When you sell a duplex in Minneapolis, St Paul, or any other location, most buyers make the purchase of your property contingent upon their ability to obtain financing.
In other words, if they can’t qualify for a loan under the terms they outline, then they are not obligated to buy your duplex. (Of course, cash buyers don’t need a loan.)
However, it’s important to note that the financing contingency doesn’t mean only the buyer needs to be able to borrow the money. It also means your duplex needs to qualify too.
Before any bank will lend property on a Minneapolis duplex, they send out an appraiser. This is someone they hire (using the buyer’s money) to give them an independent opinion of value on the property.
Back in the real estate boom, this figure was often higher than the amount the seller agreed to sell the duplex for, which meant, theoretically anyway, the buyer immediately made money through equity.
These days, however, exactly the opposite is true. More and more duplex sellers are discovering appraisers, and therefore, the buyer’s bank, doesn’t think their property qualifies to be sold for as much money as is on the purchase agreement.
In other words, the bank sends the message to the buyer of “We think you’re paying too much.”
And, after seeing the appraisal, the buyer always tends to agree.
Duplex values are determined by a couple of things; the amount of rent they generate, and, more importantly, how much similar properties in the immediate area have sold for.
While duplexes that were sold as short sales or foreclosures are not supposed to be compared to those offered by traditional sellers, appraisers often must include them simply because there isn’t anything else. And while appraisers do take this into consideration, sometimes they simply aren’t generous enough in atoning for the discount found in distressed duplexes.
Unfortunately, as a duplex seller, you are left with very few choices. You can find a buyer using conventional financing who is willing to pay more, you agree to sell the property to the original buyer for the appraised value, or you can simply remove it from the market and wait for real estate prices to go up.
It could be a long wait.