4 Tips for Buying a Fixer-Upper

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While the process of buying and renovating fixer-upper homes has increased in popularity due to fix-and-flip home improvement TV shows, not everyone is cut out for  major renovation projects. 

In fact, only 19% of homeowners said their home needed serious updates, and only 3% said their home needed a complete overhaul, according to the Zillow Group Consumer Housing Trends Report 2020. 

Buying a fixer-upper involves purchasing the least desirable home on the block and overseeing its transformation. Whether you’re considering a fixer as an investment — and you plan to sell after construction is complete — or you’re fixing up a home to make it your own, there’s a lot to consider when buying a fixer-upper, from home price to construction costs to financing. 

What is a fixer-upper home?

A fixer-upper is a home that needs repairs, but not so many that it’s uninhabitable or worthy of being torn down. 

Fixer-uppers are usually offered for a lower price than homes in better condition, which makes them appealing to buyers looking to maximize their purchasing power or investors looking to flip the property and turn a profit. 

Should I buy a fixer-upper home?

Most often, people buy fixer-upper homes because the cost of purchasing the home plus renovation costs may total less than what they’d pay for a comparable home in good condition. 

Here are some of the key reasons buyers decide on buying a fixer-upper:

Reduced price

If you have your eye on a popular neighborhood, either for resale value or your own lifestyle, you may be able to get a better deal buying a fixer upper in your desired location and renovating it than purchasing an already-updated home. 

Customizable improvements

When you purchase a fixer-upper, the sky’s the limit when it comes to fixtures and finishes (within your budget, of course). Renovating a fixer-upper can be ideal for buyers with very specific tastes or those who want more control over the aesthetics of their home. When buying a fixer-upper, you avoid paying for the renovations someone else completed, especially if you don’t like them. 

Older home charm

The character of older homes isn’t easy to replicate. Buying an older home in need of some TLC can allow you to restore and maintain time period details, while bringing the home up to today’s efficiency, safety and comfort standards. 

Make a profit

Whether you’re planning to flip or live in the home for a few years before selling, you may be able to turn a good profit based on the renovations you make. Your return on investment depends on the types of renovations you complete, the materials you use and the quality of the work. If profit is the goal, select popular home improvements in your market to increase property value and appeal to a wide variety of buyers. 

Tax incentives

In some metropolitan areas, such as Philadelphia and Cincinnati, buyers who purchase a fixer-upper and renovate to improve the property value may be eligible for a tax abatement or credit. 

How to find fixer-upper homes

Finding the right fixer-upper is all about where you look. Here are a few strategies for finding the right home. 

Search online: Use Zillow to search for homes below market value. You can search keywords such as “fixer upper,” “needs work” or “TLC” to narrow down potential properties. 

Work with an agent: A local buyer’s agent should be able to help you find fixer-upper homes in your desirable neighborhoods. Well-connected agents may even be able to show you homes that haven’t hit the market yet, via word of mouth. 

Search auctions, foreclosures and short sales: Distressed properties may be in fine structural condition but are sold below market value in order to offload them quickly. It’s important to note that these homes are usually sold as-is, and disclosures might not be available, so be sure you have enough extra money in your budget to cover surprise issues. 

What to look for when buying a fixer-upper home

When shopping for a fixer-upper, prioritize the things you can’t change about a home (like its location), or things that would be too costly to change (like significant structural renovations). Here are key factors to consider:

Location

Location is the most important thing to look for, because it can’t be changed. Look for a fixer-upper in a desirable or an up-and-coming neighborhood in order to maximize potential resale value. Finding the right location will also ensure that you’re happy in the home. Pay attention to things that might be important to you, like school ratings, nearby parks and restaurants and commute times. 

The home’s location will also play a part in determining your renovation budget and estimating the home’s post-renovation value. The quality of finishes and upgrades you select should be in line with comparable homes in the same neighborhood if your goal is to recoup costs on resale.

Layout and size

With a fixer-upper, you might be able to change the layout as you see fit, but pay attention to any design and layout ideas that would require removing load-bearing walls. This can be a costly exercise, and sometimes it’s just not possible. Home additions to increase square footage are also expensive and might not be allowed, depending on local zoning requirements and laws. 

Home condition

There’s a difference between a fixer-upper and a home with significant structural defects. Structural and mechanical problems are a lot more expensive to fix than cosmetic ones. Be sure to hire a home inspector to gain knowledge of the home’s positives and negatives — hiring a home inspector is an invaluable step, even if you’re buying a home as-is. Here’s what should be on your home inspection checklist for a fixer-upper:

  • Strong foundation
  • Up-to-code electrical
  • Proper plumbing
  • Solid roof condition (should come with roof certification)
  • HVAC and/or central AC
  • Functional windows

Straightforward cosmetic updates

Prioritize homes that have outdated or worn out finishes that don’t appeal to the general public but can be updated affordably and without too much effort. Ideally, the fixer-upper you buy will only need cosmetic upgrades. Look for homes with:

  • Peeling or dated paint (interior and exterior)
  • Older bathroom fixtures and tile
  • Dated kitchen cabinetry
  • Laminate or tile countertops
  • Stained carpeting
  • Hardwood floors in need of refinishing
  • Leftover belongings or trash that need to be removed
  • Neglected landscaping
  • Old or non-functioning appliances

How to buy a fixer-upper

Buying a home that needs work can be risky, because you won’t know the full condition of the home until you start tearing down walls. That’s why doing your due diligence on the property and neighborhood ahead of time is key.

Get a professional home inspection

When you put an offer on a house, be sure to include an inspection contingency. An inspection contingency allows you to back out of a deal and get your earnest money deposit back if the inspection reveals that the home has serious hidden defects.

Even homes marketed as being in “as-is condition” can be inspected — the only difference is with an as-is home, the seller is telling you that they do not want  to make any repairs based on your findings. 

The buyer is responsible for the cost of  an inspection, which ranges between $250 and $700, depending on the size of the home and your location. In addition to a general inspection, you might also opt for specialized inspections for trouble areas. Common specialty inspections include pests, sewer lines, radon, lead-based paint and structural inspections. Costs for specialty inspections are similar to general inspections. 

A structural inspection reviews the home’s structural integrity, but also lets you know of any natural hazards nearby that could impact the resale value or your own health and safety. You may also consider hiring a structural engineer to assess the property before you make an offer. It will cost between $500-$700 but could save you thousands of dollars in future foundation repairs.

Hire an architect and general contractor

An architect can create a new layout for a home, create plans and blueprints and tell you what is and isn’t possible. Some cities require you to submit architectural plans to acquire home permits, making an architect a necessity. The average cost for an architect is around $5,000, depending on the scope of your project. 

Your home inspector should be able to give you a rough estimate of what it would cost to adequately repair problem areas that come up in an inspection, but since they’re not the one who will be doing the work, it’s best to get a more accurate quote from a contractor. Whatever they quote you, add a 10% contingency for any problems that come up along the way. Be sure to get quotes from a few contractors and do your due diligence in checking their licensing and customer reviews. 

Budget for improvements

Working with your contractor, be sure that your budget takes into consideration all applicable costs. Don’t forget to include:

  • Permit fees, if applicable
  • Cost of materials, like flooring, paint, light fixtures, cabinetry, countertops and hardware
  • Cost of labor, including general contractors, plumbers, electricians and inspectors
  • Cost of living during renovations, if the home will be uninhabitable during the project

Know your limits

Above and beyond the financial concerns, you also need to gauge your tolerance for a major renovation project, especially if you plan to save money by doing some of the work yourself. Home renovations are not as easy as they look on TV and if it’s your first time, a lot can go wrong. Even if everything goes right, there’s a lot of hassle involved in a large-scale construction project. You’ll have to live in a construction zone or move elsewhere temporarily, while still paying all the carrying costs for the home. 

If the thought of a months-long renovation is more than you’re willing to take on, but you’re looking for a move-in-ready home, consider a Zillow-owned home. Every home has been recently repaired for buyers to avoid costly surprises. 

Financing options with fixer-upper loans

You can purchase a fixer-upper with a traditional conventional loan then pay for all the improvements out of pocket. Or, you can get a fixer-upper mortgage that’s designed to help you finance both the house itself and the renovations. Common types of home loans for fixer-uppers are: 

FHA 203(k) standard

An FHA 203(k) Standard loan finances the purchase and renovation of a primary residence. Here are the key requirements:

  • Minimum credit score of 500 with a down payment of 10%, or a credit score of at least 580 with down payment of 3.5%
  • The total cost of the loan must fall under FHA mortgage limits in your area
  • No luxury improvements (like pools) are allowed, but structural work is allowed
  • Requires a HUD consultant to approve the architectural plans, oversee payments to contractors and review inspections to ensure the home meets structural integrity and energy efficiency standards
  • There are limits on how soon you can resell (not within 90 days)
  • The contractor is paid out of an escrow account managed by the lender

FHA 203(k) streamlined

This financing option has similar requirements as the FHA 203(k) Standard, but it’s meant for simpler, cosmetic renovation projects, as it has a spending limit. 

  • Minimum credit score of 500 with a down payment of 10%, or a credit score of at least 580 with down payment of 3.5%
  • For cosmetic upgrades under $35,000
  • There are limits on how soon you can resell (not within 90 days)
  • The contractor is paid out of an escrow account managed by the lender

HomeStyle loan

A HomeStyle loan is a combination home loan and home improvement loan, guaranteed by Fannie Mae. 

  • Minimum credit score of 620; minimum down payment of 3 or 5%, depending on a few factors like owner occupancy, first-time home buyer status and income
  • Allows for other improvements that aren’t covered under an FHA 203(k), like pools and landscaping—but note that all improvements need to be “permanently affixed to real property (either dwelling or land)”
  • The contractor is paid out of an escrow account managed by the lender
  • You must use a certified contractor

CHOICERenovation

A CHOICERenovation loan is a combination home loan and home improvement loan, guaranteed by Freddie Mac. 

  • You can finance renovations that cost up to 75% of a home’s value
  • Money can be used for upgrades that prevent natural disasters
  • You can DIY the work and get a down payment credit
  • Requires multiple appraisals to ensure you’re upholding the terms of the contract and that the agreed-upon renovations make the home meet its estimated value

Source: zillow.com

5 Killer Real Estate Lessons We Learned From ‘Friday the 13th’

Friday the 13th is an unlucky day if you’re superstitious. And in case you haven’t noticed, it’s here! But we like to think we are people who see the glass as half-full. We prefer to look at the doomed day as an opportunity to reflect upon some unexpected nuggets of—you guessed it—real estate wisdom.

To prove that valuable real estate knowledge truly can be found anywhere, we’ve turned to Jason Voorhees from “Friday the 13th” and (spoiler alert!) his nutty, murderous mother for inspiration. The hockey mask–wearing horror icon is an unlikely choice, but no one personifies the dreaded date better than the fictional fright master. And, as it turns out, there are some helpful housing lessons buried deep within the horror franchise.

After binge-watching the “Friday the 13th” series all the way through “Friday the 13th Part VI: Jason Lives” (just a tiny glimpse of the sacrifices we make for you, dear reader), we realized Jason and a whole lot of dim-witted camp counselors can teach us plenty about buying a home.

So join us as we head back to Crystal Lake, NJ, for a few (creepy) lessons learned … the hard way.

Lesson No. 1: Always talk to the neighbors

If just a single camp counselor in 30 years had listened to one of the eager-to-blab neighbors, the “Friday the 13th” franchise wouldn’t exist. Everyone seems to know something is wrong with the property at the lake. (Dozens of dead teenagers each summer could be the tipoff.) People at the diner, truck drivers, the town loon—everyone! And they’re more than happy to warn off newcomers.

It’s a pretty strong endorsement to listen to the locals when trying to nail down your housing needs.

No, you’re probably not looking at properties in towns with as sullied a reputation as Crystal Lake. But we still offer this as an example of how you can learn a ton from talking to the neighbors—and discover what the place is really like.

Picturesque and serene in sunlight, spooky and isolated at night.Picturesque and serene in sunlight, spooky and isolated at night.
Picturesque and serene in sunlight, spooky and isolated at night

(Sjo/iStock)

Whether it’s the fact that a crazed killer occasionally rises from the depths of the nearby lake, or a noxious odor wafts from a nearby sewage plant when the wind changes, checking in with potential neighbors can help you make a sound decision.

Lesson No. 2: Read the seller’s disclosure

OK, back to that spoiler alert from 1980: The whole “Friday the 13th” franchise hinges on the narrative that a young Jason drowned in a lake due to the negligence of some sex-crazed camp counselors—prompting mom to go on a gruesome rampage for revenge. Could happen, right?

Death, murder, mayhem. These are all items that must appear on the seller’s disclosure in many states. It doesn’t take a cinematic genius to see our plot twist coming: Simply read the seller’s disclosure to avoid an awful fate. Maybe you’ll learn that your potential home has a grisly, murderous history. Or maybe you’ll discover that the property is covered in mold. Either way, it’s scary, scary stuff you need to know about before you buy.

Lesson No. 3: Decide how much isolation you can handle

In its heyday, the town of Crystal Lake seemed to have been a quaint getaway—bustling during the summer with throngs of children, and morphing into a quiet and rustic retreat during the off-season. It had the potential to be a perfect spot for a vacation home.

But one look at the town we see on-screen should set off some warning bells. The boarded-up shop windows. The deserted streets. The four weird locals in the diner. The long, long drives required to get anywhere. No bus service! No phone service! This place just screams “isolated,” and we haven’t even thrown a crazed killer into the mix yet.

When you’re buying a property—seasonal or otherwise—look at the bigger picture. How far away are the nearest neighbors? Does the town have its own police and fire services? Will you have cell service in case of an emergency?

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Keep in mind many properties in vacation destinations are only seasonally occupied. You might not have neighbors around when you need them. Weather conditions could also conspire against your being able to get to and from your home in the event of an emergency.

Take stock of the home’s surroundings and consider just how off the grid you want to be. If isolation is what you truly crave, Godspeed. But don’t say we never warned you! (Just like those weirdos in the diner.)

Lesson No. 4: Home inspections save lives

Call us conspiracy theorists, but we blame many of the murders in the original “Friday the 13th” on the lack of a proper home inspection.

The spotty electricity went out every time it rained (of course!), leaving camp counselors to rely on a generator several yards away in a barn. Every time Big Jason wanted to gouge or skewer a victim, all he had to do was cut off the generator.

If only a trusted home inspector had flagged the electrical problems and made sure the house had no issues in times of inclement weather!

Know this: Home inspectors suss out potential issues before they become flat-out problems. Talk to a home inspector about any issues that might turn into a home purchase deal breaker. It’s smart to get any potential frights out of the way early.

Lesson No. 5: Beef up your security before you settle in

Throughout just about all of the flicks (we’re happily ignoring “Jason X,” in which our antihero rampages in outer space), Mr. Hockey Mask outsmarts camp counselors through a series of calculated maneuvers, a little luck, and some seriously crappy or nonexistent security features.

Please, Mr. Postman

Send me news, tips, and promos from realtor.com® and Move.

Really—where were the locks in this place? Typically in the final scenes, a lone survivor is seen running from room to room,  slamming doors behind her, trying to get away. But locks don’t seem to exist and doors seem to be made of corrugated cardboard, because the killer just keeps coming.

While odds are you won’t be stalked by a psychotic, immortal killing machine in your home, never overlook your security features. Change your locks as soon as you move in, and check all interior doors and windows for properly working latches and locks. If you do have a security system (and you should), don’t forget to try it out and ask your security technician everything about it. You’ll sleep more soundly.

You might want to avoid the lake, too.

Source: realtor.com

15 Words That Could Add Value to Your Listing

When it comes to writing an effective listing description, don’t hold back. If you’ve got it, flaunt it!

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Why do some homes sell for a premium? Timing, for starters. An analysis of 24,000 home sales in “Zillow Talk: Rewriting the Rules of Real Estate” also reveals listings with certain keywords tend to sell for more than expected.

“Bottom-tier homes described as luxurious tend to beat their expected sale price by a whopping 8.2 percent,” write co-authors Spencer Rascoff and Stan Humphries. “Top-tier homes described as captivating tend to beat theirs by 6.5 percent. That means, if your home’s estimated home value is $110,000, but your listing includes the key word ‘luxurious,’ you could pocket an extra $8,965.”

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If one of the following words accurately describes your home, you might want to consider adding it to your listing.

1. Luxurious

As mentioned above, lower-priced listings with the word “luxurious” sold for 8.2 percent more on average than expected. “Luxurious” signals that a home’s finishes and amenities are high-end. This is a huge selling point, particularly in this price range.

2. Captivating

Top-tier listings described as “captivating” sold for 6.5 percent more on average than expected. Unlike the word “nice,” “captivating” provides a richer, more enticing description for buyers. Plus, it’s less open to interpretation. Anything can be seen as “nice,” but “captivating” sets a high bar.

3. Impeccable

On average, listings in the bottom tier with the word “impeccable” sold for 5.9 percent more than expected. Like “captivating,” “impeccable” is a rich adjective. It also implies something about the quality of a home: The features are desirable and the home is move-in ready.

4. Stainless

“Stainless” is typically used to describe kitchens with “stainless steel appliances.” It’s in your favor to talk up these features in your listing — especially if your home is in the bottom price tier. In our analysis, lower-priced homes with the word “stainless” sold for 5 percent more on average than expected.

5. Basketball

On average, lower-priced homes with the word “basketball” sold for 4.5 percent more than expected. This may seem like an odd word to include in this list, but when you consider the context it makes sense. Among lower-priced homes, a basketball court — or even better, an indoor basketball court — is a huge selling point. While it may not stand out as much among higher-priced homes, it’s definitely worth mentioning in this price range.

6. Landscaped

It’s just as valuable to describe your yard as your house. In all price tiers, listings with the word “landscaped” sold for more than expected on average. The biggest premium was seen among lower-priced listings, which on average sold for 4.2 percent more than expected.

7. Granite

In the same vein as “stainless,” “granite” is typically used to describe countertops or another high-end home feature. Listings with the word “granite” sold, on average, for 1 to 4 percent more than expected across all price tiers.

8. Pergola

Not only should you include high-end home features in your listing description, you should also mention features not found in every home. They’ll help your listing stand out, especially if buyers are searching for homes online by keyword. The data shows mid-priced listings with the word “pergola” sold for 4 percent more on average than expected.

9. Remodel

Was your home recently remodeled? It may be worth mentioning. On average, bottom-tier listings with the word “remodel” sold for 2.9 percent more, middle-tier homes for 1.8 percent more and top-tier homes for 1.7 percent more than expected.

10. Beautiful

While beauty is in the eye of the beholder, a beautiful feature like a view may be worth noting. Lower-priced listings with the word “beautiful” sold for 2.3 percent more on average than expected.

11. Gentle

“Gentle” may seem like a weird adjective to have in a listing description. It’s typically used to describe “gentle rolling hills” or something about a home’s location. Top-tier listings with the word “gentle” sold for 2.3 percent more, on average, than expected.

12. Spotless

You may think all homes are spotless when a buyer moves in, so it’s not worth mentioning in a listing. But when it comes to lower-priced homes, cleanliness isn’t always a given. In this price range, listings described as “spotless” sold for 2 percent more on average than expected.

13. Tile

Much like “stainless” and “granite,” “tile” is a great word when it comes to describing the features of your home. A newly tiled backsplash or updated bathroom tile not only indicates a home’s aesthetic value but also sends a message to buyers that the home’s been well cared for by the current owners. Bottom-tier homes with the word “tile” in the listing sold for 2 percent more on average than expected.

14. Upgraded

On average, lower-priced listings with the word “upgraded” sold for 1.8 percent more than expected. Most buyers will agree that upgrades are a selling point. They indicate a home not only looks nice but also functions well. Spelling out which features have been updated is a good approach, so buyers have the right expectations when they see your home.

15. Updated

“Updated” sends a similar message to “upgraded.” But in addition to speaking to the quality of a home, it signals that something old has been replaced with something new. This is a great fact to communicate to potential buyers, as evidenced by the data. Mid-priced homes with “updated” in the listing sold for 0.8 percent more on average than expected.

Related:

Source: zillow.com

How to Get Rid of Your Roommate (Legally!)

As tempting as it may be, you can’t just kick him to the curb.

He’s messy, his rent is always late, and now he “lost” his pet scorpions somewhere on the premises. In other words, it’s high time for your roommate to hit the road.

But how to get him out? Legally speaking, can one tenant kick the other to the curb based on a few common lease violations? And, if so, what is the least-stressful way to accomplish this feat? Below, we discuss several tips and techniques for lawful roommate eviction, as well as conduct to avoid at all costs — or you may find yourself on the curb.

Communication is key

As in any relationship, lack of clear communication between roommates could be the downfall of an otherwise promising cohabitation situation. When a problem first arises, talk it out. Perhaps your roommate is under unusual stress, isn’t aware of the rules or just needs a little coaxing to meet obligations. Hopefully, this tactic will calm the waters.

But if not, it may be time to bring your landlord in on the conversation. If your roommate is engaging in clear violations of the lease agreement, your landlord should be notified immediately, and the violations should be clearly documented through pictures and descriptions. Assuming your roommate is a tenant of record (more on that below), he or she maintains a distinct legal relationship with the property owner or landlord and must abide by the terms of the lease. While general messiness is not usually cause for eviction, late rent payments and unapproved pets likely are, so alert your landlord. He or she can start the eviction process under your state’s landlord-tenant laws.

Off-the-record roommates

This issue can become much more acrimonious if your roommate is not a tenant of record (i.e., an inhabitant who has not signed a lease agreement). In essence, this person has no legal duty or obligation to the property, its owner, or its lessee (you), so state landlord-tenant laws do not apply. Accordingly, it may be time to seek an alternative legal remedy. However — and this is key — you cannot physically force a roommate out the door by pushing them or throwing belongings on the sidewalk.

Most states have enacted a more civilized approach that provides the unwanted guest the right to notice and due process. In many states, a roommate must first be put on notice that he or she is no longer welcome. To accomplish this, a simple one-page statement declaring that the roommate arrangement has ended should suffice. Further, provide the roommate with a deadline for leaving, which usually must be at least 15-30 days from the date of the notice. Lastly, as much as you might like to avoid actual interaction, be sure the roommate actually receives the document.

See you in court!

Hopefully, the roommate will take a hint and exit gracefully. If this does not happen, however, it will be necessary to file a petition for eviction in your local court, which is likely the same court that handles formal landlord-tenant matters. By allowing the roommate to remain on the property sans lease, you actually created a month-to-month oral tenancy agreement, which must be undone using proper legal channels.

The court staff will give you a date and time for an eviction hearing. At the hearing, be prepared to present the eviction notice mentioned above, as well as evidence to show that the roommate was never included on the lease and — at most — had a month-to-month tenancy as an off-the-record roommate.

The court will likely grant the petition, and your roommate will have no choice but to vacate the premises immediately.

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Related:

Source: zillow.com

What Are Comps? Understanding a Key Real Estate Tool

Whether you’re buying or selling a home, comparing similar homes can yield a wealth of helpful information.

“Comps,” or comparable sales, is a term anyone on either side of a real estate transaction should know well. It refers to homes located in the same area and very similar in size, condition and features as the home you are trying to buy or sell.

Buyers look at comps when deciding what price to offer on a home, and sellers use comps to figure out how to best price their home for the market. Real estate agents look at comps all day long as a way to keep on top of their local market. If you are a buyer or seller, it’s helpful to have a strategy to analyze comps, because all comps aren’t created equal.

Location is the highest priority

If you are trying to price a home or figure out its value, you need to look nearby. The market is based on location, so keeping as close to the subject property as possible — meaning, within the same neighborhood — is the most effective approach.

If you can’t get enough comps nearby, it’s fine to keep expanding out. But there will always be a boundary, like a school district, that you need to stay within.

Timeframe matters

The best comps are homes that are currently “pending.” Why? Because a pending home is a piece of live market data. A pending home means that a buyer and seller made a deal, and that deal will reflect the most up-to-the-minute stats on the market.

A good local real estate agent, leveraging her network, can get a fairly accurate idea what the ultimate sale price or range is for a pending deal. Try to stick with sales in the past three months, and never go more than six months, because older data is not reflective of the current market.

Factor in home features

Once you have location and timeframe, it is key to look for homes with similar features that have sold, as opposed to comparing price per square feet. While the latter is helpful, it won’t consider factors like views, a new designer kitchen or a finished basement vs. unfinished.

If you have all three bedrooms on the top floor, look for something similar. Try to compare your subject property to like properties when it comes to traits like total size, the number of bedrooms and bathrooms, and the size of the lot. You can make adjustments once you have found similar homes.

Don’t overanalyze the comps

Putting your trust in a good local agent will keep you from agonizing over the petty details of each comparable home. Your agent is likely familiar with some of the recent sales, and can help shed light on why one comp fares better than another. You may not know that one home was next to a fire station or across from a parking lot, or that another didn’t have a real backyard, but your agent will. These small nuances will affect the home’s value.

Find your home on Zillow to see your Zestimate® home value with your comps.

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Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Source: zillow.com

HARP Now Extended Through 2016

The program, which helps underwater borrowers refinance, won’t be ending any time soon.

Since it first launched in 2009, the Home Affordable Refinance Program (HARP) has helped 3.2 million borrowers across the country lower their monthly payments by refinancing at historically low interest rates. Friday, FHFA Director Melvin Watt announced this relief won’t be ending any time soon.

HARP will continue through the end of 2016, allowing homeowners who owe more than their homes are worth and regularly make mortgage payments to refinance. To help eligible borrowers take advantage of this program, Zillow remains the only marketplace supporting HARP and FHA Streamline refinances.

The FHFA has started a 10-day Twitter campaign using the hashtag #HARPfacts to help spread the word. They’re targeting Chicago first, where nearly 40,000 Chicago-area homeowners could save an average $189 per month or $2,300 a year with HARP.

Get answers to your HARP questions here.

Related:

Source: zillow.com

What Are Comps? Understanding a Key Real Estate Tool

Whether you’re buying or selling a home, comparing similar homes can yield a wealth of helpful information.

“Comps,” or comparable sales, is a term anyone on either side of a real estate transaction should know well. It refers to homes located in the same area and very similar in size, condition and features as the home you are trying to buy or sell.

Buyers look at comps when deciding what price to offer on a home, and sellers use comps to figure out how to best price their home for the market. Real estate agents look at comps all day long as a way to keep on top of their local market. If you are a buyer or seller, it’s helpful to have a strategy to analyze comps, because all comps aren’t created equal.

Location is the highest priority

If you are trying to price a home or figure out its value, you need to look nearby. The market is based on location, so keeping as close to the subject property as possible — meaning, within the same neighborhood — is the most effective approach.

If you can’t get enough comps nearby, it’s fine to keep expanding out. But there will always be a boundary, like a school district, that you need to stay within.

Timeframe matters

The best comps are homes that are currently “pending.” Why? Because a pending home is a piece of live market data. A pending home means that a buyer and seller made a deal, and that deal will reflect the most up-to-the-minute stats on the market.

A good local real estate agent, leveraging her network, can get a fairly accurate idea what the ultimate sale price or range is for a pending deal. Try to stick with sales in the past three months, and never go more than six months, because older data is not reflective of the current market.

Factor in home features

Once you have location and timeframe, it is key to look for homes with similar features that have sold, as opposed to comparing price per square feet. While the latter is helpful, it won’t consider factors like views, a new designer kitchen or a finished basement vs. unfinished.

If you have all three bedrooms on the top floor, look for something similar. Try to compare your subject property to like properties when it comes to traits like total size, the number of bedrooms and bathrooms, and the size of the lot. You can make adjustments once you have found similar homes.

Don’t overanalyze the comps

Putting your trust in a good local agent will keep you from agonizing over the petty details of each comparable home. Your agent is likely familiar with some of the recent sales, and can help shed light on why one comp fares better than another. You may not know that one home was next to a fire station or across from a parking lot, or that another didn’t have a real backyard, but your agent will. These small nuances will affect the home’s value.

Find your home on Zillow to see your Zestimate® home value with your comps.

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Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Source: zillow.com

Facts About Using a Co-Signer on a Mortgage

If you’re thinking about buying a home with a co-signer, be sure you know what that means for both you and them.

Do you need a co-signer to buy a home? To help you decide, let’s review the reasons you might use a co-signer, the types of co-signers, and the various requirements lenders have for allowing co-signers.

When to use a co-signer

Many young professionals ask their parents to co-sign while they’re ramping up their income. Other lesser-known but still common scenarios include:

  • Divorcees use co-signers to help qualify for a home they’re taking over from ex-spouses.
  • People taking career time off to go back to school use co-signers to help during this transitional phase.
  • Self-employed borrowers whose tax returns don’t fully reflect their actual income use co-signers to bridge the gap.

Before using a co-signer, make sure all parties are clear on the end game. Will you ever be able to afford the home on your own? Is the co-signer expecting to retain an ownership percentage of the home?

Types of co-signers

There are two main types of co-signers: those that will live in the home, and those that will not. Lenders refer to these as occupant co-borrowers and non-occupant co-borrowers, respectively.

  • Non-occupant co-borrowers are the more common category for co-signers, so the lender requirements summarized below are for non-occupant co-borrowers.
  • Occupant co-borrowers who are co-signing on a new home can expect lenders to scrutinize the location and cost of their current home, and should also expect post-closing occupancy checks to verify they’ve actually moved into the new home.

Ownership considerations for co-signers

Lenders require that anyone on the loan must also be on the title to the home, so a co-signer will be considered an owner of the home.

If borrowers take title as joint tenants, the occupant and non-occupant co-borrowers will each have equal ownership shares to the property.

If borrowers take title as tenants in common, the occupant and non-occupant co-borrowers can define their individual ownership shares to the property.

Financial considerations for co-signers

Lenders allow occupant and non-occupant co-borrowers to have different ownership shares in the property because the Note (which is the contract for the loan) makes them both equally liable for the loan.

This means that if an occupant co-borrower is late on the mortgage, this will hurt their credit and the non-occupant co-borrower’s (aka the co-signer’s) credit.

Another co-signer risk is that the co-signed mortgage will often count against them when qualifying for personal, auto, business, and student loans in the future. But the co-signed mortgage can sometimes be excluded from future mortgage loan qualification calculations if the co-signer can provide documentation to prove two things to their new mortgage lender:

  • The occupant co-borrower has been making the full mortgage payments on the co-signed loan for at least 12 months.
  • There is no history of late payments on the co-signed loan.

Lender requirements for co-signers

Occupant co-borrowers must have skin in the game when using a co-signer, and lender rules vary based on loan type and down payment. Below are common lender requirements for co-signers. This list isn’t all-inclusive, and conditions vary by borrower, so find a local lender to advise on your situation.

  • For conforming loans (up to $417,000, and high-balance conforming loans up to $625,500 by county), Fannie Mae and Freddie Mac will allow for the debt-to-income ratio (DTI) to be calculated by simply combining the incomes of the occupant and non-occupant co-borrower. This is known as a “blended ratio,” and is especially helpful when the co-signer has most of the income.
  • Conforming loans will require at least a five-percent down payment to allow a co-signer.
  • For conforming loans with less than 20 percent down, lenders will require at least five percent of the down payment come from the occupant co-borrower. Flexible programs like Fannie Mae HomeReady loan allow blended ratios for co-signers, and go further by allowing income of people who won’t even be on the loan but that will verify in writing that they’ll be living in the home with you for at least 12 months.
  • Some jumbo loans above $417,000 (or above the conforming high-balance limit by county) will allow blended ratios for qualifying with co-signers. Your lender will advise based on your down payment, reserves left over after the loan closes, loan amount, credit score, and other components of your profile.
  • Many jumbo loans allow for the occupant co-borrower’s DTI to go as high as 50 percent when using a co-signer, but in most of these cases, at least 10 percent of the down payment must come from the occupant co-borrower.
  • Select jumbo loans allow for the occupant co-borrower’s DTI to go as high as 75 percent when using a co-signer, but there will be many other requirements, and the rates won’t be as competitive.

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Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Source: zillow.com

3 Situations Where It Pays to Buy a Fixer-Upper

You finally found “the house,” but it needs some work. Will it be a money pit or a money maker?

It’s every home buyer’s worst nightmare: Finding a house within striking distance — of your price range and work— that quickly turns into a money pit.

On the flip side of the fixer-upper experience is someone like Jordan Brannon, a director of digital strategy in Spanaway, WA, near Tacoma. Although he’s sunk considerable money into his two-story, late-1990s home, he feels it was a good investment.

“It was about finding a home that we could add value to — and could purchase at a below-market rate,” he says of his 3,000-square-foot home. But there was one crucial caveat: “The fixer-upper work that we wanted to do, we had to be able to do.”

While that fixer-upper you’ve got your eye on may not be the steal you’re expecting — the average fixer-upper lists for just eight percent less than market value, according to a new analysis from Zillow — it’s still a tempting prospect for many buyers.

Should you make a fixer-upper your next home? Here are three scenarios where the answer may be “Yes!”

When the upgrades are simple

Knowing that hiring contractors was out of the question — in part because Brannon works from home — Brannon and his wife focused on finding a home they could revamp themselves.

This meant forgoing homes with any foundation, electrical, or plumbing issues, and eyeing properties where cosmetic upgrades were the name of the game.

This isn’t to say the couple didn’t put in a lot of hard work; the project took nearly three months.

“We basically gutted the first floor down to drywall — did a full repaint, with all new trim; replaced the kitchen cabinets and countertops, and added new light fixtures and door handles,” Brannon says. New toilets and sinks are recent installments.

“The home looks 10 years younger, and feels cleaner and brighter,” Brannon remarks. “We’re more comfortable living in it, and I’m confident we’ve made an improvement in the home’s resale value.”

Combined estimates from contractors put the value of the improvements around $55,000, minus one bathroom. Altogether, Brannon says the couple spent about $15,000 on the work, plus 240 hours in labor (yes, he’s been tracking). For Brannon, it was a worthwhile endeavor.

When the numbers add up

“Fixer uppers [only] make sense as long as the numbers pencil out,” says George Vanderploeg, a luxury real estate broker with Douglas Elliman in New York. In other words, “Is the money that I have to put into it going to make the property worth at least that much when I do it?”

In general, people will price a property based on what others sell for, Vanderploeg explains. “If I were just to pick a block in Manhattan, say on 63rd Street, between Lexington and Third Avenue, the renovated townhouses there might sell for $3,000 per square foot,” he continues. “An un-renovated townhouse might sell for maybe $2,000 per square foot. If you have the money to put in, it may all work out.”

Of course, for many home buyers, especially those without a big — or any— renovations budget, this is easier said than done.

When the timing is right

Every municipality has a building code, says Vanderploeg, and the work that you do on the home must fall within legal bounds. “An architect usually will supervise the work, and then at the end of the process, they’ll sign off on it,” he says. However, this can be time-consuming.

You can also run into hurdles if your contractor falls behind schedule, has trouble staying on budget, or is just unreliable. “Where people go wrong sometimes is having a bad contractor,” says Vanderploeg.

If you’re unable to live in the home or get stuck waiting for permits, you could also find yourself in a bind. “Sometimes we have to find people a place to live for six months to a year while they’re waiting for something to be finished,” Vanderploeg adds.

For these reasons alone, homeowners need to be clear-eyed about the renovation process.

Remember, committing to upgrade a fixer-upper is more than a labor of love — it requires a time and financial commitment. But if you’re willing to go all in, think about the bragging rights!

Hear about one family’s fixer-upper experience:

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Source: zillow.com