Tuesday, September 28, 2010

Q: My partner and I can’t make up our minds between two houses.

We’re ready to buy and preapproved for our loan, but both houses are attractive to us. One of these places is in much better shape than the other but it’s on a tiny lot. The other home is on acreage. We’ve been hoping to have a little farm with a big garden and maybe some chickens. Our daughter is also talking about a pony someday, so the home on acreage would be a better bet. However, we are not experienced fixer upper people. What do you recommend?

A: Well, I have always had “land lust” myself, so my instinct is to go for the house on acreage. Having acreage is usually more desirable on resale and privacy is almost everyone’s first priority. Plus having chickens is really great!

If the seller is willing, I’d recommend you do a pre-inspection of the fixer. Pre-inspections are not common but they do happen. That can tell you whither the work that’s needed is a major deal killer or simply deferred maintenance and cosmetic repair with maybe some up grades needed.

We have some great rehabilitation mortgage loans from FHA that can cover the cost of fixing these problems if the seller isn’t willing or able to make repairs. Let’s say you do the inspection and the inspector finds about $10,000 worth of repair work needed. On top of that, you’d really like new floor coverings and paint. You get some quick bids for those and the total for everything comes to $22,000.

Next, you make an offer to buy the place but deduct $22,000 from the asking price to cover the rehab. You may not get that entire amount off the price but it’s worth a try. If the seller accepts your offer, the FHA rehab loan will cover those repairs and up grades and you can have all the work done, to your specifications, after closing and end up with a great house. Ask your lender about the details of this program or call me for more information.

Tuesday, September 14, 2010

Q: We can’t believe the hassle we’ve had with our bank during the course of our home purchase.

In the end the bank was simply dysfunctional and incompetent! It’s a wonder we closed at all. We did everything they asked and gave them the same paperwork over and over again. What is the matter with these people?

A: It does seem that the larger, national banks have become somewhat dysfunctional in their mortgage department. In order to save money, many of them have laid off workers so now you have fewer people doing the work of many. They also have the most inexperienced people doing the work since those folks cost the banks less to employ.

Over the course of the last two years I’ve been shocked at the difficulty we’ve been having with the largest banks. There are constant delays, often the loan is reassigned several times to different offices in other cities, and files are sometimes lost.

I’ve had the best luck with private mortgage brokers, however I only recommend mortgage brokers I’ve worked with for many years and can really trust. I have also been pleasantly surprised at the speed and efficiency of credit unions. They close the sale smoothly and on time.

There are also smaller, primarily regional banks in our area that are doing a good job. They don’t seem to outsource their work, but keep it local and are still using experienced staff who know what they’re doing.

I’ve had two recent transactions that almost drove me over the edge. In the first case, the bank fired the loan officer we were working with without telling my clients or me, then lost the file, and then failed to do a proper credit check or appraisal. They stopped returning calls or emails so finally we took the loan to someone else.

In the second case, the bank couldn’t get closing papers to escrow on time even with many weeks to work on it with extraordinarily qualified borrowers who did everything right. My clients found the money elsewhere. These were large national banks.

Wednesday, September 01, 2010

Q: You came out to our home and gave us an opinion on the value of our house, which we appreciate.

However, I don’t think you realize all the things that we have done to the place since we bought it. We’ve done a lot of remodeling and think that should get us a higher price when we go on the market.

A: We all think our home is worth more than the next guy's. That’s just human nature. Most people have done a lot to their property over the years. But I think it’s easy to confuse maintenance and up keep with remodeling. There are three categories I use to describe changes to a house: maintenance, up grades and remodeling.

Let me give you a couple of examples. If you replace you’re worn out roof; that’s maintenance. It has to be done to keep the house dry. If you replace a standard three tab shingle roofing with metal or tile or some other higher end product, that’s an up grade. If you rip out half the roof, raise it eight feet and add a bank of clearstory windows and then vault the ceilings under it, that’s remodeling.

Or here’s another example. If you replace your worn out carpet with new, that’s maintenance. If you replace the carpet with wood or bamboo flooring, that’s an up grade. If you tear out the floor, lay in heating coils for in floor heating and add a gas fired boiler to heat the coils and then cover it all with beautiful tiles, that’s a remodel.

Just painting a home, which is maintenance, or putting in nicer appliances or cabinets, which is an up grade, will not add significantly to the value of the house. Many up grades don’t necessarily add to the bottom line. But, they make your home more attractive and easier to sell quickly. A well cared for, well priced home that’s clean and inviting will always sell. A home in excellent condition will sell quicker than the competition, which is particularly important in a slow market.