Karen Lumm Presents 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, 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)

Agent Photo
cotact us

Office: 419-535-0011
Cell: 419-351-5339
Fax: 419 535-7571
VM: 419-539-2700 ext. 123
karenlumm@wellesbowen.com

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.

 

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Ginni Neuenschwander 6 Things Everyone Should Do When Moving Into a New House

Ginni NeueschwanderArticle From HouseLogic.com By: Courtney Craig Published: October 01, 2012

Moving into your first home is exciting! But it also means you’ve got work to do.

When I bought my first house in May, my timing couldn’t have been better: The house closing was two weeks before the lease was up on my apartment. That meant I could take my time packing and moving, and I could get to know the new place before moving in.

I recruited family and friends to help me move (in exchange for a beer-and-pizza picnic on the floor) and, as a bonus, I got to pick their brains about what first-time home owners should know.

Their help was one of the best housewarming presents I could have gotten. And thanks to their expertise and a little Googling, here’s what I learned about what to do before moving in.

1. Change the locks. You really don’t know who else has keys to your home, so change the locks. That ensures you’re the only person who has access. Install new deadbolts yourself for as little as $10 per lock, or call a locksmith – if you supply the new locks, they typically charge about $20-$30 per lock for labor.

2. Check for plumbing leaks (http://www.houselogic.com/home-advice/plumbing/plumbing-leaks-8-smart-tips-stop-them/). Your home inspector should do this for you before closing, but it never hurts to double-check. I didn’t have any leaks to fix, but when checking my kitchen sink, I did discover the sink sprayer was broken. I replaced it for under $20.

Keep an eye out for dripping faucets and running toilets, and check your water heater (http://www.houselogic.com/home-advice/water-heaters/water-heater-maintenance/) for signs of a leak (http://www.houselogic.com/blog/plumbing/fix-a-leak-week-2012/).

Here’s a neat trick: Check your water meter at the beginning and end of a 2-hour window in which no water is being used in your house. If the reading is different, you have a leak.

3. Steam clean carpets (http://www.houselogic.com/home-advice/home-improvement/carpet-or-hardwood/). Do this before you move your furniture in, and your new home life will be off to a fresh, clean start. You can pay a professional carpet cleaning service – you’ll pay about $50 per room; most services require a minimum of about $100 before they’ll come out – or you can rent a steam cleaner for about $30 per day and do the work yourself. I was able to save some money by borrowing a steam cleaner from a friend.

4. Wipe out your cabinets. Another no-brainer before you move in your dishes and bathroom supplies. Make sure to wipe inside and out, preferably with a non-toxic cleaner (http://www.houselogic.com/green-living/green-cleaning/), and replace contact paper if necessary.

When I cleaned my kitchen cabinets (http://www.houselogic.com/home-topics/cabinets/), I found an unpleasant surprise: Mouse poop. Which leads me to my next tip …

5. Give critters the heave-ho. That includes mice, rats (http://www.houselogic.com/home-advice/pest-control/Need-to-Get-Rid-of-Rats-Its-a-Community-Effort/), bats (http://www.houselogic.com/home-advice/pest-control/attic-pest-removal/), termites (http://www.houselogic.com/home-advice/pest-control/detect-termites-other-wood-destroying-insects/), roaches (http://www.houselogic.com/home-advice/pest-control/roach-home-removal-tips/), and any other uninvited guests. There are any number of DIY ways to get rid of pests, but if you need to bring out the big guns, an initial visit from a pest removal service will run you $100-$300, followed by monthly or quarterly visits at about $50 each time.

For my mousy enemies, I strategically placed poison packets around the kitchen, and I haven’t found any carcasses or any more poop, so the droppings I found must have been old. I might owe a debt of gratitude to the snake (http://www.houselogic.com/blog/pest-control/how-help-snake-slither-out-your-house/) that lives under my back deck, but I prefer not to think about him.

6. Introduce yourself to your circuit breaker box and main water valve. My first experience with electrical wiring (http://www.houselogic.com/home-advice/electrical/when-time-for-electrical-wiring-upgrade/) was replacing a broken light fixture in a bathroom. After locating the breaker box, which is in my garage, I turned off the power to that bathroom so I wouldn’t electrocute myself.

It’s a good idea to figure out which fuses control what parts of your house and label them accordingly. This will take two people: One to stand in the room where the power is supposed to go off, the other to trip the fuses and yell, “Did that work? How about now?”

You’ll want to know how to turn off your main water valve if you have a plumbing emergency, if a hurricane (http://www.houselogic.com/protect-your-home/hurricanes/) or tornado (http://www.houselogic.com/protect-your-home/tornadoes-severe-storms/) is headed your way, or if you’re going out of town. Just locate the valve – it could be inside or outside your house – and turn the knob until it’s off. Test it by turning on any faucet in the house; no water should come out.

What were the first maintenance projects you did when you moved into your first home?

Ginni Neueschwander, Realtor

www.ginnineuenschwander.wellesbowen.com

Office: 419-335-5170
Cell: 419-822-7045
Fax: 440-399-9346
ginni@wellesbowen.com

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Mary Ann Almester Bring you – Budget for a Remodel

 

general contractors in richmond virginia

Article From HouseLogic.com By: Oliver Marks Published: August 28, 2009

To calculate how much remodel you can afford, follow these four steps: Ballpark the cost, establish a spending limit, make a wish list, and set your priorities.

What’s on your remodeling wish list? Maybe you’re longing for a spa-like master bathroom (http://www.houselogic.com/home-advice/bathrooms/evaluate-your-house-bathroom-addition/), a new eat-in kitchen (http://www.houselogic.com/home-advice/green-remodeling/green-kitchen-remodeling/), or a garage (http://www.houselogic.com/home-advice/garages/garage-doors-guide-options/) with space enough to fit your cars and your outdoor gear. Well, when it comes to home improvements, knowing what you want is the easy part. The tougher question is figuring out how much you can afford. Follow this four-step plan to arrive at the answer.

Ballpark the costs

The first step is to get a handle on how much your remodeling dreams will cost. Remodeling Magazine’s 2010-11 Cost vs. Value Report (http://www.remodeling.hw.net/2011/costvsvalue/national.aspx) gives national averages for 35 common projects. Or you can use a per-square-foot estimate: In general, major upgrades, such as a bathroom remodel or a family-room addition, run $100 to $200 per square foot. Your local National Association of Home Builders (http://www.NAHB.ORG) (NAHB) affiliate can help with estimates. At this point, you’re not trying to nail down exact prices, but to get a rough sense of what your project might cost.

Figure out how much you have to spend

Once you have a ballpark cost estimate, the next question is whether you have the money. If you’re paying cash, that’s pretty easy to answer. But if you’re borrowing, you need to assess how much a bank will lend you (http://www.houselogic.com/home-advice/equity-loans/equity-loan-options/) and what that loan will add to your monthly expenses.

For the vast majority of homeowners, the best way to borrow for a home improvement is a home equity line of credit (http://www.houselogic.com/home-advice/equity-loans/home-equity-line-tips/). A HELOC (pronounced HEE-lock) is a loan that’s secured by your home equity, which means that it qualifies for a lower rate than other loan types, and you can deduct the interest on your taxes. Because a HELOC is a line of credit rather than a lump-sum loan, it comes with a checkbook that you use to withdraw money as needed, up to the maximum amount of the loan. For help shopping for a HELOC, download our free worksheet.

The catch is that the minimum payment on a HELOC is just that month’s interest; you’re not required to pay back any principal. Like only paying the minimum due on a credit card, that’s a recipe for getting stuck in debt. Instead, establish your own repayment schedule. You can do this simply by paying 1/60th of the principal (for a five-year paydown) or 1/120th (for 10 years) in addition to the monthly interest. If you can’t afford that much, then you should reconsider your project.

Get quotes from contractors

Once you have ballpark estimates of what your job might cost and how much you can spend, you know whether it’s feasible to move forward. Assuming the numbers are within shooting range of each other, it’s time to get a nuts-and-bolts assessment of project costs.

Don’t ask contractors for bids yet, though. First, you need to determine exactly what you want, right down to the kitchen countertop material and the type of faucet. By specifying these details up front, you ensure that contractors are all pricing the same things, rather than the countertop and faucet they assume you want. If you’re using an architect or designer, bring them in now to help with these choices. If not, consult magazines, go to showrooms, and visit friends’ houses for ideas.

Next, get recommendations for at least three contractors from friends, neighbors, and other tradesmen that you trust. Give each one your project description and specific product lists and request an itemized bid. To make a final decision, assess some of their previous work, their attitudes, and their references, and then choose the contractor who impresses you most.

Prioritize and phase

Take the winning contractor’s bid and add a 15% to 20% contingency for the unforeseen problems and changes that occur on every project. Is the total still within your ability to pay? If so, you’re ready to get started. If not, it’s time to scale back your plans.

Because you have an itemized bid, you can get a good sense of what you’ll save by eliminating various aspects of the project. Enlist the contractor’s help: Explain that you’ve decided to hire him (and you’re not trying to nickel-and-dime him) but that the bid is over your budget, and ask him to recommend ways to cut costs. He may suggest phasing parts of the job-keeping your old appliances in your new kitchen, for example, because they’re easy to upgrade later-or stealing some underutilized square footage for part of your family room to reduce the size of the addition. He may even suggest waiting until the slow winter season, or letting you do some of the work yourself (http://www.houselogic.com/home-advice/contracting/when-it-pays-to-do-it-yourself/). Once the bottom line on the bid matches the bottom line on your budget, you’re ready to transform your home.

 

Mary Ann Almester

Office: 419-891-0888 Cell: 419-340-9180 Fax: 419 891-1092 VM: 419-897-2700 ext. 221 maryannalmester@wellesbowen.com

IDing the Drafts in Our Drafty Old House + $100 Giveaway

Visit houselogic.com for more articles like this.

Copyright 2012 NATIONAL ASSOCIATION OF REALTORS®

Michelle Rumans

Office: 419-698-5370
Cell: 419-467-5882
Fax: 419 754-1408
VM: 419-754-1405 ext.120
turnthekey@buckeye-express.com

You can find Michelle’s website by clicking here.

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Joan Rogge Presents – A Financial Plan for Your Home

Joan Rogge

JOAN ROGGE, REALTOR, WELLES BOWEN TOLEDO OFFICE

Office:         419-535-0011
Cell:             419-944-3129
Fax:             419 535-7571
VM:             419-539-2700       ext.125
joanrogge@wellesbowen.com

Visit Joan’s website by clicking here

Article From HouseLogic.com

By: Richard Koreto
Published: August 28, 2009

Your home is probably your biggest investment. To manage it, create a financial plan that takes into account repairs, upgrades, mortgages, insurance, and taxes.
Do you pay each home-related expense as it comes? If so, you’re missing opportunities for upgrades, or much worse, heading into a financial crisis when a slew of surprise maintenance items hit. So take a holistic look at what it costs to operate your house and set up a home financial plan.
Use our home financial plan budget worksheet, and start by writing a list of expenses, such as:
•Mortgage

•Taxes

•Home insurance, including liability

•Repairs and maintenance, such as new furnace, roof, painting

•Voluntary upgrades, such as a swimming pool, a premium range, a new powder room

What will you learn from this home financial plan weekend exercise?
•How much you have to spend

•How much you need to allot in the short- and long-term for necessary maintenance and voluntary improvements

With this new found grip on your home’s expenses, you can create a home financial plan that’ll help you there for years with maximum enjoyment and minimum anxiety.
The mortgage: Pay it–and then some
Yup, you already shell out a lot for your mortgage, but can you pay more? Even a little extra each month can add up to an earlier payoff. Let’s say you have $200,000 in outstanding principal and a 20-year fixed-rate mortgage at 5%. Your monthly payment is $1,319.91. But if you can manage to pay another $100 a month, you’ll save $14,887 in interest.

Run the numbers (http://realestate-calc.com/Mortgage_Calculators/Mortgage_Calculator_Input_Add_Payment.asp) yourself for your home financial plan.

Advantages of an early payoff, says Alan D. Kahn, a financial planner in Syosset, N.Y.:
•Less debt means more money to spend later.

•It feels darn good to own your house outright as soon as possible.

•Minimal tax loss. Toward the tail end of the life of a loan most of your payment goes to the principal, not the interest, so you’re getting only a small tax break anyway.

Of course, if you’re still saving for retirement, put the 100 bucks elsewhere:
•A retirement plan

•An account for the inevitable home repairs

•An account for discretionary improvements, which can raise your home’s value

Insurance: Protect your property
Your vegetable garden is pointless without a fence to keep out rabbits; likewise, your home financial plan will come to nothing without an insurance “fence”:

Homeowner’s insurance. Basic coverage (http://www.houselogic.com/articles/homeowners-insurance-are-you-over-or-underinsured/) for your home and everything in it. The average cost is $636 per year but this varies widely by state.
Liability coverage. Protects you from a lawsuit if someone gets hurt on your property, for example. Your best bet: An umbrella policy (http://www.houselogic.com/articles/umbrella-insurance-and-homeowner-liability/). For about $300 a year you can by a typical $1 million policy.
Various disaster insurance policies. Optional policies (http://www.houselogic.com/articles/insuring-against-natural-disasters/) cover flood, earthquake, and hurricane damage. As part of your home financial plan, you have to research to see what disaster coverage, if any, you need in your area, and what your standard policy already covers. For $540 a year you can buy flood insurance, for example.
Don’t under- or overbuy insurance
For your basic policy, get homeowners insurance with full replacement coverage (http://www.houselogic.com/articles/homeowners-insurance-time-for-annual-check-up/) in case your house burns to the ground.

That sounds simple, but heads up on calculation. Remember that you own a house as well as the land on which it sits. So even though you bought your home for $300,000, it may cost only $100,000 to rebuild it. Your policy limits should reflect this. This difference will vary widely by region.

Another heads up: Don’t make the common and potentially disastrous mistake of thinking that because your home has fallen in value you need less insurance. If you bought a $1.2 million townhouse in Florida during the boom, it’s true it now may only sell for $600,000. But the replacement cost of the townhouse hasn’t changed much, so you can’t improve your home financial plan by cutting insurance costs that way.

Other ways to cut your insurance budget:
•If you make structural improvements, such as adding storm shutters, your insurer may give you a break.

•If you belong to certain groups, such as AARP or veterans’ organizations, your premiums may be lower.

Repairs and renovations: By choice or necessity
You own a home, so you’ll be spending money on everything from a new faucet to-surprise!-a new roof. Freddie Mac and other authorities say as part of your home financial plan, you should be prepared to spend 1% to 3% of the market value of the home annually on maintenance. To be extra-prudent, open a savings account and make regular payments until your account reaches 1% to 3% of your home’s current value.

To help you budget:

Start with the inspection report you received when you bought the house. Did the inspector indicate that you would need a new roof in five years? A new furnace in 10?

Keep a log of your major appliances’ age so you can estimate when they’ll need replacing. Some estimated life spans:
•Roof: 20-25 years

•Heating systems: 15-20 years

•Range/ovens: 11-15 years

•Water heaters: 8- 13 years

Then get estimates on what replacements will cost and start saving.

Consider ongoing non-emergency maintenance, too. Do you live in New England? Price a snow blower and get bids from plow services.

Resist the siren call of the home equity loan (http://www.houselogic.com/articles/a-guide-to-equity-loan-options/) to take care of everything. That just defeats your efforts to pay off the mortgage early.

Separate out what you want from what you need. A $50,000 kitchen remodel is nice, but you’ll recoup only 76% of the project cost your home’s resale, according to Remodeling magazine (http://www.remodeling.hw.net/2009/costvsvalue/national.aspx).

If you can afford to redo, go for it. Just don’t confuse your necessary repairs (new oil furnace-about $4,000) with your discretionary upgrades (Viking range-$6,000 and up).
Taxes: (Almost) no way around them
Even if your lender handles your property taxes from an escrow account, you need to budget for them in your home financial plan. They creep up almost every year, it seems. Take responsibility for tracking the changes in your area: Look over past tax bills to get a sense of how quickly they’ve risen in the past.

Or if your lender handles escrow and you haven’t saved your bills, ask for an accounting. The median annual property tax payment is $2,198, but that hides the enormous range in medians from state to state:
•New Jersey: $6,320

•New York: $3,622

•California: $2,829

•Alabama: $383

•Louisiana: $188

You can generally deduct property taxes on your federal return. A tax pro can tell you how much of a tax break you’ll get, to help you fine tune your home financial plan.

You may be able to reduce your tax burden by getting a reassessment. Do your homework first: Are comparable houses taxed less than yours? Ask the local assessor what formula is used to set tax rates. You can challenge the assessed value (http://www.houselogic.com/articles/appeal-your-property-tax-bill/) and get yourself a rollback.

If you’re in a special group, you might get some help from state or local programs. Check around to see what’s available in your area. New York State, for example, has its Star Program (http://www.orps.state.ny.us/star/index.cfm) for giving senior citizens some relief from school-related property taxes.

Richard J. Koreto is a managing editor of finance, taxes, and insurance at HouseLogic. He has been editor of several professional financial magazines and is the author of “Run It Like a Business,” a practice management book for financial planners. He and his wife own a pre-Civil War house in Rockland County, N.Y.

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