How to Assess the Real Cost of a Fixer-Upper House

How to Assess the Real Cost of a Fixer-Upper House
Article From BuyAndSell.HouseLogic.com
By: G. M. Filisko
Published: August 24, 2010
When you buy a fixer-upper house or Grand Junction Foreclosure, you can save a ton of money, or get yourself in a financial fix.
Trying to decide whether to buy a fixer-upper house? 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. Doublecheck 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 downpayment, closing costs, and repairs without draining your savings.

If you’re planning to fund the repairs with a home equity (http://www.houselogic.com/articles/consider-home-equity-line-of-credit/) 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 (http://www.hud.gov/offices/hsg/sfh/203k/203kmenu.cfm), 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.
More from HouseLogic
What you need to know about foundation repairs (http://www.houselogic.com/articles/what-you-need-know-about-foundation-repairs/)

Budgeting for a home remodel (http://www.houselogic.com/articles/budget-for-remodel/)

Tips on hiring a contractor (http://www.houselogic.com/articles/five-essential-questions-ask-before-hiring-contractor/)
Other web resources
This Old House remodeling cost estimates (http://www.oldhouseweb.com/how-to-advice/estimated-remodeling-and-repair-costs.shtml)

G.M. Filisko is an attorney and award-winning writer whose parents bought and renovated a fixer-upper when she was a teen. A regular contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Grand Junction Homes For Sale

When looking for Grand Junction Homes for Sale there are many ways to search.  The easiest is via a web based Grand Junction MLS search site such as the one provided by the Real Estate Diva Team.

For more info contact:

By Andrea Haitz
Google
Real Estate Diva Team
970-201-3578

Take the Stress Out of Homebuying

Buying a home should be fun, not stressful. As you look for your dream home, keep in mind these tips for making the process as peaceful as possible.

1. Find a real estate agent who you connect with. Home buying is not only a big financial commitment, but also an emotional one. It’s critical that the REALTOR® you chose is both highly skilled and a good fit with your personality.

2. Remember, there’s no “right” time to buy, just as there’s no perfect time to sell. If you find a home now, don’t try to second-guess interest rates or the housing market by waiting longer — you risk losing out on the home of your dreams. The housing market usually doesn’t change fast enough to make that much difference in price, and a good home won’t stay on the market long.

3. Don’t ask for too many opinions. It’s natural to want reassurance for such a big decision, but too many ideas from too many people will make it much harder to make a decision. Focus on the wants and needs of your immediate family — the people who will be living in the home.

4. Accept that no house is ever perfect. If it’s in the right location, the yard may be a bit smaller than you had hoped. The kitchen may be perfect, but the roof needs repair. Make a list of your top priorities and focus in on things that are most important to you. Let the minor ones go.

5. Don’t try to be a killer negotiator. Negotiation is definitely a part of the real estate process, but trying to “win” by getting an extra-low price or by refusing to budge on your offer may cost you the home you love. Negotiation is give and take.

6. Remember your home doesn’t exist in a vacuum. Don’t get so caught up in the physical aspects of the house itself — room size, kitchen, etc. — that you forget about important issues as noise level, location to amenities, and other aspects that also have a big impact on your quality of life.

7. Plan ahead. Don’t wait until you’ve found a home and made an offer to get approved for a mortgage, investigate home insurance, and consider a schedule for moving. Presenting an offer contingent on a lot of unresolved issues will make your bid much less attractive to sellers.

8. Factor in maintenance and repair costs in your post-home buying budget. Even if you buy a new home, there will be costs. Don’t leave yourself short and let your home deteriorate.

9. Accept that a little buyer’s remorse is inevitable and will probably pass. Buying a home, especially for the first time, is a big financial commitment. But it also yields big benefits. Don’t lose sight of why you wanted to buy a home and what made you fall in love with the property you purchased.

10. Choose a home first because you love it; then think about appreciation. While U.S. homes have appreciated an average of 5.4 percent annually over from 1998 to 2002, a home’s most important role is to serve as a comfortable, safe place to live.

Does Moving Up Make Sense?

These questions will help you decide whether you’re ready for a home that’s larger or in a more desirable location. If you answer yes to most of the questions, it’s a sign that you may be ready to move.

1. Have you built substantial equity in your current home? Look at your annual mortgage statement or call your lender to find out. Usually, you don’t build up much equity in the first few years of your mortgage, as monthly payments are mostly interest, but if you’ve owned your home for five or more years, you may have significant, unrealized gains.

2. Has your income or financial situation improved? If you’re making more money, you may be able to afford higher mortgage payments and cover the costs of moving.

3. Have you outgrown your neighborhood? The neighborhood you pick for your first home might not be the same neighborhood you want to settle down in for good. For example, you may have realized that you’d like to be closer to your job or live in a better school district.

4. Are there reasons why you can’t remodel or add on? Sometimes you can create a bigger home by adding a new room or building up. But if your property isn’t large enough, your municipality doesn’t allow it, or you’re simply not interested in remodeling, then moving to a bigger home may be your best option.

5. Are you comfortable moving in the current housing market? If your market is hot, your home may sell quickly and for top dollar, but the home you buy also will be more expensive. If your market is slow, finding a buyer may take longer, but you’ll have more selection and better pricing as you seek your new home.

6. Are interest rates attractive? A low rate not only helps you buy a larger home, but also makes it easier to find a buyer.

How to find those great foreclosure deals!

Have you recently been hearing people chatting about the great bank owned and foreclosure deals that are out there but can’t quite seem to get a grasp on where to find em?  It’s actually very simple. When a home is going to foreclosure it will first show up on the public auction list.  Not too many homes sell in this phase of the foreclosure process as buyers must have the funds available to purchase the home by 1pm the day of the auction.  When the house fails to sell at public auction, it then returns to the lender and becomes bank owned real estate or REO.  These are then re-listed with a real estate agent on the MLS.  This is where most buyers find these great deals and you can too.  As a real estate agent, I have several tools at my disposal.  I can create a current list of foreclosed bank owned homes from our local MLS and simply print this or email it to you.  Since these properties sell rather quickly, the list obviously changes from day-to-day.  I can also go into the MLS and set an email alert for my clients based on specific criteria such as: bank owned, 3 bed, 2 bath in the city.  My client would then receive a daily email straight from our MLS system with the most updated bank owned homes currently available.  The email would include pictures, details about the property and lending available.  When you see a property you are interested in, simply shoot me an email or give me a call and we will go and see it.  Or we can also set up a day and preview a number of bank owned homes.  It’s really that simple.  So what are you waiting for?  Let’s get you set up today.  Call the Real Estate Super Diva 970-201-3578

10 Big-Impact, Low-Cost Remodeling Projects

10 Big-Impact, Low-Cost Remodeling Projects

Working with sellers who have some—but not unlimited—cash for upgrades? Here are budget-minded enhancements you can suggest to make their home stand out.


1. Tidy up kitchen cabinets.

“Potential buyers do open kitchen cabinets and look inside,” says Morrissey. “Home owners can add rollout organizing trays so when buyers peek in, they feel like there’s lots of room for their stuff.”


2. Add or replace tile.

“By retiling very inexpensively, you make a room look way cleaner that it was,” says Javier Zuluaga, owner of Home Repairs and Remodeling LLC in Tempe, Ariz. “Every city has stores that offer $1 to $2 tile, so home owners have to pay only for the low-cost tile and labor to replace a dated backsplash or add a new one. We also use inexpensive tile to upgrade bathrooms.”


3. Add a breakfast bar.

When a wall separates a kitchen from a family room, suggest cutting out an opening to create a breakfast bar. “In one home, there was a cutout in the wall between the kitchen and living room,” explains Matthew Quinn, a sales associate at Quinn’s Realty & Estate Services in Falls Church, Va., who handles estate and real estate sales for family members whose loved ones have passed away. “We left the structure of the cutout, added an oversized granite breakfast bar, and put chairs in front of it. That cost about $600.”


4. Install granite tile instead of a slab.

“Everybody is hot for granite kitchen countertops, but that can be a $5,000 upgrade,” says John Wilder, a general contractor and owner of Fence and Deck Doctor in New Castle, Ind. “Instead, home owners can put in 12-inch granite tiles for about $300 in materials and get very high impact for little money.”


5. Freshen up a bathroom without retiling.

“With a dated bathroom, I recommend putting in a new medicine cabinet for $100 to $150, light fixtures for about $100, a faucet for $50 to $75, and a vanity for $200 to $300,” says Wilder. “And instead of replacing the tile, the existing grout can be lightly scraped and regrouted, which leaves a haze that can be buffed out and will make the tile look brand new. Also install glass shower doors. A French door adds a lot of panache and elegance for $250, and people will notice the door, not the tile. With all that, you’ve done a bathroom remodel for $1,000 to $2,000.”


6. Freshen up the basement.

“If home owners have cement block or poured concrete walls in the basement, suggest they have a contractor fill in cracks with hydraulic cement and then paint with waterproofing paint,” recommends Wilder. “They can then add a top coat to add color. They can also paint the basement floor with a good floor paint, which spiffs it up. The basement may not be finished, but it’s no longer a damp dungeon.”


7. Add a room.

Look for large spaces that can be enclosed to create a new bedroom for just the price of creating a wall. “One time, we closed off a half-wall to an office and added a door to the other side of the room, thus creating another bedroom,” says Quinn. “That $400 procedure, which took a contractor one day, netted about $40,000 in the sales price.” Zuluaga has also added bedrooms inexpensively. “In a two-bedroom house, there was an archway that led to a third room that was used as a den,” he explains. “It had a dry bar where there would have been a closet, so we took out the dry bar and created a closet so the owners had a third bedroom.”


8. Spruce up cabinet fronts.

Suggest home owners update tired-looking kitchen cabinets. Reconditioning is the least expensive move for under $1,000. “If the wood is starting to look shabby from use or contaminants in the air, we take out the nicks and scratches, recondition it with oil, and put new hardware on,” explains Heidi Morrissey, vice president of marketing and sales at Kitchen Tune-Up in Aberdeen, S.D. For $1,500 to $4,000, owners can replace the cabinet doors and drawer fronts, and for $4,000 to $12,000, they can have all the cabinets refaced. “With refacing, owners can change the color of the cabinets by replacing the door and having a new skin put on the boxes,” says Morrissey. “If they have oak cabinets today, they can have cherry the next day.”


9. Replace light fixtures.

“In a foyer and in bathrooms and kitchens,” says Wilder, “replacing overhead light fixtures provides a lot of pop for a little money.” If the kitchen has track lighting, Zuluaga suggests the home owner spend $450 to $600 to have an electrician replace it with recessed canned lights on a dimmer switch to add ambience. For about $700, Zuluaga also suggests installing pendant lights over a kitchen island or peninsula.


10. Tech-up the garage.

“Sometimes we replace the garage door opener with a remote touchpad entry system,” says Zuluaga. “That costs about $425 and makes it look like a high-end system.”


Download a PDF version of these 10 big-impact, low-cost ideas.

G.M. Filisko is a freelance writer for REALTOR® magazine. You can contact magazine staff at narpubs@realtors.org.

What will 2010 bring for home sales?

One of the million dollar questionRcolumn_investorss for this year is what’s going to happen with the real estate market? Many wonder if home prices will still decline, plateau or actually rise?

My thought for this coming year, especially in the first couple of quarters is that we will see a slight increase in home sales. With the extension and expansion of the Home Buyer Tax Credit till April 30, 2010, I think those who are buying are doing it now rather than later this year.

Traditionally the winter months tend to slow down, however home buyers, especially those that can qualify for the tax credit cannot wait till this spring to start looking for a home. They need to be doing it now.

In the Grand Junction area we have seen 5 consecutive months of declining inventory. Meaning less homes are listed on the market. It certainly is still a buyers market, however the market is not as saturated as it once was. If this trend continues we will start to see a balanced market in our area.

Below are some comments about what 2010 will bring for home prices. I don’t know about you, but I’m a glass half full kind of person, so I expect to see great things for 2010!

Some real estate researchers are forecasting that home prices will fall again in 2010.

· Fiserv Lending Solutions, a financial analytics firm, predicts that prices will decline an average of 11.3 percent in 342 of the 381 markets it covers.

· Moody’s Economy.com foresees another 8 percent drop, with Arizona, California, Florida, and Nevada feeling even more pain.

· Shari Olefson, author of Foreclosure Nation: Mortgaging the American Dream, predicts a national average decline in prices of about 10 percent in 2010.

· Peter Schiff, president of Euro Pacific Capital and the most bearish of the bears, says real estate prices could possibly fall another 30 percent before they hit bottom.

NATIONAL ASSOCIATION OF REALTORS® Chief Economist Lawrence Yun sees it all differently. He predicts home prices will rise more than 3 percent in 2010.

“The headwind we face is rising mortgage interest rates,” Yun says, “but the compensating factors will be the home buyers tax credit in the first half of the year and increased job creation in the second half.”

Source: CNNMoney.com, Les Christie (01/01/2010)


Why Real Estate is still a great investment in an economic downturn.

“Let history be our guide” as the old adage says, and that’s exactly what we need to do when it comes to our current economic situation and more specifically our current real estate market.

Real estate has long been a strong investment. Throughout history we can see those that invested in buying up real estate have set themselves up in an advantageous position for their future. How can you try to do the same?

As many Americans are taking their money out of the stock market, because of the failure of the financial market many more are taking advantage of investing their money in real estate.

I have spoken with many individuals that are so scared about the economy, that they cannot see the forest through the trees. When I tell them that they should invest in real estate they seem a bit confused, the reason being with home prices falling, they think that it is a failing market. The funny thing about real estate is that it is a finite commodity. We cannot make more land, and everyone needs a place to live, so individuals will either buy a home or rent a home.  And even if property prices fall dramatically, as the old adage goes, “time heals all wounds when it comes to real estate.”

Learning from History

Take for example John D. Rockefeller Jr. During the Great Depression developed land and was the sole financier of a vast 14-building real estate complex in the geographical center of Manhattan, Rockefeller Center, and as a result became one of the largest real estate holders in New York City. *

I know here in Grand Junction, CO that some of the wealthiest people are ones that bought up a lot of real estate in the Grand Junction area in the 1980’s when the oil shale industry closed up shop and moved out of town. The local economy as well as the national economy was in a downward spiral at that time, similar to today. As the market started to recover they started to develop the land or sold it off and are now financially set.

What a Deal

Let’s take a look at a great deal. In Tolleson, Arizona, just outside of Phoenix, there is a 4 bed, 2 bath, single family home listed for $110,000. What a steal. Even better are the 4-plexes for sale near the colleges and universities in Phoenix that are listed around the same price as this home, and are fully occupied with renters. Naturally this equates to immediate cash flow.

Obviously invest in areas that are desirable for people to live in. Waterfront property is always sought after, as well as warmer and more temperate climates.

Make sure you have investment goals for the real estate you buy. Is this setting you up for retirement, helping you build up your portfolio by attaining more assets. Then when you are looking at purchasing property you can have a gauge to go by.

*(http://en.wikipedia.org/wiki/John_D._Rockefeller,_Jr.)

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