Duplex Chick

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As the sand in the hourglass of the $8000 first time home buyer tax credit begins to run out, an article in the New York Times this week reported there are doubts that the housing market can function without it.

The Times article estimates that as many as 40 percent of all home buyers this year qualify for the credit. In fact, the National Association of Realtors estimates the credit is responsible for 350,000 in sales this year alone. Moody’s Economy.com, however, is still more optimistic, putting the figure at 400,000.

Evidence to support this may be found in the fact that mortgage applications for the week ending September 3, showed the largest gain since early April.

Home builders and the National Association of Realtors want Congress to extend the tax credit through at least next summer. The groups are suggesting the program be expanded to $15,000, and the credit granted to all buyers.

Republican Senator Johnny Isakson of Georgia, the sponsor of the original Senate bill, is working on just that. Isakson is submitting a new bill that would give a maximum $15,000 tax credit to any buyer who stays in the home for at least two years.

A former Realtor, Isakson accurately states that “The problem now is not first-time buyers, it’s the move-up market…”

Don’t hold out for the $15,000 credit, however. Washington, being the contentious place it is, is sure to hotly debate any additional stimulus package. If a new housing tax credit is passed at all, expect it to be a watered down version of Isakson’s original idea.

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Is there ever a reason you don’t need a rental license in the city of Minneapolis? For any kind of house?

What if you’re selling your Minneapolis duplex, do you need one? After all, you’re almost done with the property, right?  How about if you live there?

The answer is yes. To all of the above.

As long as there are tenants, the city of Minneapolis requires any type of  rental dwelling to have a license; whether it’s a single family home, duplex, apartment or rooming house, regardless of or whether or not it’s for sale.

And yes, if the duplex is owner occupied, it too needs to be licensed.

The rental license application fee is $84. The fine for not having a license is $500.

What if you buy a Minneapolis duplex?

Provided the property has been a licensed rental property in the past, your license application fee is the same $84.

As of June 8, 2009, however, the city doesn’t stop there. When the property changes ownership, you are required to pay a $450 “change of ownership inspection fee”.  A truth in sale of housing report doesn’t count, nor does the independent inspection you paid for prior to purchasing it. The city wants to look at it again to make sure it’s in compliance.

What if you’ve decided to rent out your house instead of selling it? Well, as it’s never been a rental property before, the city requires not only the $84 application fee, but an additional $1000 for inspections.

Are you surprised? After all, these are the folks that require us to license dogs.

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I have to admit sometimes it’s tough to come up with blog posts four days a week. So, today, I want to report some exciting, non-scientific news.

There’s finally a fresh shipment of produce down at the real estate market.

Last winter I showed countless properties. Of them all, there were three, all short sales, I absolutely loved. For a variety of reasons, none of them sold. And all went back to the respective banks that held the loans.

I’ve stalked these duplexes ever since; to the point of calling the lenders in order to try to ascertain when they were coming on the market.

It took months, but as of six weeks ago, I knew two of them were in the works.

In the last 24 hours, all three of them appeared on the MLS.

What’s more, a couple I hadn’t even known about also showed up.

I love having nice properties that are good values to show my clients. Trouble is, even in this market, they don’t last very long.

Call me if you’d like to see them. But hurry.

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While it’s been a while since I went back to school, somehow coming in to the office today also felt like summer’s end.

Except, well, in this case, there weren’t any new pencils, crayons or erasers waiting for me.

There was, however, the Weekly Market Activity Report from MAAR, which, unfortunately, felt like a surprise essay question on the first day back.

For the week ending August 29, 2009, the number of new single family listings was higher than at this time last year.  In fact, there were 3.3 percent more of them.

Suggesting something of a shift,  there was also a 20.3 percent increase of traditional home sellers among the new inventory.

When we make our way over to the small multi-family classroom, however, things looked a little too familiar. While the number of new duplex listings was down 28 percent, pending sales were as well, dropping 12 percent from the same stretch last year.

The good news, however, is of this year’s new inventory, 58.8 percent was bank owned, compared to last year’s 74.6 percent.

Pended sales for the week consisted of 88.9 percent lender-mediated inventory. While this is down from 2008’s 90.2 percent, it is still disproportionately high.

Of course, lender mediation seems to put downward pressure on prices as well. While the average off market multifamily price for the last week of August in 2008 was $98,571, this summer’s end posted a paltry $79,270.

Let’s hope getting back into a routine helps us all.

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One of the most difficult concepts for Minneapolis buyers to understand is that right now, there are really two duplex markets. And seeing the differences in them is like looking at property in the moonlight vs sunlight.

The first duplex market the one we’ve all heard about, consisting of foreclosures and short sales. The second, on the other hand, is comprised of traditional sellers trying to market their properties without the involvement of a bank in the negotiations.

Believe it or not, who’s selling the properties makes a radical difference as to their value.

A chart recently released by the Minneapolis Area Association of Realtors of Foreclosures and Short Sales in the Twin Cities Housing Market illustrates exactly this point.

Let’s start with one of the neighborhoods I’m often asked about; Calhoun/Isles. Close to the lakes and within walking distance of countless restaurants and activities downtown, many people find it a desirable place to live. And in today’s market, the perception is, a foreclosure in the neighborhood can be a tremendous deal.

Statistics provided by MAR seem to support this. The average sales price for a foreclosure in the Calhoun/Isles neighborhood in the second quarter of 2009 was $129,250. Compare this to an average sales price of $287,000 for properties sold by traditional sellers. That’s a difference of $157,750!

So who would want to buy anything but a foreclosure? Or at least, so the thinking goes.

You’d be surprised.

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Today’s real estate market is kind of like my favorite pair of jeans. 

You probably have a pair too. The kind you wear regularly; because they’re comfortable, easy. They always feel good.

But if you’re anything like me, there are times they aren’t. The waistband is suddenly tighter, somehow slightly uncomfortable. And I can’t remember where I overate, stopped exercising or fell off the healthy wagon, but I know, without question, things have changed.

The belt of the Twin Cities real estate market is getting a little tighter too. With active listings down 21.2 percent from last year, buyer’s are finding it harder to breathe. It’s not their imaginations. The supply of inventory has dropped from 10.5 months to 7.2 months. A balanced market, where everything’s even between buyer and seller, occurs at 5 months.

And that number may not be far off.  The 1,012 signed purchase agreements for the week ending August 22, 2009, is a 23.7 percent gain over the same week last year. In fact, that week represents the 59th week of the last 60 with a year-over-year increase.

This duplex market seems to be packing on the pounds as well. There was a 26 percent increase in the number of pended sales from the same stretch last year, resulting in an average off-market price that was a whopping $20,012 higher than last year’s.

Of the 2009 properties that received offers, 26 percent were owned or negotiated by real people, as opposed to lending institutions. Last year for the same week, banks sat at the table on 96 percent of the transactions.

The amount of new inventory that came on the small multifamily market may result in us splitting our pants altogether in the not too distant future. The number of new listings for the week was down 43 percent over last year. Meanwhile, the percentage of those new listings that will be lender mediated held relatively steady; consisting of 66 percent of the new inventory as opposed to last year’s 69 percent.

While all of this is wonderful news for sellers, it should serve as a warning to buyers too. Start getting your excercise by running around looking for duplexes; before you can’t get your pants on at all.

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From time to time I have clients ask about purchasing a duplex that’s For Sale By Owner (FSBO). 

This makes sense. After all, can’t they save a lot of money?

Honestly?

No. In fact, it may even cost them money.

Most FSBO’s want to save  the commission they would pay to the broker of an agent who represents a buyer. They would rather put that money in their pocket.

So, instead of a buyer getting professional advice and representation from a Realtor, he pays the equivalent of the commission to the seller, yet receive none of the benefits of the agent’s counsel.

Let’s say a duplex is listed on the Multiple Listing Service for $200,ooo. In order to be featured there, the listing agent’s broker agrees to pay a portion of the sales price to the broker of the agent whose client buys the property.

While commissions vary, in the Twin Cities they seem to average about 2.7 percent. On a $200,000 duplex, this represents $5400 for the buyer’s agent’s company.

Won’t the seller pass all that money he’s saving on to the buyer? Probably not. After all, if he was willing to part with it wouldn’t it have been wise to expose his property to a much larger pool of buyers on the MLS?

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One of the most confusing things for many buyers looking for a Minneapolis duplex is how a property can appear to be available on whatever web site they’re using to search the Multiple Listing Service (MLS), yet when they ask me to set up a showing, I tell them it’s sold.

How can a duplex still be “for sale” but be sold?

Well, it comes down to where the buyer and seller are in the process of negotiating an offer.

In today’s market, there are two types of sellers; an individual or corporation who may sell the duplex without consulting an outside party, and a short sale, where the seller must also come to terms with the bank that holds their mortgage.

Regardless of the type of seller, when a buyer submits an offer on a property, she does so with certain contingencies. 

For example, a buyer will most likely make the purchase contingent on her ability to get a loan. If she can’t, she may cancel her purchase. 

Thanks to sellers requiring buyers to provide proof they can financially qualify to buy the property by submitting a pre-approval letter with their offer, most buyers are able to get a loan and the transactions goes forward.

However, a buyer may make the purchase contingent on a home inspection. During a limited window of time, she can hire a home inspector to come in and check things like the furnace, the roof, water pressure and electrical circuits, as well as ask to review copies of the leases.

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