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Clock Ticking On Minneapolis Duplex Tax Credit
February 15th, 2010 categories: Tax Credits
With all the snow on the ground, April 30 seems ages away.
But really, it’s only 74 days away.
Less than three months to find your first duplex or house before the $8000 first time home buyer tax credit expires. Less than three months for repeat buyers to qualify for the $6500 credit.
Yes, it still sounds like a lot of time. Except for the fact that many of the first time buyers I’ve worked with have taken four to six months to define exactly what it is they’re looking for in a property and then find one that matches both their budgets and criteria.
Remember, purchase agreements must be signed no later than April 30, 2010, to qualify for the credit. New owners must take title no later than June 30.
If you’re wondering whether you qualify, just remember; a first time home buyer is defined as anyone who has not owned a home in the last three years.
A repeat buyer must have lived in their homes consecutively for five of the previous eight years.
For either, income limits are $125,000 for single buyers and $225,000 on a joint tax return.
Of course, in either instance, the maximum home price is $800,000.
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Minneapolis Duplex Market Goes Zen
February 9th, 2010 categories: Twin Cities Real Est
MAAR issued its Weekly Market Activity Report this morning and by all appearances, housing transactions for the week ending January 30, 2010, remained in their meditative state.
Pending single family home sales were down just slightly from the same week in 2009, while the number of signed purchase agreements rose just 0.7 percent.
The number of new single family home listings didn’t make any real perceptible moves either, dropping 3.7 percent year over year.
The duplex and small multi-family market showed a few signs of movement, but most were slight. For example, of the properties this year that received purchase agreements, 95 percent involve a lender in the negotiations. This is down .5 percent from last year.
The average pended price of properties for the week in 2010 was $98,395, compared with last year’s average sale price of $93,118.
New listings for the week trailed last year by 12.3 percent. The good news is 40.35 percent of the week’s new inventory was offered by traditional sellers, compared with just 26 percent for last year.
Let’s hope the tranquility doesn’t last.
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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 Market Studies Itself In The Mirror
February 2nd, 2010 categories: Twin Cities Real Est
The Minneapolis Area Association of Realtors released its weekly activity report last night, and it turns out that January of 2009 and 2010 are almost mirror images of one another.
Pending sales and new listings are down a bit from last year, and there’s a little bit more inventory on the market, but, by en large, it’s a wash.
For the week ending January 23, there were 2.3 percent fewer signed single family purchase agreements than there were for the previous year.
In the duplex market, however, the reflection from year over year had a few ripples in it.
The number of signed purchase agreements for the week in 2010 was down 31.4 percent from the 2009 mark. Of those properties that did receive and accept offers, 12.5 percent were brought to the market by traditional sellers. This represennts an increase of 4 percent year over year.
The average off market price for the week was $95,177; almost identical to 2009’s $95,371.
While the number of new listings to hit the market was virtually identical, this year traditional sellers were responsible for 40.35 percent of the new inventory. This is a stark contrast to last year’s market share of just 8.5 percent.
Hey, look at it this way. At least there aren’t any new wrinkles or gray hairs to contend with.
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Minneapolis Duplex Owners’ Paperwork Due
January 18th, 2010 categories: Paperwork, Paperwork, Paperwork!
While the procrastinators among us still have time, those who are more organized might like to get working on their Certificates of Rent Paid (CRP).
Minnesota landlords are required to provide their tenants with completed CRPs no later than January 31. The certificates reflect the amount of rent the tenant paid in the previous year, and the amount of property taxes your unit helped pay for (expressed as a percentage of total rent collected for that unit).
The CRP helps tenants qualify for a portion of the property tax refund received on the duplex.
There are income limits for qualification. Households with no dependants can earn no more than $50,030 per year. Income limits increase with the number of dependants, going up to $74,930 with five or more dependants.
The forms are easy to understand and simple to fill out. On occasions when I’ve had multiple units at one location, I’ve made a master copy with the property address, owner name and PID number filled out. I then made multiple copies of it and filled each in with a tenants name and rental history.
Failure to provide tenants with CRPs can result in a $100 penalty for each occurance. If you have more than one rental unit, this can add up in a hurry.
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Get A Loan At Closing To Repair That Foreclosed Minneapolis Duplex
January 15th, 2010 categories: Financing
One of the challenges many first time home owners face when buying a foreclosed Minneapolis duplex is the cost of repairing and deferred maintenance or damage.
After all, when you spend your savings on the down payment and have to wait several months to get your $8000 first time home buyer tax credit check, how can you afford to make the place livable?
It’s important to remember for the last several years FHA has offered a loan called a 203k construction loan. Basically, you can get a loan for up to 110 percent of the rehabbed value of the property, with the money left after purchase being allocated for construction and repairs.
The 203k is one loan, as opposed to a first and second mortgage.
There are stipulations to these mortgages, including that the improvements must be made by licensed contractors and the bank pays those vendors directly.
Historically, these loans have typically been more expensive than a straight FHA loan: as much as 1 – 1.5 percent higher.
However, a loan officer who specializes in 203ks told me yesterday in the last several months, interest rates on them have been just .25-.85 percent higher.
That seems like a pretty affordable way to finance the repairs and updates so many of these distressed properties require.
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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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Minneapolis Duplex Sale May End Soon
January 12th, 2010 categories: Twin Cities Real Est
The buyer’s market is over.
Buried in the Weekly Market Activity Report from the Minneapolis Area Association of Realtors was news that The Months Supply of Inventory in the marketplace is 5.
In other words, if no new houses came on the market today, in 5 months we’d be out of houses to sell.
A year ago, we had a 6.7 month supply.
Generally speaking, the housing market is considered to be balanced, with neither buyer nor seller having the advantage, at a 5 month supply.
Does this mean we’re once again on course for double digit rates of appreciation for single family homes?
Unlikely. Especially with the distinct possibility of higher interest rates on the spring horizon.
The duplex market for the week ending January 2, 2010, however, tells an entirely different story. The average off market price for a pended duplex or small multi family property for the week was $161,237. For the same week in 2008, that number was $92,656.
The number of sales week over week was a bit less promising, dropping 16 percent. Traditional sellers for the week represented 19 percent of the transactions. This is more than double their market share for the year before.
New listings continued to be few and far between, dropping 38 percent week over week. Just over one quarter of the new inventory for the New Year was offered by traditional sellers, an increase of three percent year over year.
While the months supply of inventory and increased traditional seller market share are good news, it’s important to remember the vast majority of the market is still controlled by lender mediated transactions.
While foreclosed duplexes seem to be increasingly rare, the same cannot be said in the single family home market. There are persistent rumours of a shadow inventory of foreclosure properties being kept off the market by banks, though the validity of those rumors is difficult to substantiate.
If they exist, we’re all likely to lose our balance.
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Another Lap Likely For Minneapolis Duplex Tax Credit
October 19th, 2009 categories: Tax Credits
For those hoping for more time to get around the track in order to take advantage of the $8000 first time home buyer tax credit , it looked like Congress was poised to keep their hands off the stop watch last week.
Both CNBC reporter Diana Olick and Realty Times columnist Kenneth Harney reported last week that sources indicate to them that the credit will be extended for several months past its November 30 deadline.
Chairman of the House Ways and Means committee, Congressman Charles Rangel (N.Y. -Dem.) also stated to Dow Jones Newswires, “There’s no question I think it should be extended. How long, I haven’t discussed.” When it comes to expansion to all home buyers, however, Rangel expressed his opposition.
Both the National Association of Realtors and the National Association of Home Builders have been advocating for a one year extension of the credit, expanding it to all home buyers and capping it at a maximum of $15,000.
Of course, Congress is rightly concerned about how to pay for it. The original tax credit was included as part of the governments stimulus package. To date, this component alone has cost the government an estimated $15 billion.
Having said that, it has repeatedly been credited as being responsible for the uptick in activity in the housing market, and, as a result, one of the most successful pieces of the stimulus package.
Some estimates for the cost of an extension range as high as an additional $15 billion. One solution for covering the additional cost has been offered by the Republican Senator from Georgia, Johnny Isakson, who suggests the extension be funded with some of the unspent money from the original $800 billion economic stimulus bill.
Of course, until legislation is passed, the deadline to qualify for the credit remains November 30. We’ll watch for news out of Washington in coming weeks for further evidence of change.
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Let Your Minneapolis Duplex Go To The Dogs
October 16th, 2009 categories: Tenants
You would think with all the foreclosures on the market and in the works, it would be tough to find a vacant duplex anywhere.
And yet, recent media reports cite the highest national vacancy rates in over 20 years. Where did all those people tenants go? Some foreclosure victims are renting. Others have moved in with friends or family to weather the storm. And many prospective tenants, like recent college graduates, simply haven’t left home.
So in the midst of this economic downturn, how can you make sure you don’t go months without rent?
Well, in addition to cosmetic improvements, one of the most effective ways is to allow pets.
Finding a place to live if you’re a dog owner can be nearly impossible. And duplexes with yards are especially appealing to someone with pets.
In my experience, it’s as important to “interview” the dog as it is the prospective tenant. Well trained and behaved dogs, for example, tend to make better tenants than those who jump all over you, as it speaks to the owner’s commitment to the dog.
By en large, pet owners are appreciative of finding a place that welcomes them and go to great lengths to insure they don’t endanger their living situation.
However, there are exceptions to every rule, and to protect yourself from the additional damage pets can inflict on a property, you should ask for a pet deposit in addition to the regular security deposit you take when you have them sign the lease.
A word of caution, however. It’s important to check with your insurance company before you decide you’re willing to rent to pet owners. Many have clauses in their policies limiting their responsibility if specific breeds of dogs are on the premises.
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