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.
Comment
Let me be blunt.
The girlfriend who dumped you in college isn’t coming back. And your Minneapolis duplex is not worth what you paid for it in 2000-2006.
She doesn’t miss you as much as you imagine. And your duplex is not worth what you paid for it any other year plus the costs of the repairs and improvements you’ve made in the years since.
Odds are she’s gained weight and still wearing grunge wear anyway.
And odds are your duplex won’t be worth what you paid for it way back when any time in the near future either.
The duplex market, by all expert accounts, is a long way from getting back to where it was. Some economists think it may be as long as a decade.
Your duplex is worth what someone is willing to pay for it.
That value is determined by how much rent it’s generating, what expenses the owner incurs, location, condition, and what comparable duplexes in the area have sold for.
That’s true today, and it will be tomorrow, next month, next year, and 20 years from now.
If you’re a duplex owner thinking of selling, the question you have to ask yourself is this; what will my life be like for the next decade if I wait for the market to possibly rebound?
If you don’t like your answer, call me and I’ll help you determine whether there’s a way out.
And if you don’t mind owning your duplex for the long haul, remember, the best way to keep your options open (and property value up) is to keep your rents near market value, your property in excellent condition, and your expenses down.
That way, even if life forces you to change your mind five years from now, you stand the best possible chance of getting the highest value the market will bear for your duplex.
As for the dating problem, well there’s always Match.com.
Comment
If the first time and repeat buyer tax credits were a housing party, then it’s fair to say the post tax credit hangover continued in the Twin Cities housing market for the week ending August 7.
Pending sales of single family homes continued stay in bed; down 36.5 percent from their mark one year ago.
With fewer sales, it’s natural that the amount of inventory would continue to swell. In fact, there are 7.4 percent more homes available for sale than there were last year at this time. This month, there will be 8.64 homes available for every buyer in the marketplace. Last year, there was an average of just 5.28 for each buyer to choose from.
Duplex sales fared no better, with week over week sales dropping 25.6 percent from their 2009 mark. Of those duplex houses went under contract, just 13.79 percent were offered by traditional sellers. While this is an improvement over the 10.26 percent sold by parties other than banks for the same week last year, neither number is reason to celebrate.
However, it could be argued that the $118.224 average off market price for the pended sales is an improvement over last year’s sold price of $86,334, neither number is worthy of a party announcement.
Unlike single family homes, new duplex and small multi-family listings were down year over year by 31.8 percent.
While less inventory should ultimately put upward pressure on prices, and 7 percent more of the week’s new listings were offered by traditional sellers than last year’s figures, we’re a long way from anything resembling either price stability or appreciation.
Comment
It’s easy to blame a long holiday weekend for many things: weight gain, too much shopping, and, even, perhaps, a case of sagging Minneapolis duplex sales.
Pending sales for the week ending November 28 dropped 27.5 percent from their mark for the week one year ago.
This slowing in transactions also resulted in a slightly lower average off market price of $117,776, compared with last year’s sold price of $120,363. The good news is traditional sellers accounted for 20 percent of the properties that left the active roster this year, compared with just 13.79 percent one year ago.
Another encouraging sign is the trickle of new inventory coming on the market.
New listings for the week dropped 52 percent, meaning there are increasingly fewer properties for buyers to choose from. Of this new inventory, 38 percent was offered by traditional sellers. This represents a radical shift from last year, when 91 percent of the properties new to the market were lender owned or mediated.
The holiday season distracts nearly everyone, so it’s unlikely we’ll be able to glean any sort of real market knowledge until the new year.
Comment
The other day a seller received notice one of his tenants is moving out. As his property is on the market, he asked whether it was more advantageous to a sale for the unit to be vacant or full.
The answer is full.
But isn’t it easier to show the property with no one in it? Doesn’t it show better?
Yes.
However, the benefits of it being occupied far outweigh the consequences of a vacancy.
First, mortgage payments, taxes, insurance and utilities are all due whether the property is available for sale or not. As a result, it’s important the owner continue to generate revenue to cover those expenses.
Next, prospective buyers want to know not only that a property is appealing enough to attract tenants, but what the market value of that appeal is. If the rents are healthy, the property is a more desirable investment. The rents that are reflected on the MLS are therefore actual, not a fantasy concocted by the listing agent and seller.
Many buyers also like to know they are going to have a revenue-generating property the minute they take ownership. A 100 percent vacant duplex means a new owner has to scurry to fill two vacancies before the first mortgage payment comes due a month later.
What if a prospective owner wants to live in a tenant occupied unit? This takes some forethought, but if there’s a possibility you many sell your duplex some time in the future, it’s a good idea to have a clause in your lease stating the tenant agrees to vacate the property for an owner occupant provided they are given appropriate notice.
Of course, if your lease doesn’t have such a clause, you may need to visit with the residents to see if there’s an incentive that would entice them to move.
If they choose not to, the lease is a legally binding contract that both the seller and new buyer must honor.
Comment
There are two phrases I hear over and over again these days: “When will the market rebound?” and “I’m going to wait until it does to sell/buy.”
Whenever I hear these words I always wish I had an answer to the first, because it would also solve the last.
The trouble is, absolutely no one knows when the market will rebound.
I’ve recently been more optimistic about a recovery in light of the foothold I see traditional sellers gaining in the small multi-family sector.
However, yesterday an agent who works primarily with foreclosures told me he is managing over 100 properties for a single financial institution. These are foreclosed properties, sitting empty, and deliberately being withheld from the market by the lender.
If he has that many, how many more can there be?
If you look for housing rebound predicitons among economic prognosticators, you’ll see dates ranging from the fall of 2010 to some time in 2013 or 2014.
This would be in keeping with recent history. The Savings and Loan Crisis of the late 1980’s resulted in a real estate crash in many parts of the United States. And by most accounts, the recovery took from 1989 to 1995 or 1996. In other words, six or seven years.
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