Archive for August, 2009

Why Buying A FSBO Duplex Costs You Money

said on August 31st, 2009 categorized under: Buying A Duplex

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Pair of Owls standing on a For Sale sign.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?


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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saving moneyThe closer we get to the December 1 deadline for the $8000 first time home buyer tax credit, the more complicated the questions about it get.

Today I had to explore whether or not having a co-signor on a loan for a Minneapolis duplex who already owns a home would disqualify the buyer from earning the tax credit.

And the answer is no.

According to the Federal Housing Tax Credit web site, unmarried joint purchasers may allocate the credit to the party who qualifies for the credit.

In other words, if your parents are willing to help you obtain the loan, or you’re buying the duplex with a significant other who’s already owned a home, you can still obtain the $8000. One hundred percent of the credit can go to the partner who’s a first time buyer (whereas if both are first timers, it’s split down the middle).

Again, you simply can’t be married to your partner.

Hmm. There’s a reversal of benefits!


not soldOne 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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Minneapolis Duplex Sales Go To The Movies

said on August 25th, 2009 categorized under: Twin Cities Real Est


382px-Incredible_shrinking_womanRemember the movie The Incredible Shrinking Woman?

After being exposed to a mix of household chemicals, the lead character, played by Lily Tomlin, inexplicably begins to shrink. This, of course, baffles everyone involved.

Kind of like the Twin Cities housing market.

Amid reports of a glut of foreclosures on the horizon, and an uptick in foreclosure notices, the Minneapolis Area Association of Realtor’s Weekly Market Activity Report notes shrinkage.

For the week ending August 15, there were 25,765 active listings on the MLS; the least since 2005.

There were 1,630 new listings for the week; the fewest since 2002.

And, there were 1,026 signed purchase agreements; the most since 2005.

Over in the duplex and small multifamily market, new listings were down 42 percent from 2008. The percentage of those new listings that will involve a lender in the negotiations lost an inch as well, dropping 1.5 percent year over year.

Unfortunately, pending sales lost a little altitude also; experiencing a 35 percent decline week over week. While I can’t prove it statistically, I believe this may be a result of a lack of inventory for owner occupants to choose from.

While the average off market price for the week was a healthier $112,620, it still trails last years average sales price for the week which was $133,130.

The good news is the percentage of bank owned or lender mediated properties that left the market appears to be stabilizing; up just 1.7 percent over 2008.

We’ll hope for a growth spurt next week.

$8000 First Time Minneapolis Duplex Buyer Deadline Looms

said on August 24th, 2009 categorized under: tax credits


Cash for ClunkersOn my way in to the office, I pass several auto dealerships.

This morning, I couldn’t help but notice big rows of older cars line up along the back of the lots;  the clunkers brought in as the part of the government’s “cash for clunkers” program, which ends tonight.

There were a lot of them.

I wondered what the weekend was like for the car dealers; whether they’d had a chance to sleep or eat, and if they had a line of people waiting to talk with them.

And when I read Ken Harney’s column in the Washington Post questioning whether Congresss would extend the $8000 first time home buyer tax credit, I imagined a line of buyers at the door of local real estate broker’s offices as the November 30 deadline approaches.

There are 14 weeks left. As most real estate transactions take, on average, 45 to 60 days to close (six to eight weeks),  there are, for all intents and purposes, just six weeks to go.

I realize that sounds like a lot of time. However, anyone who’s been out there looking can tell you, good properties can be hard to find.

So will Congress extend the deadline like they did with the clunkers program? Hard to tell. They have plenty on their plate already when they return from summer break; including the not-so-small matter of  health care reform.

According to Harney, there are already bills pending in both the House and Senate to extend the credit for another year.

Meanwhile, Senators Christopher Dodd (D-Conn) and Johnny Isakson (R- Georgia) are co-sponsoring a bill that would eliminate the income restrictions on the credit, raise it to a maximum of $15,0000 and extend it to all home buyers.

It all sounds exciting. However, it’s important to remember the tax credit ultimately ends up costing the government lost revenue. As the federal budget is already deeply in the red, there may be more than a little resistance.

So are they going to extend or expand the credit?

Don’t count on it. It is Washington, after all.


adorable toddler boy with book on headI had someone ask the other day if a short sale is one that happens really fast.

It was a fair question. We’ve all had to add language to our vocabularies in recent years that we never thought we’d need.

But no, a short sale isn’t one that happens quickly. And it isn’t one that’s vertically challenged, either.

Rather, it’s one where the seller is unable to sell the home for what the lender is owed. In other words, the homeowner is “short” more than a few dollars, and needs to get the bank to agree to take less.

A Minneapolis duplex owner does not need to be delinquent in payments to be faced with a short sale.  Some people have to sell, regardless of market conditions.

And in today’s real estate market, the foreclosure down the street has negatively impacted the values of all of our properties. Simply put, the owner can’t get out of it what he has into it.

However, in the event a duplex owner is behind, a short sale is a better long term strategy than a full foreclosure.

While both a short sale and a foreclosure have a negative effect on a credit report, some sources report the ding is smaller with the former. Foreclosures may result in a credit score hit of 200-300 points, as may a short sale. However, some who’ve successfully sold their properties as a short sale are seeing less of an impact; in the 100-200 point range.

Perhaps the biggest benefit of selling a duplex as a short sale is it doesn’t haunt your credit as long as a foreclosure does. Thanks to new Fannie Mae guidelines, people faced with a short sale will be able to buy another home within two to three years.  Those who opt for foreclosure, however, may find themselves out of the housing market for a full five to seven years.

As always, it is important to seek legal and tax advice before making the decision to pursue either path. And in the event you do opt for a short sale, the importance of an experienced, tenacious Realtor can’t be underestimated.

Six Reasons It's A Great Time To Sell Your Duplex

said on August 20th, 2009 categorized under: Selling A Duplex


Property and house for sale concept 3d illustrationWell, there’s a headline I didn’t think I’d be writing any time soon.

So why is it a great time to sell?

If your expectations are realistic, here are six great reasons.

1. Shortage of Inventory – While it may seem as if there are a glut of “for sale” signs hanging in yards, the reality is, there are far less of them than there were this time last year. In fact, inventory on the MLS is down year over year by more than 20 percent. This means there are fewer properties for buyers to choose from (a phenomenon my clients and I are experiencing.)

2. Buyers With a Deadline – Thanks to the $8000 first time home buyer tax credit, buyers in the marketplace have to take title to a property no later than November 30, 2009.  This means they are extremely motivated, knowing full well they don’t have the luxury of time.

3. Short Sales Take Too Long – There are many lovely duplexes on the market right now that, were they not short sales, would be sold. The time between writing an offer on a short sale and successful negotiations with the bank is, more often than not, well over three months.

Of course, if a first time home buyer commits to buying a short sale duplex, she may or may not close in time for the tax credit. As a result, many buyers and their agents are reluctant to write offers on those properties.

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yesI saw a Oujia board in the closet of a foreclosure I showed recently.  I should have gone right out while I was thinking of it and bought one.

It might help me make sense of the numbers for Twin Cities duplex sales in the Market Activity Report for the week ending August 8.

The number of bank-owned listings new to the market dropped 20 percent from the same stretch last year. Whether this is a reflection of a shift in the market, or last winter’s foreclosure moratorium is a mystery.

Overall, the number of new listings for the week was down 15 percent.

The number of properties that received purchase agreements for the week was up 29 percent over last year. Unfortunately, the average off market price dropped from $147, 210 to a meager $88,021.39.

Both year’s transactions consisted of 89 percent lender-mediated sales.

MAAR reports that the single family housing market saw a 9.5 percent drop in new inventory for the week, while there were 15.2 percent more purchase agreements signed.

A balanced market occurs when there is a 5 month supply of inventory available. Right now, we have a 7.2 month supply; down 31.4 percent from the 10.5 month supply seen at this time last year.

Will things be different next week?

Ask the Ouija. Yes? Or no?

Why A Realtor Can't Find You A Duplex A Good Neighborhood

said on August 17th, 2009 categorized under: Buying A Duplex


graffiti460Clients often ask me what a neighborhood is like.

I would love to answer. But I can’t.

Federal and state fair housing laws prohibit Realtors from commenting on any sort of demographic information, whether it’s factual or perceptual.

Further regulations prohibit Realtors from engaging in anything that could resemble “steering”, which is a practice of directing a client toward or away from a property in any sort of discriminatory manor.

So, wink, wink, nudge, nudge, can’t I just give clients my opinion?


Not that I don’t have plenty of them.

But I try to base my opinions on facts, and when it comes to things like crime statistics and addresses of registered sex offenders, I don’t have them.

The police do.

And believe it or not, if you ask them their opinion of a given neighborhood or street, they will tell you. In fact, in the case of both Minneapolis and St Paul, the latest crime statistics are posted on their web sites.  If you’d like even more up-to-the-minute data, you can call and ask for the SAFE officer in the neighborhood police precinct.

If you look at the maps or call, you might be surprised.

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Minneapolis Duplex Buyers Can Now Put Less Down

said on August 14th, 2009 categorized under: Financing


declineThere was a quiet bit of good news for Minneapolis duplex buyers in the mortgage market this week.

PHH Home Loans and two of its mortgage insurance companies removed the “declining market” label from the Twin Cities.

For the last couple of years, lenders deemed a metropolitan area a “declining market” if the Federal Housing Finance Agency Home Price Index saw a slide in value of, basically, one percent or more. In other words, if the average home price drops, it’s a declining market.

Understandably, banks are reluctant to lend money on a duplex that’s going to be worth less money one year from now. As a result, if a property is in one of these markets, an appraiser may flag it as such. This has, has often resulted in owner occupant buyers who intended to use conventional financing being required to bring more money to closing table for a down payment.

This often meant a 20 percent down payment on the duplex they wanted to live in. Needless to say, this additional cash requirement was a deal breaker for many.

Big deal, right? Just use an FHA loan.

Well, remember those FHA red flags?

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