), duplex and other investment property owners also retain all of their rights as a landlord.

If you’re a duplex owner facing foreclosure, however, please remember that a second loan or Home Equity Line of Credit (HELOC), will survive the loss of the property, and the lender will have up to six years to pursue you for the deficiency.

And that’s the good news.

The not so good news is the IRS may want to hear from you too.

There are solutions, including short sales and loan modifications. Please contact me. I’d be happy to help find a solution.

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duplex market better and worseIf we’re looking for signs the Minneapolis duplex and housing markets are getting better, today’s Realty Trac  report gave us the definitive yes and no answer.

Realty Trac’s foreclosure statistics for the month of May appeared on the surface to contain good news, but may, in fact, simply represent the calm before the storm.

Nationally, 214,927 properrties received default, auction or repossession notices in May. That breaks down to one in 605 households. That’s the least since November, 2007.

In Minnesota, 2,813 properties received these notifications, with 1,073 of those coming in Hennepin county.

There is no way to determine, at this point, how many of those properties were duplexes or investment property.

The good news in all of this is in all, foreclosure filings dropped 33 percent from May in 2010, and were down 2 percent from April of this year.

But is it?

According to Realty Trac CEO James Saccacio, “Even at a significantly lower level than a year ago, the new supply of REOs exceeds the amount being sold each month.”

(REO, by the way, stands for “Real Estate Owned”, meaning it’s owned by the bank.)

Of course, the lack of buyer activity Saccacio cited was reflected in housing prices sliding 3.6 percent in the first quarter of the year, according to the S & P/Case-Shiller index.

According to Realty Trac’s communications manager Daren Blomquist, the inventory of distressed homes nationally stands at 1.8 million, which if no additional foreclosures came on the market, would take three years to sell.

That puts us into 2014.

That is, IF no additional properties come on the market and IF unemployment doesn’t get any worse and IF interest rates don’t go up (as everybody’s forecasting they’re about to).

Talk about hedging our bets…

Minneapolis Duplex Foreclosures Slow

said on May 18th, 2011 categorized under: Short Sales/Foreclosure

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Housing market collapseLast week you may have heard that duplex and single family home activity nationwide was at a 40 month low.

This would explain why there are so few duplexes on the Minneapolis/St Paul market to buy.

Don’t dance in the streets just yet. According to RealtyTrac CEO James Saccacio, “This slowdown continues to be largely the result of massive delays in processing foreclosures rather than the result of a housing recovery that is lifting people out of foreclosure.”

In fact, data provided by the Mortgage Bankers Association suggest there are still about 3.7 million properties with loans that are seriously delinquent.

In Minnesota, one property owner of every 882 is either delinquent on their mortgage or somewhere in the foreclosure process. While this looks stellar compared with the one homeowner out of every 97 in Nevada, it loses some of its luster when measured against the one homeowner out of ever 17,580 in North Dakota who is facing foreclosure.

Saccacio said there are two different stretches where they’re seeing the delays; between delinquency and the start of the foreclosure process, then again when the process has started and lenders are taking more time to complete the process.

These delays are due in part to the lenders desire to give duplex and homeowners more of an opportunity to get a loan amodification, complete a short sale, or find some other solution.

Nationwide, the average length of time for a foreclosure to be completed as of the first quarter of 2011 was 400 days. At the same time last year, that number was 340 days.

At some point, the log jam will clear. Until then, see this as a window of opportunity to sell your Minneapolis duplex if you’re considering doing so.

Comments Off on Why A Duplex Foreclosure Can Haunt You For 26 Years

Fear of Duplex ForeclosureOne of the biggest fears any of us face in life is fear of the unknown. I see it almost every day in myself, as well as the Minneapolis duplex owners, sellers and buyers I work with.

I believe it’s this very fear that keeps duplex owners who are facing foreclosure from going forward with a short sale.

At first, they tell they don’t want to go through the process, and would prefer to just let it go back to the bank.

And yet, when I question them further, I always discover they simply don’t know the facts about a short sale.

Last week I had the opportunity to visit with Jeff Nycklemoe, a short sale and foreclosure attorney who has helped a number of my duplex sellers through the short sale process. And he told me something that should scare distressed property owners even than their fear of the unknown; a second mortgage or home equity line of credit on a property not only survives the foreclosure, but can haunt the former owner for as long as 26 years.

When a duplex goes back to the bank, the lender who held the first mortgage on it is given the keys. The lender who had the second mortgage is left with nothing.

As a result, most second mortgages contain language that allow them to pursue the amount they are owed, in full, for as long as six years after the default happens.

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Comments Off on Minnesota Duplex Owners Get Lifeline From Fannie Mae

Woman signs duplex mortgage contractIf you are a duplex owner in Minneapolis, St Paul, or anywhere else in Minnesota, and are struggling to make payments or facing foreclosure, there is a wonderful new resource available to you through the Minnesota Home Ownership Center (MNHOC).

MNHOC has teamed up with Fannie Mae and thirty-nine non-profit agencies throughout the state of Minnesota to not only sort out your options, but  also potentially perform a squeeze play on the bank servicing your loan (which is usually perceived as the lender), forcing it to work with you toward a solution that works for everyone involved; a solution which is often a loan modification.

The non-profit counseling agencies, which include entities like Lutheran Social Services and Habitat For Humanity, help duplex owners complete a comprehensive application that covers anything the lender would need to know in order to make a decision whether or not to agree to alter the terms of the loan.

While most of us perceive the bank we make payments to as the lender, they are often, in fact, simply taking care of all of the paperwork for an investor they sold your mortgage (along with hundreds of others) to. Often, these loan servicers simply do not have the authority to negotiate or agree to terms of a loan modification.

In Minnesota, Fannie Mae is the investor in at least one third of duplex mortgages. As such, they DO have the authority to renegotiate the terms of your loan.

The non-profits agencies, which are under the umbrella of MNHOC, then take the completed application and submit it directly to two Fannie Mae employees who are now working permanently out of MNHOC’s offices in St Paul.

Since Fannie Mae is the investor in the duplex mortgage, they have leverage with the servicer.

As a result of having Fannie Mae involved in the process, some duplex owners are receiving loan modifications in as little as ten days.

According to Ed Nelson, marketing director for MNHOC, Fannie Mae is taking similar steps in six or seven other states in the country, but only Minnesota has a coordinated, statewide effort in place.

So what if you don’t live in Minneapolis, but are delinquent on your duplex mortgage?

Nelson says it’s important to verify the authenticity of any company or service that promises to help you with a loan modification. If they are legitimate, they should be a part of HUD’s Counseling Agency Network.

Members of this network can be found at www.findaforeclosurecounselor.org and lookbeforeyouleap.org.

The Minnesota Home Ownership Center can be found at www.hocmn.org.

No matter where you live, it’s important to know that regardless of however bleak your circumstances seem to be, you do have options. Options help grow hope, and once you have that, everything else can change.

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Short Sale Duplexes Are Best BuysA client wrote an offer last week on a Fannie Mae owned duplex in south Minneapolis.

His offer was one of eight.

Needless to say, his offer was well above the list price. Hugely above. And he was going to live in it and put 20 percent down.

He lost out…

to a cash offer.

If you want to invest in a Minneapolis duplex, have good credit and a down payment, but don’t have six figures in cash, what should you do?

I’m going to encourage my duplex buyers to look at short sales.

Yes, they require a great deal of patience due to the amount of time it takes lenders to approve the transaction. However, here are five good reasons a short sale duplex is worth the wait:

  1. The bank looks at one offer at a time- If the seller decides to work with you, you don’t face a bidding war.
  2. Short sale duplexes are often in better condition than foreclosures- There’s an odd phenomenon that happens to unoccupied property. Somehow, the presence of people in a duplex keeps the plaster on the walls, the plumbing from freezing and windows from breaking. As a result, many short sales do not require an immediate cash infusion for repairs.
  3. Short sale duplexes come with tenants- Not only does the rental income help you qualify for a mortgage, it also allows you to your ownership of the Minneapolis duplex with an infusion of cash from the damage deposits and pro-rated rents that should have been assigned to you at closing.
  4. Less competition- By now, we all know of someone who wrote an offer on a short sale, only to wait 9 months for a bank response. Most of the banks have gotten better at processing these files. However, they still do require time. That fact alone helps deter people from making an offer, meaning you’re less likely to experience multiple offers and have a broader selection of inventory to choose from.
  5. The seller is human- Banks don’t care about anything but their bottom line. There is no reasoning, no arguing a case and, in the case of a foreclosure duplex, no one who can answer questions about the property’s history. With a short sale, most sellers are happy to tell you what year the roof was replaced, where the nearest hardware store is, and warn you about the little quirks most properties seem to have.

I know I’m frustrated with losing out on great duplex investments. And I’m sure my clients are too. That’s why we’re going to be looking at more short sale multi-family properties.

Foreclosure Decline Deceptive

said on April 18th, 2011 categorized under: Short Sales/Foreclosure

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When to Buy and Sell Real EstateLast week it was reported Minnesota experienced an 18.1 percent decline in single family, duplex and multi-family in foreclosures and related activity in the first quarter of 2011, when compared to the same three months in 2010.

The decline, according to Realty Trac, the nation’s leading foreclosure data company, put Minnesota 24th out of the 50 states, with 7,539 foreclosure filings.

Filings included notices of default, scheduled sheriff’s sales, and repossessions.

Of these filings, 6,918  were in the Minneapolis, St Paul and surrounding communities.  Of the 200 metro areas surveyed, that put the Twin Cities 70th in the nation; not near the bottom, but clearly in the top half of the cities in the country.

While the drop in the number of filings initially appears like cause for celebration, it’s important to note that Realty Trac attributes most of this decline to the bank’s winter moratorium on foreclosure activity while they sorted out the paperwork they have been accused of mishandling.

In fact, while the 3,330 foreclosure filings in Minnesota in March represent a decline of 11 percent compared to the same month last year, it also represents a 57 percent increase from February.

In fact, the month of March alone contributed 44 percent of the quarter’s foreclosure activity.

While market activity does seem to be picking up in the duplex market, data seems to indicate we still have a long way to go before we see stability in the Minneapolis and St Paul market.

Short Sales Help Ease Duplex Investor Taxes

said on March 30th, 2011 categorized under: Short Sales/Foreclosure

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Duplex Short Sale Tax ConsequencesThe Minneapolis duplex market still has many owners facing foreclosure.

I do everything I can to track down as many of these property owners as possible so I can help them explore alternatives to losing the property through foreclosure.

After all, a foreclosure can cause more than just damage to credit. In fact, it can not only impact things like employability and security clearance, but may also be a taxable event for a real estate investor.

And yes, even if the duplex is owner occupied, the portion occupied by tenants is considered an investment property, and may trigger a tax obligation.

I don’t know whether it’s due to a sense of defeat or depression, but I am always surprised by how few duplex owners are willing to explore their options.

First, while the odds are long, in the last three months I have spoken with two duplex owners (both owner occupants) who have succeeded in getting loan modifications. While they seem to be the exception to the rule, places like the Minnesota Home Ownership Center can help property owners through the process.

Second, in Minnesota, if a duplex is sold at the sheriff’s sale for less than the amount owed to the bank, the property owner has the right to purchase the property back at that adjusted amount priot to the end of the six month redemption period.

The duplex owner may also sell the property for that amount or more and pocket the difference (provided there isn’t a second mortgage on the property).

Finally, there is the short sale option. If the duplex is too far along in the foreclosure process, this may not be as beneficial to the owner’s credit score as it is early in the process. This is largely as a result of the impact of additional late payments.

Nonetheless, not only does a short sale drop off a credit report much more quickly than a foreclosure, it also tends to result in a higher sales price for the duplex owner.

According toRealty Trac Senior Vice President Rick Sharga, the average sales price for a short sale in 2010 was 16 percent higher than an REO.

In other words, if a distressed property happens to be owned by an investor, the short sale reduced their potential tax obligation by 16 percent.

 To me, that’s quite a savings.

Comments Off on How Duplex Owners Facing Foreclosure Can Get Cash In Their Wallet

Minneapolis Foreclosure Duplex Owners Put Cash In Their Wallet I wish every Minnesota duplex or investment property owner facing foreclosure knew this one thing: the amount the bank bids at the sheriff’s sale is the amount they want to redeem the property.

For example, if you owe $200,000 on your mortgage, and the lender offers the number $85,000 at the courthouse, it means if you pay them that, as well as  approximately another  2-3 percent in interest, penalties and attorney’s fees, that debt is settled.

In this instance, I am referring only to the lender who is foreclosing. If you have a second mortgage or Home Equity Line of Credit (HELOC), that must be settled separately and, even if you lose your property to foreclosure, that indebtedness survives the proceedings and the lender can and will in all likelihood, chase you for the balance.

Knowing this, I am constantly amazed that more distressed property owners don’t choose to go ahead and sell their property prior to losing it to the bank.

What’s even more puzzling is if these owners could (and in many instances can) sell their property for well beyond the amount  bid at the sheriff’s sale– they are free to keep the difference!

I have investors looking for exactly these kinds of opportunities and can, within days, quickly and painlessly end the stress and strain of foreclosure for distressed Mineapolis duplex owners.

Please call if you’d like to get cash for your property. You have more options than you think.

Comments Off on Why A Duplex Realtor Is Free- 60 Percent Of The Time

freeA lot of people are afraid to speak with a Realtor when they’re thinking of buying or selling a Minneapolis duplex because they’ll “have to pay them”.

The irony is, a great deal of the time, agent representation is absolutely free.

When a seller and her Realtor decide to “list” a duplex for sale, what they’re referring to is putting it on the Multiple Listing Service or MLS.  In order for that to happen, the seller, the agent, and his or her broker (like Keller Williams) negotiate an agreement among them where the agent and broker agree to help the duplex owner sell the property by marketing it in exchange for a percentage of the sale.

As part of those  marketing efforts, the agent submits all of the details on the property to the MLS so it can be featured there. Access to the MLS is limited to its members, which are real estate brokers and Realtors who have their licenses with those brokers. (The MLS Online is NOT the MLS.)

To entice all of these agents to show the duplex, the broker agrees to offer any agent who brings a buyer to the property a split of the commission the company and the agent would earn on the sale. This is usually just under half of the total commission.

So, when the sale of the property is completed, the buyers agent, through his or her broker, is paid by the selling agent and broker, costing the buyer nothing.

What if you’re a duplex owner who’s upside down and facing a short sale on your investment? How are you going to find the money to pay both the listing agent and the buyer’s agent?

Relax. Even though the bank is losing money, they understand that Realtors are an important part of the transaction and willingly pay commissions out of the proceeds of the sale.

Realtors can be a valuable resource for market knowledge, negotiation expertise and advice.  If you don’t have to pay us, why fear us?