BuyingHouse Flipping September 19, 2019

Considering a Fixer-Upper? Follow These 21 Tips

Fixing up a house — either to live in or to flip — has become an increasingly popular dream, and it makes sense: Who doesn’t love watching all those shows on HGTV while you ponder how much money you could make on your own flip (or how nice it would be to live in a fully upgraded house) one day?

That’s the dream, anyway. The reality can be a lot messier, and a heck of a lot more expensive, than what you see on television. So before you start thinking seriously about buying a fixer-upper, make sure you know what you’re getting into and how to come out on top by following the best-practice tips.

BE REALISTIC ABOUT PROJECT SCOPE

The fixer-uppers that need the most work are going to be priced at the bottom of the market, and therefore they’re probably going to be pretty attractive — especially to someone who’s never fixed and flipped a house, and who doesn’t necessarily understand what’s involved. And oftentimes, a fixer-upper requires more than just a cosmetic update; there could be structural issues, plumbing problems, or the house might need to be rewired entirely, just to name a handful of potential fixer-upper pitfalls.

Not only do you need to be realistic about the project scope for each individual fixer-upper that you’re considering, but you also need to think about your own, personal project scope wants and needs. Are you hoping for an almost-move-in-ready type of job, where you’ll just be replacing some flooring and painting the walls? Or are you prepared to tackle a full gut-and-repair type of job?

SET A BUDGET

It’s probably not a newsflash that updating a house costs money — sometimes a lot. The fixer-upper itself might not be all that expensive, but bringing it up to par with the rest of the market (or above) is definitely going to cost you. Talk to any partners going in on this project with you, and ideally a financial advisor, to hammer out how much you can realistically afford to spend on the fixer-upper and to explore any funding ideas that you might have.

If you’re not sure what a realistic fixer-upper budget looks like in the area where you’re searching, then it’s useful to find a local contractor who can give you some ballpark figures for what you can expect to spend. (And you’ll probably be glad you connected with that local contractor before all is said and done, anyway!)

SET A CALENDAR

Buying a fixer-upper to improve and live in might not require a strict calendar, although it is a good idea to give yourself some general parameters around how long you really want to spend working on the house, whether it’s one year or five. But if you’re planning to fix-and-flip the house, or fix it up and rent it out, then a calendar becomes much more critical.

Remember: You are on the hook for the mortgage while you own this house. If you can’t fix it within your ideal time frame, then not only will you be paying for the repairs, but you’ll continue to carry the mortgage loan, too. And if it doesn’t rent or sell as quickly as you’d hoped, then that’s another month of payments you’ll have to make. 

This is another area where a local contractor or even a real estate agent might be able to help. They usually know a lot about the permitting and repair process, not to mention the local contractor market and how busy or relaxed it is at any given time of year, and they can give you a guesstimate as to how long fixing a fixer-upper should take.

… THEN BE WILLING TO WIGGLE WITH BOTH

Of course, life happens, and you can’t always expect things to go according to plan. Contractors don’t always know how much help they’re going to have, or they might be booked for months — and weather can also be a factor. That’s why it’s always smart to remember that your budget and calendar might act more as guidelines than hard-and-fast rules, and you should be prepared to extend one, the other, or both beyond your projected expectations.

If you know going in that your budget and your calendar aren’t set in stone, it’ll be easier to bear when something inevitably shifts and you wind up a little bit (or a lot) behind schedule or over budget. Just have a contingency plan in place in case that happens so you don’t overextend yourself financially.

FIND THE RIGHT LOCATION

Some fixer-uppers are going to be a lot more lucrative for an investor than others — and to find them, you’ll want to start with location. A fixer-upper that’s surrounded by a bunch of houses that also need a lot of work isn’t going to flip for as much as one that’s surrounded by luxury homes, for example. And even though you probably won’t find too many fixer-uppers surrounded by luxury homes, there are plenty in up-and-coming neighborhoods that are just as potentially viable.

Talk to an expert in the area (like a real estate agent) about where to find a house that needs some TLC but could yield a great return for you, and then start targeting homes in your price range in that spot. That’s the best way to narrow your search in a manner that doesn’t restrict you too much and gives you the highest chance of finding an excellent deal.

LOOK FOR A ‘MOST POPULAR’ HOUSE

The most popular type of residential property in the area is going to vary depending on where you are. In some suburbs, it’ll be a three-bedroom house with a yard, while in other downtown artist enclaves, there will be a lot more demand for studio condos with room to create. A hotspot for retirees might favor one-story homes with just two bedrooms, and maybe graduate students in the nearby college town are most interested in small, easy-to-manage units within walking distance of campus.

Wherever you find that fixer-upper, make sure you understand what the most popular homes in its neighborhood look like. If the fixer-upper doesn’t resemble that profile — and it would cost a lot of money to get it to conform — then you should probably pass and move on to the next opportunity.

THINK ABOUT THE LAYOUT

It’s not enough to just know how many bedrooms and bathrooms are ideal for your target renter or buyer (or yourself). You’ll also want to look at the home’s layout and ask yourself whether it needs work, and how much that work might cost.

For example: Many modern homes have an open floor plan between the kitchen and dining room, and sometimes the living room, too. And newer parents often prefer a master bedroom that’s on the same floor as their baby’s nursery or toddler’s room. Think about the type of person who’s most likely to want this house when you’re done with it (even if that’s yourself!) and then ask yourself what needs to be fixed in the layout (if anything) and whether you can afford to fix it.

CONSIDER CONDITION

Some fixer-uppers are going to be easier to handle than others. A house that was mostly well-maintained but not updated significantly for decades is probably going to be an easier lift than one that’s been sitting abandoned for a couple of years. If your budget and timeline aren’t going to accommodate a house that’s in really bad condition, then you need to know that before you make a mistake and put an offer on a house in really bad condition.

Real estate agents and real estate inspectors are pretty familiar with the typical problems that houses encounter (and it’s slightly different depending on where you live, the climate, the neighborhood, and so on). If you’re not sure what big condition red flags you should be seeking out, then tap someone like that to help you set some parameters around condition.

KNOW YOUR LOAN OPTIONS

Some people think a mortgage loan is a mortgage loan is a mortgage loan — but those people probably haven’t been keeping up with the financial industry. There are a lot more options for buyers these days, including loans specific to fix-and-flip deals that usually involve shared equity. In other words, there are companies out there that will help you with the down payment or finance the sale and possibly even pay for repairs on the home in exchange for their money back and a slice of the profit you make from the sale.

Depending on what your plans might be for this fixer-upper, talk to a mortgage broker and do some additional research to figure out what options you might have. You’ll probably be pleasantly surprised by how many there are!

GET A PEST INSPECTION

Hopefully you’re well aware that a general inspection is very important when buying a fix-and-flip, but there are other inspections that might not be on your mind but that are still a really good idea. A pest inspection is one of them — one of the last things you want to discover when you start to take on the serious repairs is an infestation of insects, rodents, or any other wildlife that doesn’t belong inside. If you live in an area where there aren’t a lot of pests, maybe you can skip this one, but it’s almost always worth considering.

CONSIDER A SEWER LINE INSPECTION

Did you know that some sewer lines are made with clay pipes — or Orangeburg pipes, which are made from wood pulp and tar? When a sewer line backs up or breaks, it’s not very fun for the occupants, and this is an inspection that may turn out to save you a lot of money, especially for an older home. If you have any misgivings or questions about the sewer line, don’t play a guessing game; call in a professional.

THINK ABOUT AN ENGINEERING REPORT

An engineering report and structural inspection will tell you everything you need to know about the foundation on the house, and whether it’s at risk for any future issues. This isn’t always a necessary part of a transaction, but with a fixer-upper — especially an older one in poor condition — it’s probably not a bad move to cover your bases and get someone to take a look at everything before the final papers are signed.

FACILITATE COMMUNICATION BETWEEN PLAYERS

There can be a lot of people involved in polishing up one fixer-upper, from real estate agents and inspectors and appraisers and mortgage brokers or other loan contacts during the buying process, to general contractors and specialists during the actual fixing, and possibly future renters or buyers, too.

One person is probably going to know more than anybody else about exactly what’s going on with this fixer-upper — and that’s you. So to make sure you’re successful and everything sticks as close as possible to your schedule, be prepared to act as the point person and facilitate communication to the best of your ability.

FIND THE RIGHT PEOPLE

Some general contractors are experienced with fixer-uppers, while others mostly work on new construction. You probably also need to call in some people who are more specialized in their work — plumbers, electricians, stonemasons, landscapers, and so on. As you’ll be working with all of these people to make the property shine, and they’ll be working together at least to some extent, try to find the right people for the job.

It’s up to you to decide who the right people are. Maybe you’re prizing speed over craftsmanship — which is absolutely fine; it’s your rodeo, and these are your clowns — but if that’s the case, then you probably would be wasting the luxury-home contractor’s time by asking for a quote. Be sensible about what you want to accomplish and then go looking for the specific folks who can help you get there.

SHOP AROUND FOR APPLIANCES AND SUPPLIES

The big-box stores are always one place to find appliances, and the home improvement or hardware store may be convenient for supplies — but if you know where to look, you might find some excellent deals on the nuts-and-bolts ingredients for your fixed-up place.

If you know any other people who’ve worked on fixer-uppers in the area, it won’t hurt to ask them what they know about where to find good prices on high-quality appliances and supplies. You can also ask contractors, real estate agents, and other experts in the area to help you track down reclaimed wood or farmhouse sinks on the cheap.

FAMILIARIZE YOURSELF WITH THE NEIGHBORS …

You might not be planning on living in the property at all, but don’t make the mistake of thinking you can ignore the neighbors. They are going to be dealing with the noise, traffic, and possible inconvenience of your fixer-upper plans, possibly for months, and if you want a minimum of trouble, then it’s smart to introduce yourself early and explain what you’ll be doing and how long you’ll expect it to take.

It’s probably also a smart move to give them your email address or cell phone number and ask them to contact you if they’re experiencing any problems with the work you’re doing on the house. Just telling them where to complain and how to reach you can really help you avoid bad blood down the road.

… AND ANY HOME ASSOCIATIONS INVOLVED

You don’t need to give the homeowners’ association (HOA) your phone number, but it is wise to at least familiarize yourself with the bylaws and restrictions of the HOA, if there is one. Those restrictions often govern things like additions, and some outline things like exterior paint color and landscaping requirements. What you don’t know can actually hurt you in this case, because the HOA can fine you as the owner for noncompliance with their rules, and that’s probably not another expense you want to incur if you can help it.

KNOW YOUR PERMITS

The HOA isn’t the only entity that cares about what you do with your property. Cities and counties usually have policies around what you can and can’t do, and for some improvements, you may need to get a permit approved in order to move forward. This is something best done on the front end, and some cities and counties are a lot slower (or more overworked) than others, so try to get it done as early as possible.

KNOW WHERE AND WHEN TO COMPROMISE

It’s rare in life to get absolutely everything you want, and that’s probably going to apply to this fixer-upper experience, too. Maybe your preferred carpet is too expensive; maybe the faucet and tap sets you were eyeing for the bathrooms have been discontinued. Maybe the improvement you want to make to the house is not permitted by either the HOA or the city or county.

Whatever the case, know that like anything else in life, this probably isn’t going to go 100% to plan — and that’s okay. Take some deep breaths and find the next-best thing. And if there’s something that you absolutely cannot compromise on, make sure everyone involved in making it happen knows that it’s do-or-die — and be willing to be flexible with everything else.

PREPARE FOR THE WORST

No matter how much planning you do, and how hard you try to prevent it, things will happen to mess up your fixer-upper experience — for sure. Something might happen with a permit, or heaven forbid, your loan. Contractors could cancel on you, and it might be impossible to find another one. Buyers and renters are going to fall through.

None of that will be a traumatic, terrible thing if you remind yourself constantly to prepare for the worst. You don’t need to actually have eight contractors on standby, but come up with Plans B and C for every step of the process so that you’re ready to pick up the pieces and keep moving toward your goal when something inevitably does go wrong.

SHORE UP YOUR EMOTIONS

There’s a reason why it made a ton of sense for a network like HGTV to go big on fixer-upper content — there’s a lot of emotion involved in fixing up a house, and nothing makes compelling reality television like heightened emotions. Between the elation of closing on the house, the daunting exhaustion after day after day of work (and still no apparent progress), the frustration of plans falling through, the satisfaction of a finished improvement, and every other feeling in between, it’s an activity that sometimes runs the full spectrum of human emotion. 

Be prepared for the potential to feel overwhelmed by how much you’re feeling — then remind yourself of the reasons why you got into this fixer-upper to begin with. Whether it’s making a profit and building wealth, generating some extra monthly income, or simply wanting to live in a house that’s nicer and brighter than the one you bought, your core reason to buy a fixer-upper will help guide you across the finish line.

Buying September 3, 2019

13 Questions About Home Inspections, Answered

If you’re not familiar with home inspections, then you might have a lot of questions about what gets inspected, how thorough the inspectors are, why you even need one, and what you can expect if you’re walking with an inspector through the house you’re hoping to buy.

There’s a lot to know about home inspection, and your questions deserve answers. Here they are!

WHAT IS A HOME INSPECTION?

A home inspection is an event that is basically exactly what the name implies: A home inspector walks through the home, looking at specific elements and features of the house, and then provides a report about anything that needs to be repaired.

WHY WOULD I WANT A HOME INSPECTION?

An inspection is a good idea anytime you want a full rundown on any issues or problems with your house. If you’re already living there, it’s a lot less necessary than if you’re buying the home — when you will most definitely want an inspector to check for any potential red flags. They’ll be your problem after closing, and big issues can sometimes affect the insurability of your house (which, in turn, affects your loan eligibility), so home inspections are most common after an offer is made on a house but before the closing finalizes the deal.

WHAT DOES THE HOME INSPECTOR LOOK AT?

There are six essential parts of an inspection that you can expect every inspector to hit. They are the roof and attic, the basement and foundation, the plumbing, the electrical setup, the heating or air conditioning systems, the interior of the house, and the exterior of the house.

Depending on where you live and what common problems tend to manifest in the homes, you might also want to think about hiring a pest inspector, a sewer line inspector, or even ask about an engineering report to evaluate the home and plot’s structure and stability.

And in areas where radon is prevalent, or where there’s a lot of humidity, you may also want to ask about radon or mold testing (some home inspectors do this as an add-on part of the package).

HOW MUCH DOES IT COST?

The price of the home inspection is going to depend on the size of the house. You can typically expect to spend around $300 on a home inspection, but smaller properties (less than 1,000 square feet) might cost only $200, whereas larger homes (more than 2,000 square feet) cost upwards of $400 to inspect. Ask an inspector or a real estate agent in your area what they usually cost to get a closer estimate.

DO YOU NEED AN INSPECTOR FOR A NEW HOUSE?

It’s always a good idea to get a home inspection — even in a brand-new house. You don’t want to find out there’s a problem after you move in, and an inspection is the best way to figure that out. So follow the “trust, but verify” process with your builder: Trust that they did their very best to get your home in the best condition possible … then verify that they did just that with an official inspection.

WHO LICENSES INSPECTORS?

Home inspectors are licensed by each state, and there are slight differences in how they are certified and how they maintain their license from state to state. Your real estate agent should be able to explain the policies in your state, or point you to where you can find them.

SHOULD YOU ATTEND THE INSPECTION?

It’s usually a smart idea for the buyer to attend the inspection in case they have questions for the inspector or want to follow up on any notes the inspector makes. Many inspectors today use new technologies that allow them to include photos of any issues or potential problems, but there’s nothing like being there in person to better understand exactly what’s wrong and how to fix it.

WHAT HAPPENS IF A PROBLEM IS UNCOVERED?

If everything is not in good shape with the home you’re about to buy, there are options. Usually when this happens, the buyers and the sellers start negotiating again — this time, to figure out who’s going to pay for the necessary repairs. Buyers might be able to ask for some money to be knocked off the final sales price to accommodate for the problem, or sellers might decide to go ahead and fix it before closing. If everyone can come to an agreement that suits everybody, then the sale can move forward.

CAN YOU GET OUT OF A CONTRACT IF A PROBLEM IS REVEALED?

Most contracts to buy a home have an inspection contingency, which is hugely important for the buyer. The inspection contingency stipulates that the buyer can bow out of the contract if there’s a big problem uncovered by the inspection, which typically motivates sellers to make sure everything is in good shape. So you’re not necessarily locked in for life after you make an offer and it’s accepted; make sure you talk to your agent about inspection contingencies.

In most cases, the inspection contingency in the contract will give you an out if you need it. 

WHAT ELSE DOES THE INSPECTOR LOOK AT, IF ANYTHING?

Home inspectors are going to keep an eye out for any modifications to the house that were made since the last time it sold and make sure that the owner filed the appropriate permits to make that modification.

If the inspector finds an unpermitted change or tweak to the house, that could also cause a problem with the deal, so it’s always a good idea to obtain permits for any changes you want to make to your home if they’re necessary in your city or county. That’s not something you want to scramble to do before closing!

CAN YOU USE THE INSPECTION TO NEGOTIATE ON THE SALE?

Yes, absolutely! Buyers make their offers on homes with the understanding that there may be some minor problems here and there, but that the home is generally in good enough shape to be sold. So depending on what the inspection uncovers, buyers can either ask for the sellers to fix any problems, or they can request that the sales price of the home be lowered to account for the flaws and tackle the issue whenever they take ownership.

WHAT ISN’T INCLUDED IN AN INSPECTION? 

Inspectors are good — they catch a lot of problems with homes, and they’re usually locally focused enough to know exactly what to target — but there are some home features and extras that aren’t included in a home inspection. If it’s important for you to get an additional expert on the scene to check something out, it’s better to know upfront.

Home inspectors typically do not look at:

– Termites or pests
– Television antennas or satellite dishes
– Detached structures — garages, sheds, chicken coops, outdoor saunas, and so on
– Well and septic systems
– Lawn sprinkler systems
– Local code compliance
– Kitchen appliances
– Central vacuum systems
– Fire or smoke detectors, or fire suppression systems
– Alarm systems
– Hot tubs or swimming pools
– Environmental hazards (asbestos, lead, or radon, for example)

So if you’re concerned about one or more of those with the potential home sale in your life, you may need to hire one or more additional inspectors to make sure everything is as it should be.

HOW CAN AN INSPECTION AFFECT YOUR OWNERSHIP?

The biggest way that an inspection might affect your ownership of the house, apart from negotiations between buyer and seller, is with the homeowners’ insurance. If you have a mortgage loan, then you must have homeowners’ insurance on the house — the lender wants to make sure that the asset is protected. (And even if you don’t have a mortgage loan, it’s usually a good idea to insure your home, anyway.)

Not every homeowners’ insurance company requires a home inspection, but it’s become increasingly common in recent years. If you can’t provide them with a recent inspection that shows no major issues with the house, then you might not be able to secure insurance, and that could be a big deal if you need it for your loan.

Buying August 27, 2019

Don’t Pay More Than What It’s Worth

It’s finally happened — after months of searching, you’ve found your dream home. It’s the perfect size for your growing family, the kitchen was just remodeled and there’s a huge deck for entertaining. And best of all, the seller accepted your offer! 

As we near your closing date, your lender will want to verify the home’s value with an appraisal. This might sound nerve-wracking, but don’t worry: Appraisals protect you from overpaying.

Let’s dive into appraisals to demystify the process: 

When do you need an appraisal?
If you’re taking out a mortgage to buy a new home, the lender will require an appraisal. The appraiser gives an independent estimate of the property based on recent sales data of similar homes

When your mortgage amount matches the appraised price of the home, you know that you have a good loan-to-value ratio — and aren’t paying more than you should be.

What does an appraiser look for?
An appraiser will physically measure the home’s square footage and visually inspect the entire property. They’ll note things like:

  • Floor plan functionality and the number of bedrooms and bathrooms
  • Age of the house and its overall appearance
  • Value of any recent updates or remodeling
  • Size of the lot
  • Desirability of the surrounding neighborhood

Comparing all of that against similar nearby homes sold within the last 90 days, the appraiser arrives at your home’s value.

What if it’s valued for less than you expected?
Let’s say you agreed to buy the property for $250,000 but the appraisal came in at $225,000. Your lender won’t approve a loan for more than the appraised price. 

If you still want to buy the home, we can negotiate a lower price with the seller or challenge the appraisal and pay for a second opinion. 

Another option is to walk away. This may not sound ideal, and it will probably be hard to do. But our goal is to get you the right home at the best price. 

If an appraisal comes in low, we’ll discuss all the options available to make sure you don’t overpay.

Are you ready to find your dream home? Reach out today to get started. 

Buying August 20, 2019

18 Secrets No One Tells You About Buying a House

Most homeowners aren’t shy about telling you how awesome it is and all about the perks of living in a house that they own … but they’re a lot less forthcoming about the ugly aspects of buying a house and the sacrifices you make.

And yes, there is ugly, and there are sacrifices. Here’s what nobody is telling you that you might need to know about buying a house (especially for the first time).

YOU DON’T NEED TO PUT 20% DOWN

In most cases and with most lenders, putting 20% down is ideal or even required. But this isn’t always true. For example, the Veterans Administration (VA) offers loans for veterans that don’t require any down payment money at all.

Other loan-backers, like the Federal Housing Administration, will allow loans with only 3.5% down, but buyers have to pay mortgage insurance on those loans. They’re riskier because the buyer has less equity in the home, so buyers can expect to pay a percentage of the loan amount in mortgage insurance over the lifetime of the loan. (Or refinance the loan once they do have at least 20% equity in the home.)

There is down payment assistance available in both loans and grants, so it helps to talk to a real estate professional (like an agent) and see whether they know of any programs that might help you secure more money down.

… BUT YOU DO NEED TO PUT ANY NEW CREDIT LINE PLANS ON HOLD

Your mortgage rate is going to depend in part on your credit score, and your credit score is going to get dinged with every new line of credit you open before buying a home. So to get the very best deal on your mortgage loan (and potentially afford more house), make sure you’re not going crazy with new credit cards right before you start shopping — and definitely don’t buy anything like a yacht or car on credit!

YOU’RE NOT LOCKED INTO ONE PARTICULAR LENDER

Some people think they should immediately dive into a relationship with the first lender that accepts them and offers to back their mortgage loan. But here’s the problem with that strategy: There may be a better match out there for you, and if you don’t shop around a little bit, then you aren’t going to find it.

Talk to a few different mortgage brokers and ask them what their best deal is. Your credit won’t get dinged by this, so please feel free to explore your options! 

YOUR MONTHLY MORTGAGE PAYMENT INCLUDES MORE THAN JUST THE LOAN PAYBACK

Every month, you’ll be paying back your mortgage loan — that much you probably figured. But of course, there’s also the interest on your loan (which under many contracts gets priority for repayment above the loan principal). And you’ll also be paying homeowners insurance, which is required for the lender to approve the loan, plus taxes, every month.

If you’re not sure how much you can afford based on all of this, it’s probably not a bad idea to sit down with a mortgage broker (or five — see above) and talk about your options.

… SO THE MORTGAGE AMOUNT ON PORTALS IS NOT NECESSARILY ACCURATE

It’s tempting to look at the “average mortgage amount” on a real estate portal and take it as gospel truth, but often those are based on a loan with 20% down and usually don’t include the insurance or the taxes. Talk to an expert to get a good sense for how much you’ll expect to pay every month.

SCHOOL DISTRICTS ARE IMPORTANT EVEN WITHOUT KIDS

If you don’t have kids or don’t plan on having any, then you might be tempted to ignore the school district when shopping for a home — what’s it matter?

School districts definitely could be very important to buyers a few years down the road when they decide to purchase your house. And homes in neighborhoods with good schools tend to appreciate in value faster than homes in neighborhoods where the schools are just so-so. Make sure you’re considering your future as you’re shopping, which includes your future after this home.

YOU DON’T NEED TO SPEND YOUR ENTIRE PRE-APPROVAL AMOUNT ON THE HOME

It’s tempting to buy at the very top of your preapproved price range, but remember that you’re going to have to pay interest on the entire amount over many years, and don’t forget about the other costs of owning a home.

Financial experts suggest that you spend no more than 30% of your household income on your mortgage, so if the amount you’re spending is creeping beyond one-third of your household income, that could be tough to meet. So don’t overextend yourself!

YOU’LL LOOK AT HOMES OUT OF YOUR PRICE RANGE (AND CRAVE THEM)

It’s only human nature to look at things you can’t have, and that goes for housing, too: You will not be able to refrain from looking at homes just above your ideal price range and thinking about how nice it would be to buy that house instead of the disappointment you walked through last week.

But what’s worse than living in a house that you might need to fix up a little bit? Living in a really nice house that you can’t afford and having to sell it — or worse, go through a foreclosure. Look if you must, but don’t let it influence your decision-making.

YOU MAY GET OUTBID, MORE THAN ONCE

Some markets are hotter than others and have more cash buyers, which can be devastating if you’re using a loan and don’t have the wherewithal to pay cash for a house. Sellers often opt for cash buyers because the closing process is less cumbersome, and it can be hard for buyers to experience bid after bid rejected by the seller.

Stay strong and have faith that your house is out there. It might not be a smooth road, but you will get there.

AGENTS GET PAID ON COMMISSION

Real estate agents typically don’t get paid until the closing table, when the house is officially yours. Then the seller will cut the agent a check. This is because agents are paid on commission: They’re taking a percentage of the sale.

If you have an agent who isn’t upfront with you about how payment works — or worse, one who is trying to talk you into more house than you can really afford — then it’s not a bad idea to question whether your agent is really the best fit for you. You want someone honest who will protect your interests, and that’s not too much to expect from an agent.

TALK TO A CONTRACTOR BEFORE CLOSING

The inspector might identify some issues that need to be addressed, and usually this is negotiated with the seller, but to be entirely sure that you understand what will be involved and how much it will cost, it’s a good idea to hire a contractor and go over the inspection report. Some contractors offer free consultations, and most will be able to give you a ballpark figure to use as a jumping-off point for negotiation.

SPEAKING OF CLOSING: INTRODUCING CLOSING COSTS!

It costs money to close on a house, and closing costs can be picked up by the buyer, the seller, or both. This is usually outlined while negotiating the contract, but if you didn’t pay close attention to those terms, then it might sneak up on you. Clarify with your agent and mortgage broker who is responsible for closing costs and make sure you’ve got the money available if you’re the lucky winner of that responsibility.

YOUR MORTGAGE WILL PROBABLY BE SOLD TO A SERVICER

After all that time looking for the right mortgage broker and lender, you may feel like it’s destiny, but the reality is that your lender probably doesn’t feel the same. Most lenders sell mortgage loans to a servicing company, which will be the entity collecting your checks every month for the next 30 years (unless the gets sold again, of course).

Be prepared for an announcement that your loan has been sold to a servicer and ready to cancel any checks or payments that slip out the door at the wrong time. It’s unfortunate, but it does happen, and you don’t want to pay your mortgage twice in one month.

PARKING ISN’T ALWAYS GUARANTEED

There may be a space with your condo, and perhaps you have a garage or a driveway, but if you live in a major metro area or have several kids of driving age (or roommates, for that matter), then it’s possible you might have a struggle with finding parking.

This is information that’s usually included in listings, and it might also help to ask agents about parking situations in different neighborhoods. Street parking might work fine, but it’s usually a good idea to know how scarce or ample it is at the very least.

YOU’LL NEED TO BUY FURNITURE

Maybe you’ve bought all of your furniture at antique stores, and it just doesn’t look right in your new mid-century modern home. Or perhaps you have several more rooms to fill than you did before. Whatever the case, be aware that you’ll have some purchases to make on the furniture front, and budget for them if you can — and definitely do not buy a bunch of furniture on credit before the loan closes, whatever you do.

YOU’RE ON THE HOOK FOR ANY HOME REPAIRS

The nice thing about renting is that when something breaks, the landlord will theoretically be by to fix it, or send someone, sooner or later. You don’t need to worry about how much the new sump pump or sewer line costs.

But all of that burden becomes yours and yours alone when you become a homeowner. The drain is clogged? The water heater won’t heat water? If you don’t fix it, or arrange for someone else to fix it, then it’s staying clogged and cold.

THOSE NEARBY EMPTY LOTS WON’T BE EMPTY FOREVER

Everything changes, and some places change more quickly than others. Almost nothing gets a neighborhood riled up like the words “new development” or “strip mall,” and you cannot take it for granted that the rolling (empty) hills around your brand-new pride and joy are going to remain empty, unless you happen to own all the land, too.

It’s not a bad idea to stop in at your city or county offices and ask what they know about any development plans or zoning for the area, and then keep tabs on things once you move in. Better safe than sorry and surprised, right?

IT MIGHT TAKE A WHILE TO FEEL LIKE “HOME”

You’d think that once you’ve gone through all of this trouble for a house, it’ll automatically “feel” like yours … but that’s not necessarily true. It may take a few weeks or even months before you start settling in and feeling like a homeowner.

So if the words “this is my house” don’t roll off your tongue quite like they should in the beginning, take heart: You’ll be claiming it without thinking about it before you know it.

Home Financing August 13, 2019

Home Financing Is Easier Than You Think

You saw an online ad for low mortgage rates and decided to apply — just to see if you qualify. Now your phone is buzzing nonstop, and lenders are emailing you about “DTIs” and W-2s. 

The onslaught of financing questions can be baffling when you’re tackling them alone. But it doesn’t have to be that way. 

Looking for some insight to make financing more straightforward? These four tips will get you started:

1. It’s okay to play the field.
Don’t be afraid to apply for several loans with different lenders to compare the terms and rates. You can — and should —  shop around. 

Just be sure to do so within a set time period to avoid multiple credit inquiries

2. Manual underwriting can help you qualify.
Most lenders automate their approval process to speed up transactions. However, if you fall outside conventional requirements, they can’t see your full financial picture. That’s where manual underwriting comes in.

Buyers with concerns about their income or credit should verify that their lender will manually underwrite the loan if needed. 

3. Broaden your prospects with a fixer-upper mortgage.
Buying a fixer-upper can give you more home at a lower price. Did you know that the Federal Housing Authority (FHA) and Fannie Mae offer loans that will cover the mortgage and necessary home repairs?

4. You don’t need 20% down.
Perhaps the biggest homebuying myth is that you can’t buy without 20% down. But you can. Here’s how:

  • Low Down Payment Options: FHA loans only require 3.5% down with a FICO score of 580 or higher, or 10% down with a score of 500 to 579. 
  • 0% Down Options: Buyers shopping in rural areas may be eligible for a USDA loan with 0% down. For qualified veterans and active-duty military members, VA loans often have no down payment requirement.
  • Buyer Assistance Programs: There are down payment and closing cost assistance programs available to first-time homebuyers. Not a first-timer? Some are also available to those who haven’t owned a home in the past three years.    

Mortgage financing can feel overwhelming. But you’re not in it alone.

Reach out today for a referral to a trusted lender to get preapproved for your next home.

Selling July 23, 2019

3 Ways an Inspection Helps You Sell

Like many homeowners, you might be hoping to capitalize on the hot summer homebuying season to sell your house for a pretty penny. Who knows, maybe you’ll even make enough for the beach house you’ve been eyeing or for a long summer getaway.

But first, you’ll need to get your home ready to sell. And getting a home inspection may be one of the best ways to do that.

Inspections can shed light on potential issues and help you make necessary repairs before listing your home. It might even help you fetch a higher asking price if the inspection shows that your home is in better condition than others in the area. 

All in all, an inspection can:

1. Alert You to Issues Before Going Under Contract
A home inspection can highlight issues that might concern potential buyers. 

Pro tip: You should fix any issues that pose a safety hazard. And your inspection report can serve as a repair guide before listing.

2. Gauge Your Pricing Expectations
Inspections help you get a handle on what condition your home is in and what price it might fetch. 

Pro tip: A clean inspection report, or proof of recent repairs, can help buyers feel more confident in making an offer.

3. Prevent Closing Delays
If issues crop up during the buyer’s inspection, it could delay closing due to repairs or prolonged negotiations. The buyer could even pull their offer altogether.

Pro tip: Fixing issues before listing the home can improve the outcome of your buyer’s inspection. And that could mean less negotiation on the whole.

Keep in mind that inspections come with an upfront fee, and you’ll be legally required to disclose any issues the inspector finds. However, we can discuss the inspection report to see how repairs could affect your home’s market value

Are you considering selling your home this year? Want to know what it’s worth or what you can expect in today’s market? Reach out today for a free local market report and see how your house measures up.

Buying July 9, 2019

Buying With Friends Isn’t Like Renting

You’ve been living with your best friend since freshman year of college, and it’s been a blast. So why not pool your money and go in on a house together? After all, it’s easier to buy when you have two incomes. 

It’s true that co-buying a home with friends or family can make it easier to own a home. And it can reduce your upfront costs. 

But there are a few unique differences to co-buying. Here are three you should consider and discuss before you jump into the process.

1. What type of ownership will you have?
Don’t assume that splitting the mortgage determines the ownership. 

If one person will be paying a larger portion, you might want to be tenants in common. This also allows you to transfer or sell your share of the property at any time. But if you want to divide the ownership equally, you can choose to be joint tenants.

2. How are your credit scores looking?
When two buyers are on a mortgage app, lenders use the lowest credit score to determine the interest rate. 

Do you both have excellent credit? If not, you could have only one person on the mortgage loan, but you’ll only be able to count one income to determine the loan size. 

3. How will you pay your bills each month?
This sounds like a minor detail, but it’s important to be on the same page about finances before the bills come in.

Will you pay bills out of a joint household account? Or will one person pay the full bill and have the other pay them back?

Once you’ve discussed your plans for the finances and ownership, your best bet is to have a legal agreement prepared ahead of time.  

Have more questions about co-buying a home? Reach out today to discuss your needs and get the process started. 

House Flipping July 2, 2019

16 Common Mistakes That First-Time House-Flippers Make

When you binge-watch a little too much HGTV, it’s easy to come to some crazy conclusions. Conclusions like, “House flipping looks easy! I should try it!”

Well, maybe you should — we sure won’t stop you! — but before you jump into your very first home flip, make sure you know what common mistakes first-time flippers are in danger of making so that you can avoid the same fate.

Not having the finances

Before you flip a house, you have to buy it. Depending on whether you’re paying all-cash or getting a mortgage loan (and whether you already own a primary residence or not), you will have to secure a down payment for the home, plan on paying mortgage interest for the months that you carry the mortgage, pay for utilities, and pay for the expenses of actually fixing up the home.

You might be tempted to assume that this will be a quick and easy project, but similar assumptions have taken down more experienced house-flippers than you. It’s much better to overestimate how long it will take then to underestimate — that way you can make sure you have enough money to cover the flip.

One money-saving tactic could be to move into the house while you renovate it (then you won’t be paying rent elsewhere). Be warned, though, that unless you live in the home for two years, you will still have to pay capital gains tax on any profit made from the flip.

Buying the wrong property

Like Goldilocks, you want a home that’s “just right” — not too expensive, or you won’t make any money, and not in too bad of shape, or you’ll spend more than you planned to fix it.

Paying too much for a home is one of the worst things you can do as a house flipper, so it might help to secure some real estate expertise from a local professional who can give you a good idea of what fair-market prices look like and help you ascertain if your offer looks good or if you want to seek out a better deal.

Additionally, a professional can help you understand how much profit you could potentially make, which is also easy to overestimate as a first-timer. And they can make sure you’re following the 70% rule. What’s that? Well …

Not following the 70% rule

Most fix-and-flip investors who have been doing the job for a while know and adhere to this rule. It’s not very complicated, but you may be tempted to indulge in some creative math to make the numbers work — resist! That’s a form of rule-breaking.

You do not want to pay more for a property than 70% of its fixed-up fair-market value.

So in other words, if you’re eyeing a home, and you have it on good authority from several people that after you fix it, you could sell it for $200,000 — do not offer more than $140,000 for that home. That is your 70% threshhold.

This will give you wiggle room to pay for the repairs and upgrades and to still make a profit.

Forgetting to make the budget

Are you getting the idea yet that flipping a home is a big exercise in math? Well, if you haven’t started laying all these costs out in a spreadsheet and figuring out what you can spend where, then start.

You’ll want to consider both the cost of the home (either paying for it outright or paying the monthly mortgage plus insurance, taxes, and any other expenses), the costs of the upgrades, the amount of time those upgrades will take, and the time on market once it’s ready to sell.

Again, a real estate professional (or another experienced house flipper) can give you a solid ballpark for all of these metrics if you don’t even know where to start.

Not getting an inspection

When you’re paying cash and you’re in a hurry — and you already know there’s a lot to fix in the home — then it can be tempting to skip the pre-sale inspection. Why bother?

Because that inspector might find a serious problem that’s going to cost you more to fix than you can afford. Foundation or structural issues are usually not cheap to solve and can eat up most (if not all) of your budget if they emerge unexpectedly.

Plus, when the time comes to sell the home, you’ll know that everything was done to get it into perfect condition if you bothered with an inspection!

Not securing the right permits

Before you start pulling out the sledgehammers for demolition, it’s a good idea to ascertain which permits you’re going to need for your upgrades. You don’t want to do all the work on a project only to discover that you needed a permit and might need to redo some or all of it.

Again, a real estate professional or someone who’s flipped houses before can help you here. They will have an idea of what permits are needed and can help you start the application process before you need them (not after).

Multitasking

When it’s time to actually get started on the work, you may be tempted to flit from project to project so that you can feel like you’re accomplishing something. Why continue working on that item that’s going to take a week to finish when you can just run over and finish two or three things really quickly?

If you’ve read anything about research on multitasking, then you already know the answer: It makes you much less efficient than if you focused on one thing and saw it through to the end.

Make a list of things that need to be done, and if you want to feel that sense of accomplishment, then plan to spend your morning working on major projects, and your afternoon on little items that help you feel like you’ve finished at least one thing.

Overestimating what you can do yourself

With the existence of YouTube, it’s pretty tempting to think that you can do anything with the right tools and a video.

But this is a major investment, and you are probably not qualified to do most of it. Putting a wall up or refinishing a floor? Sure, maybe. Any plumbing and electrical help will definitely require a professional, though, and you might want to consider finding a general contractor who’s willing to pitch in where you need.

If you have direct experience making a specific type of home repair, and you liked your results, then go ahead and assume you could do it again. If not, then for your first flip, hire a pro and watch them work so you decide if DIY might be an option — next time.

Not playing well with others

No flipper is an island, and that is especially true for first-time flippers, who haven’t yet discovered their core crew of people who can help them get the fixes in, and in quickly. You’ll need to rely on strangers to help you finish the job, and some people are better at doing that than others.

If you don’t deal with feedback well, don’t manage relationships well, or just generally don’t like working with people, then you should perhaps reconsider this method of money-making. You’re going to need to work with others, and work well with them; if that’s beyond your scope of ability, then maybe funding a flip and collecting some of the profit is a better choice.

The good news is that if your first flip goes well, you’ll be on your way toward building a crew for future flips.

Running out of time

You’re almost to your sales deadline, but the house is only half-finished. This is a real nightmare for a flipper, but it’s a common one when it’s your first flip and you have no real idea how long the fixes are going to take.

Overestimate how long you’ll need to finish the job, especially if you’re working by yourself. Leave yourself time to undo and redo some work (because you’ll probably mess something up), and don’t create a timeline that’s going to squeeze you beyond your abilities.

Don’t know how long it’s going to take? Bring in a general contractor and ask for time estimates. Add 50% or double the time on any jobs you plan to do yourself if you’ve never done it before.

Remodeling according to your personal taste

Many first-time flippers forget that they aren’t renovating the house for themselves — they’re doing it for a future buyer. And those flippers end up getting less for the sale than they could have because they insist on revamping the house according to their own personal taste instead of what sells best on the market.

A real estate agent can help give you a reality-check here and tell you that your preference for a separate kitchen, dining room, and living room is going to hurt the sale, or help you understand whether there’s really a demand in the area for a garage with a rock-climbing wall installed.

Neglecting the little fixes

There’s a lot to do in any flip, and it can be tempting to focus on the big items — floors, walls, windows, doors, and so on — and ignore the little ones.

But if you think that buyer isn’t going to notice that the kitchen drawers all stick, you’re delusional. Change the light bulbs, oil the hinges, and make sure everything (everything!) works and works well before you call it a day.

Upgrading too much

Depending on the neighborhood, a five-burner gas-range stove might be exactly what the house demands … but maybe not. First-time flippers often don’t know where to stop with the upgrades and do too much, creating a beautiful house that’s over-finished for the neighborhood, and installing features that buyers who are interested don’t really want.

That doesn’t mean you need to go for the cheapest option, but at least look at other listings in the neighborhood to see what the standard or “average” finishes and fixtures look like, then aim for that look. (This is another area where a real estate professional can be worth his or her weight in gold.)

Ignoring the outside

Well, the inside of this soon-to-be-flipped home looks amazing! Time to list?

Not quite. Have you paid attention to the landscaping? Put in new sod? Added flowerbeds to the garden, or otherwise improved the curb appeal of the home at all?

It’s a big mistake to focus only on the inside of the home and ignore the outside. A green lawn, fresh coat of paint, and some artfully placed flowers can work wonders on that final sales price.

Listing the house before it’s finished

You may think that you can show buyers what you’ve done and they’ll be able to imagine what the home will look like when it’s finished — but this truly isn’t the case. If you try to start showing the home before it’s actually ready, then all buyers are going to see is a half-finished project.

They don’t have access to the vision in your head. Don’t try to force them to create one, or the house will linger on the market for longer than necessary … and you’ll have missed your first, best chance to make an amazing impression with your flip.

Counting on the market to pull the price up

When the market is hot, it can be really tempting to hope that it will have escalated enough in the months that your flip was being renovated to bump up the sales price. We all hear the stories about how prices are rising, so why shouldn’t you expect them to rise while you work?

Because housing markets, like all markets, are subject to outside forces beyond your control that you cannot predict. If you’re counting on the market to grow, and that doesn’t happen — what’s your Plan B? Will you still make money on the sale, or will you lose your shirt?

Don’t risk it. Make sure that you can still make a profit even if the market doesn’t jump while you’re working on the house. (And if it does? Consider that a pleasant surprise.)

Staging without a pro

Many flippers are also great at staging homes, and this could well be you in the future. But for your first home, do yourself a big favor and budget for a stager from the beginning.

A professional stager will tell a story with the home, tying rooms together with color and texture, and helping buyers envision their lives in your flip. Watch and learn from the pro, and then maybe you can try staging on your second (or third, or eighth) flip.

Home Maintenance Tips June 25, 2019

DIY Doesn’t Mean Doing It All Yourself

How handy would you say you are? Can you fix a leaking faucet or install a new backsplash? Do you own all the drills, power saws and sanders used by the pros?

It can be tempting to DIY it all — especially if you’re on a budget. After all, you can have an active role in improving your home, and save cash to put toward other things. Why wouldn’t you want to?

The truth is not all projects are suited for a DIYer — no matter how much of a shiplap expert you might be. 

If you’re considering a few renovations, here’s when to put on your toolbelt and when you might want to call a pro: 

In the Kitchen: You can probably replace a sink, reface your cabinets or install a new dishwasher. 

Want to move the sink or add recessed lighting? You’ll want a pro.

In the Bathroom: Installing new floor tiles, upgrading your toilet seat or changing your showerhead are all tasks you can do. 

If you want in-floor radiant heating or to install a tub where there isn’t one, bring in a pro.

On the Exterior: Looking for more curb appeal with a new garden bed and a fresh coat of paint on your front door? Have at it. 

Substantial upgrades like installing a skylight, repairing your roof or repaving your driveway are better suited for a professional.

Structural Changes: If you’re super handy, you can probably install drywall or relocate a door. 

But if you’re changing an area that’s load-bearing? Definitely call a pro.

Remember, DIY doesn’t mean doing everything yourself. You’ll want to hire a professional for anything that requires specialized knowledge. There’s no shame in asking for help from an expert. 

Want to discuss what home renovations might improve your property’s value? Get in touch today.

BuyingHome Financing June 18, 2019

How to Effortlessly Save for a New Hamilton County Home

…EVEN WHILE YOU’RE STILL RENTING.

If you’re renting your current home and have your eye on making a home purchase in the near or distant future you might be worried that it can’t be done. The good news is that there are some effortless ways to grow your home savings with a little bit of set up and a touch of discipline.

1) Know your goal.

The best place to start is knowing how much cash you’ll need and by when. Typically, you should aim to save 5-20 percent of your planned Indianapolis home purchase price to qualify for a traditional 30-year mortgage. This amount might seem overwhelming at first but, when you break it down into annual, monthly, then weekly goals, it’ll start to feel much more manageable.

Defining your timeframe goals will help to better understand what would be required of your saving habits on a regular basis. Once you’ve figured out how much you’d need to save each week, you may wish to re-evaluate your time goals to reflect a more relaxed saving schedule if the first iteration feels too aggressive.

2) Pay Down Credit Card Debt.

If you’re carrying any consumer credit card debt, try to reduce that first before focusing on saving. When you attack your high-interest credit debt, you’re moving towards a higher credit score which will improve your chances of getting a mortgage– debt is a considerable factor lenders use to qualify you for a loan. Your higher credit score can even result in better mortgage interest rates!
Note: This may result in a smaller difference between mortgage payments after a smaller down payment than what you may initially be planning for, so plan carefully if you’re hoping to increase your budget!

Once your debt is paid off, you’ll not only have a lot more money available in your budget to set aside for a down payment, but you’re ultimately decreasing the cost of paying off your debt in the long-run.

3) Use a budgeting app.

Many free budgeting apps rake through your bank accounts and online credit card statements to track your spending for you. Once you have a good understanding of how much you’re spending, assess what could be cut back and set a maximum budget for each category. Then, plug in your target monthly savings amount for your newest budget item – a new Hamilton County home!

4) Lower your biggest living expense.

Saving for a down payment on a home is going to be tricky if you’re living in a high rent district. Consider finding a smaller rental in Hamilton County, living with friends or family, or taking in a roommate to lower your biggest monthly payment — your rent.

5) Automate.

The easiest way to save money is to make it automatic — take savings right out of your paycheck so you never even see it before it goes into your savings account. If you can’t see it, you can’t spend it! Alternatively, you can set up an automatic deduction to transfer a weekly amount from your bank account into a savings account. Your savings isn’t the only thing you should automate – to save money on potential late fees, automate all your bill payments.

6) Stay positive.

Frame your down payment goal as an exciting thing to look forward to rather than a chore. This helps to avoid stress as you approach dealing with financing your new home; you’ll also find that saving money will start to feel less like a fixation on money you don’t have and more on the wonderful home you will have in the future! Don’t forget to budget for a small treat every now and then to reward yourself and keep things feeling upbeat. You may even find that you’re so excited by saving that you use some of your flexible spending funds to save extra money for the month!

7) Make more money.

If the majority of your income is already tied up in expenditures that can’t be cut from your budget, consider taking on some side jobs. Look around your home for things you’re no longer using and arrange to sell them. You can also use one of your personal strengths, like writing or painting, to start a viable side hustle and get paid for your skills; all of this extra money can go directly to your home savings goal.

8) Make accessing your savings inconvenient.

It’s easy to see something you want and find a way to rationalize dipping into your savings. Take the willpower out of the decision by making your savings difficult to access. Put the savings in an account that doesn’t have an ATM card linked to it, or use a bank that requires you to make withdrawals in person.

Keep in mind these tips as you begin saving to buy your Hamilton County dream home. Also remember that you can always seek out help from your local real estate pro to give you an overview of the Indianapolis real estate market and to find a lender or financial coach to help you get started on the right foot.