Finding a good deal in Minneapolis and St. Paul
With properties priced at levels last seen in 2001 and 2002, pretty much everything in the Twin Cities is a bargain right now, Minneapolis real-estate agent Michael Sharp says. And buyers know it.

Inventory has dropped to about a four-month supply in the metro area, he says, and buyers are starting to get motivated as they realize that good homes are going quickly. Nationally, there was a 6.2-month supply in December, according to the National Association of Realtors.

St. Paul agent Teresa Boardman says that the number of buyers decreased last year along with inventory, but that's starting to change. "You would think (houses would) be flying off the shelves and prices would go up, but they really haven't gone up," she says. "Now we're finally starting to see more buyer activity. Going forward, maybe prices will go up."

Boardman says the best bargains she has seen in St. Paul are downtown, where new construction came online at about the time the housing market crashed. Some of those condos are now in foreclosure, and Boardman says you can find some for $35,000 to $40,000. A buyer could turn around and rent out one of those condos for upward of $800 a month.

"For something you could buy for that much and get that for rent, that would be where I would go," she says.

She warns buyers to review the financial statements for a building before buying a condo: "Don't buy a condo in a building that has too many foreclosures in it," she says.

The best deals in St. Paul outside of downtown also tend to be foreclosures, which along with short sales make up around 40% of sales in the Twin Cities. Those deals are not concentrated in any one area, Boardman says, so a buyer can find a good deal in almost any area of town.

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For first-time buyers, she recommends the Como Park area, Cherokee Heights, the West Side and the West Seventh neighborhood. Those areas have good prices on homes that won't need much work.

For buyers who can handle a fixer-upper, there are plenty from which to choose. But Boardman says agents must do a lot of work educating buyers on what it takes to purchase a fixer-upper. "You can't buy a house that's falling in and move in and fix it up," she says. "But if you have the resources or are a general contractor, you absolutely can find bargains."

Over in Minneapolis, fixer-uppers aren't staying on the market for long, Sharp says. Investors and cash buyers are pouncing on them.

Many of those fixer-uppers are in the Camden area in north Minneapolis, which was hit hard by foreclosures. But Sharp says that residents are working hard to rebuild and that the city is trying to increase the number of owner-occupants there. "The city will have someone that comes in, buys (homes) and fixes them up and sells them to first-time buyers," he says. "That helps everybody all the way around. It strengthens the neighborhood to have families that care about the neighborhood."

For first-time buyers looking for attractive pricing, he recommends northeast Minneapolis, including parts of Nokomis, and some areas of south Minneapolis, including Longfellow. The Calhoun Isles area has deals for buyers in a little higher price range, he says.

He says buyers must realize that homes are generally priced correctly and that Minneapolis is not as cheap as they might think. "When people come here, they think Minneapolis is such a deal, and they expect prices to be a lot less," he says. "We're priced the same as Chicago. I hear that a lot."

He's not far off. According to the NAR, the median sale price of an existing single-family home in the Minneapolis metropolitan area was $160,300 in the third quarter of 2011, compared with $187,700 in the Chicago area. It's not an all-encompassing measure,  because both cities have a large number of condos, but it gives you an idea.

Sharp says most sellers are already at their bottom line, and buyers risk offending them with a ridiculously low offer. "Buyers will still come in and want to haggle, but they're just not going to get the deals they're thinking," he says.

He says a recent $475,000 listing got two offers — one for $385,000 and the other for $450,000. Guess which one the seller took seriously.

"Some buyers are getting it, and some don't quite get it," he says. "Buyers that get it are the ones that are getting the homes."

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Winter home-shopping tips
Just in case the Twin Cities finally see the winter they are famous for, Sharp has a few tips for winter home shopping:

  • Wear boots that slip on and off easily; most sellers want you to remove your shoes.
  • Allow more time to get around.
  • Look at homes during daylight hours.
  • Make sure you get a quality home inspection, because it's hard to tell if there is a roof problem when the roof is covered in snow.