FixerUpperHome

Trying to decide whether to buy a fixer-upper house?

How to assess the cost of a fixer upper

Trying to decide whether to buy a fixer-upper house?  When you buy a fixer-upper house, you can save a ton of money, OR get yourself in a financial fix.

Follow these Seven Steps, and you’ll know how much you can afford, how much to offer, and whether a fixer-upper house is right for you.

1.  Decide what you can do yourself.

TV remodeling shows make home improvement work look like a snap. In the real world, attempting a difficult remodeling job that you don’t know how to do will take longer than you think and can lead to less-than-professional results that won’t increase the value of your fixer-upper house.

  • Do you really have the skills to do it? Some tasks, like stripping wallpaper and painting, are relatively easy. Others, like electrical work, can be dangerous when done by amateurs.
  • Do you really have the time and desire to do it? Can you take time off work to renovate your fixer-upper house? If not, will you be stressed out by living in a work zone for months while you complete projects on the weekends?

2.  Price the cost of repairs and remodeling before you make an offer.

  • Get your contractor into the house to do a walk-through, so he can give you a written cost estimate on the tasks he’s going to do.
  • If you’re doing the work yourself, price the supplies.
  • Either way, tack on 10% to 20% to cover unforeseen problems that often arise with a fixer-upper house.

3.  Check permit costs.

  • Ask local officials if the work you’re going to do requires a permit and how much that permit costs. Doing work without a permit may save money, but it’ll cause problems when you resell your home.
  • Decide if you want to get the permits yourself or have the contractor arrange for them. Getting permits can be time-consuming and frustrating. Inspectors may force you to do additional work, or change the way you want to do a project, before they give you the permit.
  • Factor the time and aggravation of permits into your plans.

4.  Double-check pricing on structural work.

If your fixer-upper home needs major structural work, hire a structural engineer for $500 to $700 to inspect the home before you put in an offer so you can be confident you’ve uncovered and conservatively budgeted for the full extent of the problems.

Get written estimates for repairs before you commit to buying a home with structural issues.

Don’t purchase a home that needs major structural work unless:

  • You’re getting it at a steep discount
  • You’re sure you’ve uncovered the extent of the problem
  • You know the problem can be fixed
  • You have a binding written estimate for the repairs

5.  Check the cost of financing.

Be sure you have enough money for a down payment, closing costs, and repairs without draining your savings.

If you’re planning to fund the repairs with a home equity or home improvement loan:

  • Get yourself pre-approved for both loans before you make an offer.
  • Make the deal contingent on getting both the purchase money loan and the renovation money loan, so you’re not forced to close the sale when you have no loan to fix the house.
  • Consider the Federal Housing Administration’s Section 203(k) program, which is designed to help home owners who are purchasing or refinancing a home that needs rehabilitation. The program wraps the purchase/refinance and rehabilitation costs into a single mortgage. To qualify for the loan, the total value of the property must fall within the FHA mortgage limit for your area, as with other FHA loans. A streamlined 203(k) program provides an additional amount for rehabilitation, up to $35,000, on top of an existing mortgage. It’s a simpler process than obtaining the standard 203(k).

6.  Calculate your fair purchase offer.

Take the fair market value of the property (what it would be worth if it were in good condition and remodeled to current tastes) and subtract the upgrade and repair costs.

For example: Your target fixer-upper house has a 1960s kitchen, metallic wallpaper, shag carpet, and high levels of radon in the basement.

Your comparison house, in the same subdivision, sold last month for $200,000. That house had a newer kitchen, no wallpaper, was recently recarpeted, and has a radon mitigation system in its basement.

The cost to remodel the kitchen, remove the wallpaper, carpet the house, and put in a radon mitigation system is $40,000. Your bid for the house should be $160,000.

Ask your real estate agent if it’s a good idea to share your cost estimates with the sellers, to prove your offer is fair.

7.  Include inspection contingencies in your offer.

Don’t rely on your friends or your contractor to eyeball your fixer-upper house. Hire pros to do common inspections like:

  • Home inspection. This is key in a fixer-upper assessment. The home inspector will uncover hidden issues in need of replacement or repair. You may know you want to replace those 1970s kitchen cabinets, but the home inspector has a meter that will detect the water leak behind them.
  • Radon, mold, lead-based paint
  • Septic and well
  • Pest

Most home inspection contingencies let you go back to the sellers and ask them to do the repairs, or give you cash at closing to pay for the repairs. The seller can also opt to simply back out of the deal, as can you, if the inspection turns up something you don’t want to deal with.

If that happens, this isn’t the right fixer-upper house for you. Go back to the top of this list and start again.

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The 10-Step Guide for Home Buyers

find-your-dream-home-contemporary-luxury-dream-homes-lrg-73e8ddbd090c983cThe 10-Step Guide for Home Buyers

Buying a home may be the most complicated financial process of your entire life. Luckily, we’ve broken it down into 10 straightforward steps:

  1. Are you ready to become a homeowner?

Whether you’re becoming a homeowner for the first time or you’re a repeat buyer, buying a house is a financial and emotional decision that requires the experience and support of a team of reliable professionals.  Greg Lucado, Realtor® and the NextHome TwoFourFive family of Realtors® are ready and able to guide you through this important process!

 

  1. Choose Greg Lucado, Realtor® at NextHome TwoFourFive

There are two types of real estate agents.  A selling agent and a buyer’s agent.  It is very important that you work with a Realtor® who can look out for YOUR BEST INTEREST.  As a home buyer, you will want to be represented and advised throughout this legal transaction by a Realtor® as a buyer’s agent.  There is generally no cost to the home buyer for representation however, it will cost a home buyer greatly if you are unrepresented.  In the maze of forms, financing, inspections, marketing, pricing, and negotiating, it makes sense to work with Greg Lucado a local professional Realtor® serving Central Virginia who specializes in contract negotiation, knows the community and much more.

  1. Get a mortgage pre-approval

Most first-time buyers need to finance their home purchase, and a consultation with a mortgage lender is a crucial step in the process. Find out how much you can afford before you begin your home search.  Greg Lucado, Realtor® will provide you with a list of local lenders with proven track records of great service.  The prequalification process is quick and easy, and finding the right lender can be stress free with the right help.  You will be in close contact with your lender throughout your home buying experience, so finding a knowledgeable lender who knows our local real estate market and your goals is important.

  1. Look at homes

Educating yourself on your local real estate market is the key to success.  A quick home search on our site www.GregLucado.com will bring up thousands of homes for sale, but finding the perfect home for you will require some research.  Greg Lucado, Realtor® will be able to share his knowledge of our local real estate market and work closely with you to narrow your search based on your priorities to make an informed decision on which home to choose.

  1. Choose a home

While no one can know for sure what will happen to housing values, if you choose to buy a home that meets your needs and priorities, you’ll be happy living in it for years to come.

  1. Get funding

The cost of financing your home purchase is usually greater than the price of the home itself (after interest, closing costs, and taxes are added). Get as much information as possible regarding your mortgage options and other costs.  Having Greg Lucado, Realtor® along the way will take the mystery out of your journey.

  1. Make an offer

While much attention is paid to the asking price of a home, a proposal to buy includes both the price and terms. In some cases, terms can represent thousands of dollars in additional value—or additional costs—for buyers.  Putting together the best package possible in your offer to buy your home is critical.  Considering all of the costs involved, Greg Lucado, Realtor® will ask the right questions that are important for you to and engage in contract negotiation to “win” the deal that works for you.

  1. Get insurance

No sensible car owner would drive without insurance, so it figures that no homeowner should be without insurance, either. Real estate insurance protects owners in the event of catastrophe. If something goes wrong, insurance can be the bargain of a lifetime.

  1. Closing

The closing process, which in different parts of the country is also known as “settlement” or “escrow,” is increasingly computerized and automated. In practice, closings bring together a variety of parties who are part of the real estate transaction.  Greg Lucado, Realtor®  will recommend closing companies, or settlement companies that will be the best fit for your situation and he will work closely with them to keep the communication flowing.

  1. What’s next?

You’ve done it. You’ve looked at properties, made an offer, obtained financing, and gone to closing. The home is yours.  The home is yours…..  Fast, Fair and Hassle Free….  Now it’s time to begin life in your new home and with Greg Lucado, Realtor®, the memories created are just the beginning in realizing your dreams.

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Direct# (434)546-9189

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