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I have to confess, I love it when I’m right about Minneapolis duplex sales.
Especially when they’ve gone missing.
You see, all year, I’ve been complaining– well, you might actually call it whining– about the lack of duplexes for sale here in the Twin Cities.
Every week it seems there are fewer new listings than there were during the same week the year before.
For the week ending December 3, 2011, for example, there were just 23 duplexes, triplexes and four unit apartment buildings that came on the Minneapolis and St Paul market.
Compare that with 36 during the same week in 2010.
Of the week’s new listings, 52.2 percent were offered for sale by traditional sellers. Last year, just 27.7 percent of the new listings were.
If you think these weekly drops of 10 – 15 new listings don’t add up, consider this: in 2010, there were 2,320 duplexes made available for sale in the seven county metro area.
To date in 2011, there have been 1572. That’s a decline in inventory of 32.2 percent.
And I don’t know about you, but I personally don’t think there are going to be 800 new listings between now and year’s end.
The week after Thanksgiving saw 20 duplex sellers receive and accept purchase agreements. Of these, just 15 percent were traditional sellers with equity in their investment property.
Last year, that weekly figure stood at 22 purchase agreements, with 36.5 percent of them signed by duplex owners with equity.
The average price the week’s duplexes left the market at was $144,180. While this is sure to drop when sold prices are reported, it is, nonetheless, significantly higher than the $110,200 sold price of last year’s group.
Of course, it isn’t just duplex inventory that’s down. The single family home sector also saw a 9.3 percent decline in new listings. Meanwhile, pending sales were up 36.4 percent over the year before.
If you’re thinking of selling in the spring, don’t wait. Right now, there’s clearly little to no competition for your Minneapolis duplex!
Comment
On the surface, it doesn’t seem like the holidays would be a great time to sell your Minneapolis duplex. And yet, nothing could be further from the truth.
Especially this year.
Here are 10 reasons to sell your duplex during the holidays:
- Duplex inventory is down. While this is generally true during the holiday season, as has been noted here, the Minneapolis duplex market is currently in dire need of inventory. In short, you have less competition.
- People looking to buy in the winter are serious. Come on, would you put on your parkas, boots or snowshoes to go look at property if you weren’t determined to buy?
- Many duplex investors and owner occupants buy at year’s end for tax reasons.
- If you close on the sale of your duplex early in the year (2012) and are facing tax consequences as a result, you have the rest of the year to come up with strategic ways to reduce your obligations.
- January is typically the biggest transfer month. Many corporations move employees to new locations at the start of the calendar year. These buyers are motivated to buy and get settled before starting their new jobs.
- Fewer buyers mean fewer showings. While this may sound like a bad thing, your duplex tenants will be disrupted less for showings and when they are, you will know it is so a motivated buyer can look at the duplex.
- Buyers have more time to shop during the holidays. Motivated buyers spend days off with a Realtor, looking for duplexes. While most of the year this consists of weekends, during the holidays, it’s the down time between Christmas and New Year’s.
- Your duplex looks better during the holidays. Whether you owner occupy your duplex, or have it as an investment property, tenants decorate for the holidays, which helps your units show better.
- You may net more for your duplex, as you have less competition in the marketplace.
- You can sell in the winter, and buy in the spring. While holiday duplex buyers don’t have much to choose from, sellers who want to reinvest can feel confident they will find more opportunities to do so as the spring market heats up.
Call me if you’re thinking about selling your duplex. Doing so might be the best holiday gift you get this year!
Comment
No matter how long I work in the real estate investment and duplex sales, I am always surprised by duplex sellers who want to price their property according to “what they’ve got into it”.
They’ll say things to me like, “Well, I paid $300,000 for it ten years ago, and I put new boilers in last year. That cost $12,000. And I put a roof on the year before that, which was another $7500. And I’ve gotta pay the Realtors, and, well, I’d like to put a little something in my pocket…so adding it all up, I guess I’d want $375,000.”
Duplex pricing just doesn’t work like that.
After all, when’s the last time you bought a duplex without a roof? What’s a duplex worth that doesn’t have a source of heat?
Pricing a duplex according to what you’ve got into it is a little like replacing the alternator on your car and tacking the cost on to whatever the value is according to the Kelly Blue Book.
You would just never do such a thing.
After all, the Blue Book values are determined by what the market has been willing to pay for cars comparable to yours.
It’s assumed all of those vehicles came with things like alternators, transmissions and tires.
Kind of like duplex values (unless a condemned or seriously distressed property) are determined by similar properties in the neighborhood that have sold– and included the cost of shingles and heat.
A duplex isn’t worth what you’ve got into it.
It’s worth what the market says it is.
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In the last several weeks, I’ve had several buyers and sellers ask me to give up all or part of my previously agreed upon commission on a duplex sale so they can either pay less or net more.
My answer was “no”.
Yes, real estate commissions are negotiable.
And I realize every get rich quick real estate seminar or web site encourages you to ask your Realtor to financially contribute to the sale. After all, the thinking goes, you’re going to be giving that agent “so much business” they’ll be glad to trade hundreds or thousands of dollars for the opportunity of your continued loyalty.
Besides, Realtors make so much money, they can afford to give up some or all of their commission, right?
Wrong.
In 2010, the average income for a Realtor was $34,100. This was down 4.5 percent from the average Realtor income in 2009.
Compare this to 2002, when the average Realtor earned $52,100; 34.7 percent than they do almost a decade later!
And that figure includes agents who’ve been working selling duplexes and homes for more than two years.
Realtors who’ve been in the business two years or less earned, on average, $8900.
Out of that income, Realtors pay for gas, car insurance, desk fees, errors and omissions insurance, marketing of their listed properties, mandatory continuing education, MLS dues, cell phone and Internet bills, open house signs, the installation of signs in yards, and a thousand other expenses associated with running a business.
All of this in the worst housing market in decades.
I absolutely love what I do. And I am happy to work long hours for clients who see the value in what I do; whether it be finding them a non-MLS duplex that suits their needs, or guiding them through the complicated process of a short sale.
But unfortunately, Duplex Chicks have bills to pay too.
Comment
The other day a prospective Minneapolis duplex seller suggested we just throw his property on the market at the price he “needs” to see if someone will just make him an offer.
The funny thing is, when you list your duplex for sale, most buyers think the price you list it at is what you truly want for it.
And if that number doesn’t make sense– as in it’s way out of line with what other properties are selling for– they won’t waste their time looking. Especially if it’s as much as $100,000-$150,000 above current market value.
Most duplexes and investment properties are presently selling for within 10 percent of the price they’re originally put on the market for. Therefore, a buyer has no reason to sincerely believe he or she will be able to purchase the property from you at present market value, which may be 30, 40 or 50 percent lower than the amount you “need”.
Here are the facts. If you purchased any kind of property after the year 2000, it’s probably worth considerably less than what you paid for it.
Or, if you’re a duplex owner who refinanced and took equity out of the property to pay off credit cards, buy another property, or go on vacation, odds are you owe more than the property’s worth.
And that stinks.
But today’s duplex buyer is unwilling to compensate you for that loss.
Here’s another fact. Putting a Minneapolis duplex on the market “just to try it”, costs your Realtor money. Marketing costs, like hiring a professional photographer, designing and printing brochures, paying a company to install ”for sale” signs the agent bought, gas, insurance, licensing fees, and so forth, are all up front costs your Realtor pays.
Even if your duplex doesn’t sell.
And in today’s Minneapolis duplex sales environment, where Realtors are working harder and longer hours, often for less pay, there aren’t many of us willing to give you a “free loan” of “let’s just see” marketing money.
Comment
Have you ever noticed that many Minneapolis duplexes sell for as much as a fourplex?
Why? After all, if there are more people paying rent, shouldn’t the property be worth more?
Not necessarily.
See it all boils down to that law we all learned in our first economics class: the law of supply and demand.
There are simply more prospective buyers for duplexes than there are for four unit buildings.
In the years I’ve been a Realtor, I would say that on average, at least 50 percent of the duplex buyers I’m working with at any given time are owner occupants.
Some are looking as a duplex as an affordable way to move into a neighborhood that’s out of their price range as single family home buyers.
Others are looking to owner occupy the property for a time, before moving on to a single family home while keeping the duplex as an investment.
While the prospect of having a single tenant to manage is palatable to most of these owner occupants, the idea of having three sets of tenants to respond to is overwhelming.
As a result, these owner occupants tend to relegate themselves to duplexes, where they compete with investors who are simply looking to earn a specific rate of return on a property.
More buyers in the market for a property always results in a higher price.
Comment
The other day a familiar duplex came on the market.
For the second summer in a row.
It’s a well-maintained property in a sought-after pocket of Minneapolis. As those kinds of properties are somewhat rare, I was happy to see it on the market again; this time at a price that makes more sense.
The irony is, a client of mine wrote an offer on this property last summer; at a number within negotiating distance of the price it’s listed at now.
The trouble is, my buyer bought a different duplex last summer.
And this year, that lovely duplex will likely generate an offer not too different from the one my clients wrote one year ago.
So, what’s the seller out?
A year of property taxes, insurance, maintenance expenses, water bills and the time and effort spent managing the property; all spent during a year they wanted to be done owning a duplex.
A year of lost time and effort to achieve exactly the same result.
I can’t think of a better way to illustrate the importance of pricing a property correctly the first time it hits the market.
After all, no amount of market recovery will ever reimburse you for lost time.
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Thank God that shipment of newly listed single family homes and duplexes hit the market just in time for the expiration of the first time and repeat buyer tax credits.
I’m being sarcastic, of course.
But with 2,147 new single family listings for the week ending April 24, representing an increase of 19.1 percent over last year, and duplex and multifamily listings up 32.7 percent year over year, it does appear sellers were rushing to get their properties on the market before the incentives ended.
Traditional sellers represented a clear majority of the new to market duplexes, with 60,9 percent of the new listings. This represents a significant jump from last year’s 21.2 percent market share.
Of the multifamily properties that received purchase agreements over the week, 38 percent were offered by traditional sellers. While not the majority of the transactions, this figure nonetheless represents healthy improvement over last year’s 7.9 percent.
This increase in traditional seller market share may also account for the average off market price of $155,428 compared to $88,026 for the same week last year.
Have the tax credits had an impact? We won’t know until the numbers for last week come in, but pended single family home sales for the week were up 9.8 percent over the same stretch last year.
Guess we’ll have to wait until next week’s report to see if sellers, as well as buyers, benefited from the tax credit’s end.
Comment
As the $8000 first time home buyer and $6500 repeat buyer tax credits round the bases for home, the Twin Cities housing market appears to be staging a late inning rally.
For the week ending April 10, 2010, the number of new listings to hit the market was up 47.9 percent over the same week last year. In spite of this leap, there is still just 6.5 months of housing inventory in the marketplace; the lowest supply in years.
Pending sales were also ahead of last year, though the 3.6 percent jump wasn’t enough to seal a victory.
Meanwhile, the Twin Cities duplex market seems to need a seventh inning stretch. The number of properties to receive purchase agreements for the week was down 39 percent from last year. Of those transactions, 32 percent belonged to traditional sellers, with the balance involving some sort of negotiations with a lender.
This slow re-emergence of the traditional seller has served to boost the average price a property leaves active status on the MLS at. For the week, this figure was $106,489; a grand slam when compared with last year’s $80,873.
While excess supply can often lead to falling prices, the week’s 23 percent year-over-year gain was as welcome as a seventh inning stretch. Much of the existing inventory had been sitting for a while, and the appearance of great new listings gave duplex buyers in search of a tax credit something to cheer.
Remember, the deadline for both tax credits is April 30. By then, buyers must have a signed purchase agreement in place, with closing on the property occuring no later than the end of June.
said on April 19th, 2010 categorized under: Tenants
Comment
We’re living in economically challenging times.
As a result, most of us are cutting back on “extras”. For some, that means opting to stay home and watch cable rather than going out. To others, that may mean choosing to make a peanut buttersandwich rather than bologna.
Unfortunately, for some tenants, that also means going without renter’s insurance.
First, if you’re a landlord and your lease doesn’t include language clearly stating that it’s your tenant’s responsibility to get insurance for her belongings, it should.
The reason is your owner’s insurance policy doesn’t cover the contents of your duplex.
In other words, if a fire, tornado, hurricane or earthquake topples your property, your losses may be covered, but your tenants belongings.
Most major insurance companies, like Allstate, Geico and State Farm offer some form of renter’s insurance.
While you must tell your tenant of their obligation to buy coverage, it’s a good idea to require them to provide you with proof they’ve done so.
After all, times may be hard but they’d be tougher still if you lost absolutely everything and didn’t have insurance.
