Comment
Like comic book super heroes, Minneapolis and St Paul duplex sales took off the week ending May 12, 2012.
Thirty-three cape-wearing duplex, triplex and four unit building owners accepted offers during the week; 54.5 percent of which did not need to call the bank for permission.
Compare this to last year’s Clark Kent-ish numbers, when just 25 Minneapolis investment property owners accepted offers; of which a mousey 32 percent were equity owners.
The number of new listings coming onto the market continued to be less heroic, however. There were just 25 new duplex opportunities for buyers, with 68 percent of them brought to market by traditional sellers.
Last year, there were 36 new duplex listings, with 41.6 percent of them being listed with property owners who were not in distressed situations.
This dynamic duo of increased duplex buyer activity and little new inventory ka-p0wed last year’s average sold price for the week of $133,604, finishing at an average off-market list price of $179,588. Granted, odds are when those transactions are finally closed and booked as sold, the average price will likely be about 8 percent less ($165,229.95), but it’s still a dramatic improvement over last year.
The single family home market also experienced a Wonder Woman-like transformation, spinning around to finish the month with a median sales price up 12.1 percent to $162,500.
Meanwhile, for the second week in May, pending sales leaped up 18.9 percent, while new listings dropped 11.8 percent.
This one-two punch further cemented this as a seller’s market, with just 4.7 months of inventory currently available. (A balanced market is when there is a 5-6 month supply.)
While this is all wonderful news for our market-decline crusaders, it’s important to remember no matter the comic, villians have a way of springing back to life.
We’re not at our happy ending yet.
Comment
The other day the New York Times ran an article about retail shopping that also talked about pricing duplexes to sell.
I’m sure the journalist at the Times didn’t intend to write about real estate, but she may as well have.
The article quoted the CEO of JC Penney, Ron Johnson, who said, “The customer knows the right price. We can raise the price all we want; she’s only going to pay the right price. And why is that? Because she’s an expert.”
This consumer expertise comes from hours spent on the Internet studying and comparing prices. Thanks to their research, consumers know they can get a better deal at either another store, or by ordering the item online.
The article detailed how several retailers, including American Eagle and Urban Outfitters, are reworking their pricing strategies to adjust to web-savvy consumers.
Duplex buyers are every bit as savvy as someone looking for a new bedspread. In fact, they may be even more so, as real estate is a much bigger purchase.
I often have duplex sellers they want to go against my counsel by pricing their duplexes 10 percent or more above my recommended number.
Their thinking is they can “always come down”, or, buyers can “just make an offer”.
The trouble with this logic, however, is that a duplex buyer is educated and if a property is over-priced from the outset, they won’t even go through the front door. Because they’ve been shopping online, they know they can get a comparable property down the street for less.
And once the property’s been sitting, to consumers, it becomes like last fall’s sweaters– too expensive for what it is. At that point, the only way to sell it is at a discount.
In other words, when the duplex goes “on sale” at a price usually below what it might have brought had it been priced right from the start.
Comment
One of the biggest concerns many prospective duplex sellers have about putting their duplex on the market is that the tenants will be upset and leave.
After all, nobody likes to have a parade of strangers through their house day after day.
And, more importantly, this parade causes many tenants to fear as soon as the duplex is sold they won’t have a place to live.
Many duplex sellers I work with have found these fears can be addressed through a simple, honest conversation and sometimes, a little cash.
First, in the state of Minnesota, duplex renters are protected by their lease. If, for example, they recently signed a one year lease, then that lease would follow the property and protect them for the duration of the contract.
The only time that would change would be if the tenants agreed to move as the result of financial compensation, the amount of which is negotiable (in states and cities that don’t have laws governing this).
Many duplex sellers I work with also remind their tenants that in the state of Minnesota, the landlord has the legal right to enter the property for business purposes, provided a reasonable attempt to notify the tenants has been made. (Nowhere in state law is “reasonable attempt” defined.)
Having said that, duplex sellers often reassure their tenants that while every attempt will be made to give them as much notice as possible, there will likely be instances where it’s somewhat last minute.
Duplex sellers then usually conlcude by offering a rental discount because of the inconvenience this will cause their residents. Some duplex sellers even make this discount contingent on the level of showing cooperation the tenant demonstrates.
Believe it or not, once the tenants know the process, most of my owners have found them to be enormously cooperative.
After all, most of us fear what we don’t know, rather than that which we do.
Comment
I’m hoping I can count on you to help me out with a competition I’m in at my office. Several other Realtors and I are racing to be the first person to speak with 100 people today and ask them a real estate related question.
And, well, since I don’t have any of your telephone numbers, I need you to call me.
I promise I won’t sell you a duplex (unless you want me to), make you buy a duplex (again, unless you want me to), enroll you in anything, or put you on some sort of SPAM mailing list.
It would be GREAT to trounce the Realtors in my office who sell single family homes.
So, please call. My number’s in the upper right hand corner of this web site, or you can dial six one two, two nine zero, five nine nine eight. (Sorry for writing it out, I’m trying to avoid the spambots or whatever they’re called.)
Thank you in advance!
Comment
If you’re waiting until the real estate market rebounds to sell your duplex, do you feel a little stuck?
Many duplex sellers I visit with do.
In most cases, one of three things happened:
- They made a large down payment when they bought their Minneapolis duplex, only to see that money disappear as duplex values continued to decline.
- They watched the value of their duplex rise by tens, if not hundreds of thousands of dollars on paper, only to those gains disappear with the crash of the market.
- They refinanced their duplex at the moment is was worth so much more than what they paid for it in order to buy another duplex, pay off debt, or make improvements to the property and now owe far more than the duplex is worth.
These duplex owners cling to the belief the market will rebound soon; that if only they hang on a year or two or three, the money they lost will be found and they can continue on with the plans they had for their lives.
The trouble is, the market isn’t going to bounce back next year, or the year after.
And with today’s incredibly low vacancy rates, rents are sure to rise. When they do, and it becomes more expensive for people to buy a house than rent, vacancy rates will rise, and rents will fall.
Granted, lending standards are tight right now, and it seems most people don’t qualify for a loan. Remember, however, that many of the foreclosure crisis’ earliest casualties have been renting for several years now.
Many of them have been working on repairing their credit.
So the question for duplex owners is this…is the hope of regaining the money you “lost” worth any other plans and dreams you might have had for the next decade that didn’t involve duplex ownership?
There are very few Minneapolis duplexes for sale right now. Thanks to low interest rates and demand from both owner occupants and investors, it remains a great time to sell.
No, you won’t get what you paid for it in 2005…or, what you lost on it in 2007.
But if you had other plans for the next decade of your life, remember, you will be free.
Comment
If it seems like there’s a shortage of Minneapolis duplexes for sale, it’s because there is.
Perhaps it’s because for many weeks we’ve seen statistics like this:
For the week ending January 14, 2012, there were 20 new duplex, triplex and quadraplex listings to the Minneapolis MLS.
During the same week in 2011, there were 40 new listings.
In other words, the amount of new inventory for the week had dropped by half.
In both cases, exactly half of that new inventory was brought to the market by traditional sellers– as in people who didn’t need permission from a bank to sell.
Ironically, there were just 14 Minneapolis and St Paul duplexes where sellers received and accepted purchase agreements the second week of January. Only one of these duplex owners decided to sell without bank interference.
On average, these properties pended at a list price of $78,299.
This number is down from that week in 2011, when 20 duplexes pended or sold on the MLS. Of these sellers, just less than one-third had equity in their property.
These sellers received an average sales price of $136,920.
Single family home listings followed duplexes, reporting a 5.2 percent decline in the number of new listings to hit the market. In all, there are 23.8 percent fewer homes for buyers to choose from than there were last year.
Pending sales, however, were up 29.4 percent.
The tightening market has yet to impact sales price in an upward direction.
Can’t wait to see what spring brings.
Comment
Many duplex owners across the nation are required to obtain a pre-sale inspection of their property before their local municipality will allow them to sell their duplex.
In Minneapolis, this report is called a truth-in-housing or T-I-H.
This inspection is required for all properties four units in size or smaller. So, not only would a Minneapolis duplex need to have one, but so too would a condo, single family home, townhouse, triplex or four unit apartment building.
It is also a requirement regardless of the way you sell your property; whether it be via a contract for deed, an all cash sale, whether you used a Realtor or sold the duplex yourself.
The purpose of this inspection is simply to see how the duplex measures up to current housing code. For example, current city of Minneapolis code is that all properties have a carbon monoxide detector within ten feet of any bedroom.
The pre-sale inspection is NOT as thorough as the kind of inspection a buyer might wish to have done prior to purchasing the duplex, and a clean T-I-H may or may not mean there aren’t issues with the property.
Failure to have one will result in what’s known as a Required Repair or RR. The seller may choose to make this repair before the property is sold. However, if the seller is unwilling or unable to make those changes, the buyer may assume responsibility for them at closing, provided he or she agrees to complete them and have the property reinspected within 30 days.
So what happens if you don’t get a pre-sale inspection done? While penalties differ everywhere, in the city of St. Paul, for example, you may be charged with a misdemeanor, which is punishable by up to 90 days in jail and/or a $1000 fine.
That should be enough incentive to check with your city or county to see if a pre-sale inspection’s required if you’re going to be selling a duplex!
Comment
One of the most common things I find duplex buyers confused about at closing is title insurance.
After all, most have already had to buy an insurance policy to protect the property in the event of a catastrophe.
So why do you need title insurance?
Title insurance is usually purchased the day you buy the duplex and involves a one time fee that’s part of your closing costs.
It protects you as the duplex owner in the event there are any problems with the property’s title that weren’t discovered by your title company or escrow officer prior to closing.
What kind of problems could those be? Well, let’s say one of the property’s previous owners had some construction done on the property but didn’t pay the contractor; who was slow to put a lien on the property.
Or, perhaps a previous owner failed to pay property taxes, or there were heirs to the property who only now discovered they’d inherited it.
In each of these cases, you could find yourself having to hire an attorney to defend you and your property from these claims.
An owner’s title insurance policy would cover those expenses for you.
And those expenses can be significant.
I had one buyer whose $700 title insurance policy covered almost $100,000 in legal fees and settlement charges.
For what? A litigious neighbor who simply liked to sue people for money involving a driveway easement.
And just this morning, a duplex seller I was working with, was glad he was protected by the policy he’d purchased with the property. It seems the previous owner hadn’t notified anyone his sale was part of a divorce.
As a result, his ex-wife could have a claim to the duplex, even though he no longer owned it!
I realize buying a duplex can be an expensive endeavor. But title insurance is something you should never be without.
Comment
These days, there are so few new Minneapolis duplex listings coming on the market that I’m convinced some one’s going to have to start giving out ration coupons.
Really. There’s a shortage!
For example, for the week ending September 17, 2011, there were 36 new duplex listings available for purchase.
During the same week last year, there were 49. So, from last year to this, we experienced a 27 percent decline in new inventory.
Last year, 51 percent of these listings were brought to the market by duplex owners with equity.
This year, 53 percent belonged to traditional, or equity sellers.
There were 23 duplexes, triplexes or small multi family building owners who accepted purchase agreements in the second week of September. Of these, just 26 percent will not need to consult with the bank before they sell their property.
During the same stretch last year, 19 Minneapolis and St Paul duplex owners accepted offers. Of these, 32 percent did not need permission from their lender before agreeing to sell.
On average, these sellers from one year ago received $107,100 for the sale of their property.
This year, the average property a duplex was listed at before it became a pending sale was $104,560. As sold prices, as of late, have averaged less than list prices, odds are we will see a more significant drop when sold prices are recorded.
While not nearly as dramatic as the Minneapolis duplex market, new single family home listings were down 22.5 percent for the week, marking the 15th straight week of new inventory decline.
Meanwhile, pending sales were up 40.6 percent.
Overall, there are 22.5 percent fewer single family homes available to purchase on the Twin Cities market than there were one year ago.
While I doubt they’re at the place where they’re going to ration home sales, duplex coupons might not be far away.
Comment
I went out of town for a few days last weekend.
While I was gone, I managed to help two clients write offers on Minneapolis duplexes.
Neither was an active listing on the Multiple Listing Service (MLS).
In fact, one was a property where an accepted offer on it was about to be cancelled. The other duplex was not coming on the market until next year.
This proves three things I’ve been saying for months.
1. It’s a great time to sell a duplex.
2. If you want to buy a duplex, working with the right Realtor will help you get access to properties you either won’t find on your own, or would be missed by an agent who doesn’t specialize in duplexes and small multi family properties.
3. If you’re thinking of selling, but aren’t quite ready to stage your property or leave the duplex for showings, letting a Realtor who’s a duplex specialist know, and/or agreeing to do a “pocket listing” with her, may help you avoid the inconveniences altogether.
Let me know if you’re either in the market to buy a Minneapolis duplex or sell one. While values are nowhere near where they were in 2005-2006, the market is better than you think.
