Not Just “Location, Location, Location”
Twin Cities home Buyers (and readers of this blog) know that multiple offers are back, big-time, this year.
But not everywhere, or for every property type or at every price point.
So, what makes for a sure-fire bidding war, like the one that just erupted at 4340 Colfax Avenue South?
A bank foreclosure just northeast of Minneapolis’ Lake Harriet, it reportedly received more than 15(!) offers the first week it came on the market in early June, and is now “Pending” on MLS.
TWO Ingredients (Not Just Location)
Surprise, surprise: the first and most important ingredient for multiple offers is still “location, location, location”: in this case, a high-demand neighborhood just two blocks to Minneapolis’ Lake Harriet and the beautiful Lyndale Park Rose Garden.
So, what is ingredient #2?
Actually, make that ingredients #2a, #2b, and #2c.
The first dimension of price is absolute price: in general, Twin Cities homes under $300k or so have seen the strongest demand because — thanks to absurdly low interest rates — they’re within reach of first-time Buyers (especially true for two-earner households).
That’s significant because such Buyers don’t first have to sell.
Unlike so-called “move-up” Buyers who may have little or no equity — or negative equity in the case of underwater homeowners — first-time Buyers have a clean slate.
Not only that, but first-time Buyers who are now renting have seen a one-two punch of limited supply and rising rates in nicer parts of the Twin Cities this year (if not the entire area).
Translation: they’re motivated!
“Ingredients #2b and #2c”
So, what are the other two dimensions of price?
“List price” and what I’ll call “relative” or “contextual price.”
By list price, I mean, “how well-priced is the home in question?”
Although I don’t attach inordinate significance to a home’s tax assessed value . . . it’s a start.
In this case, the tax assessed value, $385,000, is a whopping $125,000 — or almost 50% above — the home’s $259,900 asking price.
Not coincidentally, it turns out that $385k is also what the last Buyer (and the one who lost it to the bank) paid for it five years ago.
While the “Agent Remarks” field on MLS indicates that the home is being sold “As is,” and the Buyer is to “assume any R&R’s” (repair or replace items, per the Minneapolis Truth-in-Sale-of Housing inspection), the online photos suggest that the home’s in good shape, and it’s of a vintage — early ’20’s stucco bungalow — usually associated with solid construction.
The asking price is cheap.
Which leaves “contextual price” — the home’s price relative to the value of nearby homes, and the desirability of the surrounding area.
If you don’t know Minneapolis, let me put it this way: lakes are to Minneapolis what Central Park is to Manhattan.
In particular, the homes on and near Lake Harriet (as well as Calhoun, Cedar, and Lake of the Isles) command a huge premium.*
In fact, between 43rd and Colfax and the lake are homes ranging in price from $300k to more than $2 million!
Bottom line: when Buyers see a chance to buy a cheap home on an expensive block in one of the most desirable neighborhoods in the Twin Cities . . . they go for it!
The kind of feeding frenzy that just took place on Colfax.
*If you happen to live on (or near) another Minneapolis Lake — Grass, Brownie, Nokomis, Diamond, etc. — don’t worry, your home commands a premium, too — just not as much.