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

What You Should Know About Easements and Rights-of-Way

Don’t be startled to discover that you must “share” part of your land.

In certain types of real estate transactions, it’s not until the middle of the deal that home buyers realize the land they’re purchasing with their home is not 100% theirs. They are startled to discover that they must allow their neighbors to “share” part of their land, or that the local utility company has a right to access a pipe buried in their back yard.

How can this be? In both examples, the properties have what’s known as an “easement,” otherwise known as a “right-of-way.” This easement grants other designated people the right to specific types of access. Easements can be granted to another person, such as a neighbor, or to an entity, such as an electric and gas utility.

A property easement is generally written and recorded with the local assessor’s office. The documented easement will show up when a title search is conducted and it stays there indefinitely, unless both parties agree to remove it.

Without getting too deep into legal details, here are the types of easements worth knowing about.

1. Right-of-way through your property

As a homeowner, you would probably assume that you’re purchasing the land around your home, front yard, back yard and driveway. But that’s not always the case. Often, when you review the preliminary title report, you may discover that someone actually has a right-of-way through your property.

This is common in the case of a long driveway or a home that may be set back from the street. It could have been that in order for a neighboring home to have been built, that property’s owner negotiated with a previous owner to gain a right-of-way through the front of the parcel or driveway for the home you are buying.

In this scenario, you own the land, but the owner of the neighboring property has been granted right to pass through your property. In some instances, the previous owner might have been compensated for granting this access. The important thing to know is that easement carries over when a new owner assumes the property.

2. Right-of-way grant

If you’re the homeowner who needs access to a neighboring property, or you discover that the driveway or walkway to your home is actually not 100 percent yours, there’s usually nothing you need to do. It’s just important to be aware of these conditions, and that this is not entirely your land.

Depending on the size of the easement and the type of land it covers, there may be some issues regarding maintenance. For example, it may be your responsibility to keep up the land: Mowing the lawn, shoveling the pathway or maintaining a fence. If there’s a maintenance ambiguity, check with the current seller to understand how she and the other owner worked this out in the past. Many times an easement like this, known as a “Right-of-Way Grant,” has been on title through the course of three or four owners, making the original intentions or understandings not explicit. Understanding how the easement has worked in most recent practice is your best course of action.

3. Other types of easements

Anyone who lives in a condominium or some type of planned development likely spends many hours working on property they don’t own outright but have access to. Most likely, the condo or planned development’s homeowners association (HOA) actually owns those areas, but each resident or owner has a right to pass through, which is one obvious type of easement.

But some easements aren’t so obvious and take buyers and homeowners by surprise. A classic example is one in which a utility company, such as an electric and power company or a telephone company, has an easement through your land for the purpose of maintaining the utility.

There was a situation near San Jose, CA, in which the electric and gas utility had an easement through someone’s backyard. It had been on title for many years, but the existing owners didn’t know about it. One day, the electric company showed up with digging machines and materials and made a mess of the yard digging to fix a faulty line. Though the owners were shocked, there was nothing they could do.

Situations like these show why it pays to be cautious if an easement shows up in a property title search. Ask the title company, attorney or your real estate agent to retain all documents pertaining to the original easement in order to review the details. That way, you will know the exact location of the easement, its size and scope and how it’s to be utilized.

Often, there’s not a problem with easements, but it’s still important to check. Any potential red flags might wind up affecting the value of your home.

In the case of the house in San Jose, for instance, what if the utility company had done permanent damage? What would be the homeowner’s recourse, if any? It’s best to vet these things before closing, rather than facing a serious real estate dilemma down the road.

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

6 Tips to Negotiating Your Lease Agreement

The time to negotiate your lease agreement is not when you are sitting down at the table with the landlord or property manager ready to sign the agreement.  You need to talk the terms through before the lease signing date is set, but not until after you have an approved application.  If you start off the initial conversation with the landlord/property manager requesting lease term negotiations, you will probably rub them the wrong way.

1. Make Sure The Timing Is Right

As a property manager, I get first-time phone calls from potential tenants wanting to know if I will take a lower amount for the rent.  I don’t even know their name yet, nor if they will qualify for the property, so I am already put off by their request and probably won’t be willing to negotiate anything with them.  You must show some good faith by turning in your application stating your interest in the property.

2. Respect The Landlord’s Rules (Policies) First Before You Start With Your Negotiations

Respect goes a long way.  For example, the landlord may have written into their lease agreement that they have a right to be in unit at any given time in order to make inspections, repairs, etc.  You may not like this and want some sort of notice first before they show up.  So be sure to make your request with a respectful tone and say something along the lines of “I’m fine with your right to inspect the property, however I would like to request a 24-hour notice by phone or e-mail before you come.”  This will go a long way with the landlord/property manager if you respect their terms, they will likely reciprocate.

3. Don’t Be Greedy In Your Negotiation Requests

“Shoot for the moon” should not be your goal in making requests.  Asking for 3 months free of rent AND a reduction in the monthly rent amount will turn off an owner.  They will be more likely to let the property sit vacant for three months in an effort to get the full rent amount. Keep your requests reasonable and scale back any over-the-top ideas.

4. Remember That Negotiations Are Two-Sided

While the market may be favorable for tenants, you still need to have some consideration for the landlord/property manager.  Maybe a reduction in rent is not possible for the whole one-year lease term.  However, maybe the reduction will be considered for the first 4 months and then offer to pay a graduated rent amount for the remainder of the lease term.  If you show an effort of unification and benefit to both parties, they will most likely be willing to work with you.

5. Rent Is Not The Only Thing You Can Negotiate

While you may be trying to get a deal on your monthly rent amounts, the landlord/property manager may be set on receiving a specific amount and may seem to stonewall you on reducing the rent amount.  But you can still negotiate a benefit.  Consider requesting that the landlord/property manager either clean the carpets, paint the interior living room, or offer to have the property generally cleaned once a month for the first 3 months for you.  Or maybe you will be able to work out a security deposit adjustment.

6. Be Sure That All Negotiations Are In Writing and Agreed Upon

If anything is handwritten into the lease agreement, then be sure that all parties initial (or sign) and that it is consistent on all copies of the lease agreement.

Keep a good attitude in check and do not give an aura of an ungrateful or arrogant attitude.  The worst thing that a landlord or property manager can say is “no.”  You are not forced to rent that property, so you can always say “no thank you” too and move on to another property if the lease terms are not what you want.  However, arrogant and ungrateful attitudes will only result in a stronger “no” from the landlord and less tolerance for negotiations and agreements.  Keep that in mind.

Jessica Hickok is a REALTOR® Broker and Property Manager/Landlord with Dizmang Properties, Inc. (www.getpaul.com) in Springfield, Missouri. She can also be found on Twitter as @SugarCube.

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

Rental Property Investing 101 – Tips for Future Property Moguls

The media and real estate professionals continually report that 2012 is the year to buy real estate. Since home values have dropped considerably, the U.S. median list price has dropped considerably, too. Couple that with interest rates that are the lowest they’ve ever been and it’s a perfect storm of real estate buying opportunity, especially for starting out your career as a landlord.

Note: If you are one of those folks that believes you can predict the future and hopes prices will go down, they may. But interest rates might go up which would nullify any gain you would hope to obtain from any price decrease. But more importantly, all investments fluctuate in value over time. You should not be concerned about short-term fluctuations in a long-term investment, like real estate. If you buy sooner over later, ten years down the road not only will you own more properties overall than someone who waits, but you’ll most likely have earned significant equity in all of them. And you won’t care about any price fluctuations that might have occurred in 2012, 2013, or 2014.

Here are tips to get started. And, if you start a few years out of college, and amass several properties, you will probably be retiring early.

Go for the long haul — Rarely do people increase their wealth by owning property for short periods of time. Long-term investing in cash flow-producing assets like real estate is the way to go.

Don’t’ give up your day job! – You need a solid job to be able to save money for a down payment and be able to obtain financing to buy properties.

Buy cash flow-positive properties – If you don’t understand why to do this, you might want to skip real estate ownership. See “What is a Good Real Estate Investment” article.

Buy a property that you love! – The more you love the property for all the right investment reasons, the better chances you’ll own it long term.

Skip the prize properties – Prize properties have negative cash flows and are NO prize, it’s the moderately priced properties that are the real prizes.

Buy as a personal residence to change to rental – Buy properties in life that make good rental property investment sense and first live in them as a personal residence. When you buy as owner occupant, you get the best financing and can put down a smaller down payment if you so desire. Plus you learn the property characteristics, issues, and can fix issues so they won’t be issues once you make it a rental. Then, move out after one to three years and into your next personal residence that will become a rental property a few years later. This also ensures you will only buy properties in areas where you are willing to live, and that’s very important to do as a real estate investor.

If it sounds too good to be true, it is! – Real estate is high risk as there are many things that can go very wrong. If it sounds too good to be true, be very careful. Once you take ownership of the property, you have to correct the problems and issues,or live with them.

Fully educate yourself for 3-6 months – Talk to other people who own properties, read books, go to the local real estate investment clubs, etc. The better you educate yourself, the higher the chances you will take the proper steps to reduce your risks and make smart and safe decisions.

Buy properties in good shape – Fixer-uppers are money pits and rarely sell at a large enough discount to compensate for all the work needed. Buy properties that are as close to rental ready as possible. A great move, if possible, is to buy a property with a good tenant already renting the property!

Be conservative on your expectations – Always overestimate the amount it will cost to renovate a property, underestimate the rental income you will earn, and overestimate the expenses you will have to pay. Then, when you blow it out of the water, you’ll have a big smile on your face and be able to gloat to all your friends!

Stay away from high vacancy areas or declining cities – Buy properties in nice, moderate, working class areas where there are not too many foreclosures, empty properties, or in a city or area that is in decline.

Start young, but not before you are settled in a particular city – You want to start early, but make sure you’re somewhat settled before you take on this big responsibility. Have fun when you are young, there is still plenty of time to get rich on real estate. Just start saving your pennies for that first down payment.

Death, taxes, and…. – Those two items are guaranteed in life. But, there is one more item if you are a real estate investor, and it’s 100% guaranteed: If you own real estate, you will feel pain along they way. Things will go wrong, but you will recover and will likely look back on the journey with fondness when you retire early.

And let’s end where we started, once again with the most important item in real estate investing:

Go long! – Long-term ownership will give you the highest chances of entering retirement with a nice rental property cash flow stream. And long-term ownership equity gains will compensate for the hassles and issues you have along the way.

Related:

How to Figure Out the Value of Empty Building Lots

Rent to Own Properties are Usually Good for the Sellers, Not the Buyers

Why Property Price Can Be of Low Importance

Leonard Baron, MBA, CPA, is a San Diego State University Lecturer, a Zillow Blogger, the author of several books including “Real Estate Ownership, Investment and Due Diligence 101 – A Smarter Way to Buy Real Estate.” Read useful tips for real estate buyers in his blog, Making Smart and Safe Real Estate Decisions. See more at ProfessorBaron.com.

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

Pros and Cons of Building on Developed or Undeveloped Land

In the simplest sense, developed land has been fully prepared for home building while undeveloped land has not.  Each has advantages and disadvantages. If you’re thinking about building your home on undeveloped land, be sure to consider the additional work and expenses.

Are We There Yet?

One of the most important things that a developer does with raw land is bring roads onto the site and connect those roads to the public right-of-way. Lots are usually located adjacent to the new road and have direct access to it. If the subdivision remains private, the homeowners will maintain the roads but often they’re deeded to the city and maintained by the municipal service department.

Vehicular access to undeveloped land can be more difficult, although isolation might be one of your primary goals in choosing a rural location. You’ll almost certainly spend much more to build an access road back into the site (I can recall several “driveways” that are more than one-third of a mile long) and you won’t have city snowplows to clear it for you.

Red Tape and Green Paper

Buying a lot in a subdivision means buying into additional layers of government regulation including building departments and homeowner associations. Both groups will have a say about the size, location, design, types of exterior finishes, and maintenance of your house. Municipal building departments usually hold builders to a higher standard of construction quality than rural departments – a definite benefit to the homeowner – but that can mean higher construction costs, too. Subdivisions also usually have minimum house size requirements, so your home might even end up being larger than you want.

On a rural property you’ll have much greater freedom to decide what your home looks like, what it’s made of, and how it’s arranged on the land. And with that design freedom comes more control over the costs of construction. Because the options are far less limited, undeveloped land is where most truly unique custom home designs are built.

Power to the People

The development of a lot in a new subdivision typically includes bringing all utilities onto the site, where the new house is easily connected to them. Electricity, gas, water, and sanitary sewer services are available at the edge of the property, ready to be used.

Undeveloped property won’t have water and sewer taps on site. In fact, there may be no utilities anywhere nearby. Building on undeveloped land usually means providing your own private septic system and water well, installing a propane storage tank for gas appliances, and bringing electric service lines in from a distance – maybe a very long distance.

Can You Dig It?

By the time a subdivision is ready for construction, the developer’s engineers have tested the soil and graded the land for proper drainage. You’ll have access to information about the possibility of sub-surface conditions that might affect your construction plans and in many cases the developer will take some responsibility for the site’s suitability for building.

If you want the same information about your rural property, you’ll have to order and pay for it yourself. Your county extension service can provide some of this information but it may not be recent, or specific to your site. If you discover bad soil or underground rock in your building area, you’ll have no avenue for redress except your own pocketbook.

More Than One Kind of Value

A house in a subdivision may have a temporary price advantage over a “stand-alone” home, since its value will be related to the selling prices of other homes in the area. If you value predictable price appreciation, closer neighbors, and want less “hands-on” involvement in the creation of your house, you’ll probably find your dream home in a development. The majority of American home buyers do just that.

Building on undeveloped land will require more from you, your architect, and your builder. But if you’re willing to assume the risks of undeveloped land; if you’re interested in a truly custom home design; if you want to be more involved in the creation of your home, you might find your piece of paradise somewhere a little further outside of town.

Richard Taylor is a residential architect based in Dublin, Ohio.

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

Final Walkthrough Checklist

A final walk-through ensures that the property’s condition hasn’t changed since your last visit and that the terms of your contract will be met.

You’ve found the home you love, made the offer, and the seller has accepted. You’ve gotten your inspections done, your loan is being finalized and an escrow closing date has been set.

Great. But you’re not quite finished yet.

Your next step is a final walkthrough, arranged through your real estate agent, at least a week before closing. The goal: Ensure the property’s condition hasn’t changed since your last visit, that any agreed-upon repairs have been made and that the terms of your contract will be met. Depending on your contract or local customs, a walkthrough may be informal or more formal. In a formal arrangement, you will actually sign a contract addendum confirming that you’ve done your walkthrough and everything is as it should be.

Here’s your checklist for your final walkthrough:

  1. A final walkthrough isn’t a home inspection. You’ve already done that by now (or should have).
  2. Take your contract with you. You might need to refer to it while on site.
  3. In many markets, the buyers and sellers never actually meet in person. But if everyone is agreeable to the idea, perform the final walk-through in the seller’s presence. He or she knows the home better than anyone else and should be able to answer your questions and provide some color on the history of the home.
  4. If the home is vacant, it’s even more important to do a final walk-through. Since your last visit, for instance, someone might have left a faucet dripping, inadvertently causing water damage.
  5. Take along a checklist of things to do during the final walk-through, including:
  6. Check the exterior of the home, especially if there have been strong wind or rain storms since your last visit.
  7. Turn all light fixtures on and off.
  8. Make sure the seller hasn’t removed any fixtures, such as chandeliers, that he or she agreed to leave behind.
  9. Check all major appliances.
  10. Turn heat and/or air conditioning on and off.
  11. Turn on water faucets; check for leaks under sinks.
  12. Test the garage door openers.
  13. Flush all toilets.
  14. Open and close all windows and doors.
  15. Do a visual spot-check of ceilings, walls and floors.
  16. Turn on the garbage disposal and exhaust fans.
  17. Check the status of any agreed-upon repairs.
  18. Check screens and storm windows. If they’ve been stored, make sure you know where they are and that they’re in good shape.
  19. Look in storage areas to make sure no trash or unwanted items remain. Old paint cans or hazardous materials are often left behind by the seller.
  20. Do a quick check of the grounds. Some sellers have dug up and taken plants (even small trees or bushes) with them.

Taking an hour for one last inspection is a good investment in your time. After all, you don’t want to spend the first weeks in your new home cleaning up or making unexpected repairs.

Related:


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

30-Year Fixed Mortgage Rate Drops to New Historical Low

As of May 12, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.72%.

Abstract illustration of houses and charts

As of May 12, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.72%.

Mortgage rates rise on surprising jobs and inflation data.

“Mortgage rates rose over the past seven days, sharply fluctuating in response to unexpected readings of crucial economic data,” said Zillow Economist Matthew Speakman. “After a relatively uneventful few weeks for rates, the surprising results from the April jobs report and inflation data sparked sharp movements in mortgage rates. For now, rates are only slightly above where they were this time last week, but any downward momentum that has been building over recent weeks appears to have been halted. The results of the two reports place the Federal Reserve in a difficult position and adds fresh uncertainty to mortgage rates’ path forward. While Friday’s weaker-than-expected jobs report helped to bolster the central bank’s stance of maintaining loose monetary policy until more progress is made in the labor market, Wednesday’s inflation figures are perhaps the toughest test yet of the Fed’s commitment to this approach. In theory, a steep uptick in inflation would force the central bank to tighten policy by hiking interest rates or slowing the pace of bond purchases. But for now, Fed officials have downplayed the risks associated with Wednesday’s report, asserting that the sharp increase in prices will be temporary. Any shifts away from this outlook will place more upward pressure on mortgage rates.”

Additionally, the 15-year fixed mortgage rate was 2.06%, and for 5/1 ARMs, the rate was 2.13%.

Check Zillow for mortgage rate trends and up-to-the-minute mortgage rates for your state, or use the mortgage calculator to calculate monthly payments at the current rates.

The weekly mortgage rate chart above illustrates the average 30-year fixed interest rate for the past week. Here’s a comprehensive look at the current mortgage rates for all loan types:

Today’s Average Rates for Conventional Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed 2.98% 3.04% -0.22%
20-Year Fixed 2.7% 2.78% -0.06%
15-Year Fixed 2.13% 2.23% -0.05%
10-Year Fixed 2.02% 2.11% 0.02%
7/1 ARM 2.22% 2.93% 0.01%
5/1 ARM 2.2% 3.05% 0.02%
3/1 ARM 0% 0% 0%

A 30-Year Fixed loan of $300,000 at 2.98% APR with a $75,000 down payment will have a monthly payment of $1,261. A 20-Year Fixed loan of $300,000 at 2.7% APR with a $75,000 down payment will have a monthly payment of $1,618. A 15-Year Fixed loan of $300,000 at 2.13% APR with a $75,000 down payment will have a monthly payment of $1,948. A 10-Year Fixed loan of $300,000 at 2.02% APR with a $75,000 down payment will have a monthly payment of $2,762. A 7/1 ARM loan of $300,000 at 2.22% APR with a $75,000 down payment will have a monthly payment of $1,141. A 5/1 ARM loan of $300,000 at 2.2% APR with a $75,000 down payment will have a monthly payment of $1,138. A 3/1 ARM loan of $0 at 0% APR with a $0 down payment will have a monthly payment of $0. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Government Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed FHA 2.34% 3.01% 0.07%
30-Year Fixed VA 2.61% 2.91% -0.11%
15-Year Fixed FHA 2.06% 2.79% 0.15%
15-Year Fixed VA 2.6% 3.09% -0.12%
5/1 ARM FHA 2.5% 2.94% 0.05%
5/1 ARM VA 2.62% 2.57% 0.11%

A 30-Year Fixed FHA loan of $300,000 at 2.34% APR with a $75,000 down payment will have a monthly payment of $1,159. A 30-Year Fixed VA loan of $300,000 at 2.61% APR with a $75,000 down payment will have a monthly payment of $1,202. A 15-Year Fixed FHA loan of $300,000 at 2.06% APR with a $75,000 down payment will have a monthly payment of $1,939. A 15-Year Fixed VA loan of $300,000 at 2.6% APR with a $75,000 down payment will have a monthly payment of $2,014. A 5/1 ARM FHA loan of $300,000 at 2.5% APR with a $75,000 down payment will have a monthly payment of $1,185. A 5/1 ARM VA loan of $300,000 at 2.62% APR with a $75,000 down payment will have a monthly payment of $1,204. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Jumbo Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed Jumbo 3.45% 3.51% -0.25%
20-Year Fixed Jumbo 3.56% 3.63% -0.3%
15-Year Fixed Jumbo 2.83% 2.93% -0.05%
10-Year Fixed Jumbo 2.38% 2.45% 0.13%
7/1 ARM Jumbo 2.74% 3.21% -0.08%
5/1 ARM Jumbo 2.74% 3.23% -0.04%
3/1 ARM Jumbo 2.14% 2.74% 0%

A 30-Year Fixed Jumbo loan of $600,000 at 3.45% APR with a $150,000 down payment will have a monthly payment of $2,677. A 20-Year Fixed Jumbo loan of $600,000 at 3.56% APR with a $150,000 down payment will have a monthly payment of $3,497. A 15-Year Fixed Jumbo loan of $600,000 at 2.83% APR with a $150,000 down payment will have a monthly payment of $4,093. A 10-Year Fixed Jumbo loan of $600,000 at 2.38% APR with a $150,000 down payment will have a monthly payment of $5,622. A 7/1 ARM Jumbo loan of $600,000 at 2.74% APR with a $150,000 down payment will have a monthly payment of $2,446. A 5/1 ARM Jumbo loan of $600,000 at 2.74% APR with a $150,000 down payment will have a monthly payment of $2,447. A 3/1 ARM Jumbo loan of $600,000 at 2.14% APR with a $150,000 down payment will have a monthly payment of $2,259. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Source: zillow.com

Pros and Cons of Smooth Surface Cooktops

Ask 10 homeowners how they feel about their smooth surface cooktop, and you’ll hear 10 different answers. We’ve gathered these pros and cons to help you decide for yourself.

You’re determined to buy a new range, but the decisions never seem to end: Gas or electric? Standard or commercial-style? Do you need convection cooking? How about a warming drawer?

One especially important choice you’ll need to make concerns your cooktop: Do you want traditional burners or a smooth surface? This decision affects not only the way your range looks but also how you’ll cook on it and how you’ll clean it.

All but the least expensive electric ranges now feature smooth, ceramic glass cooktop designs rather than traditional coil burners (the price jump from entry-level coil-burner electric ranges to those with smooth tops is roughly $150).

Smooth, sealed-burner designs are also available on many gas ranges. You may hear sales clerks refer to these models as “gas on glass.” Smooth surface gas cooktops are also available in stainless steel.

Ask 10 homeowners how they feel about their smooth surface cooktop, and you’ll likely hear 10 different answers. That’s why we’ve gathered these pros and cons, so you can decide for yourself.

Pros

  • The smooth cooking surface is easier to clean after a messy meal. Sauces can’t drip into crevices, and crumbs can’t fall into crannies.
  • The ceramic cooktop’s design is sleek and can easily make your kitchen look more modern and updated.
  • Because the surface is flat, with no protruding burners, a ceramic cooktop can double for counter space in a pinch.

Cons

  • You must use specialty cleaning products to avoid damaging the smooth ceramic surface. And don’t be fooled, with even with the right products, some burned on messes are nearly impossible to clean.
  • Ceramic cooktops aren’t exactly fragile, but they can be scratched or cracked if a pan (or anything else) is dropped on the surface. Replacing the entire cooktop can cost upward of $1,000, while replacing just the glass may run $300 or more.
  • It’s pretty easy to tell when a traditional electric coil or gas burner is turned on. With a ceramic cook top, it’s not nearly so simple to tell. You – or more likely, a child – could easily be burned by touching a smooth surface cooktop that hasn’t adequately cooled.

It is important to note that not all smooth surface cooktops are created equal. Several manufacturers, for example, now offer induction cooktops, which use a magnetic field similar to the way your microwave oven works. A magnetic pan is used, and, underneath it, a magnetic field is created that transfers heat to the pan instead of the glass cooktop itself. These induction cooktops, which cost upward of $3,000, allow for more even distribution of temperature for even cooking.

In January 2012, Thermador took induction cooking a step further with the introduction of its Freedom Induction cooktop. The full-surface induction appliance uses mapping interfacing that recognizes cookware size, shape and position to deliver heat without boundaries. The cooktop is built with 48 individual 3-inch induction heating elements below its surface and can accommodate a pan as large as 21-by-13 inches.

Source: zillow.com

How Does a Court-Confirmed Probate Sale Work in Real Estate?

Properties sold in probate court can be a good deal, as they’re often priced lower than other homes. But there are risks, and probate sales often take longer than traditional real estate transactions.

If you’re an active real estate buyer, at some point you’ll likely come across a probate sale. Properties sold in probate court can be a good deal, as they’re often priced lower than other homes. But there are risks, and probate sales often take longer than traditional real estate transactions.

As a result, as with short sales, some buyers keep the probate sales at bay and their real estate agents discourage them from getting their hopes up on actually buying a home through probate courts.

Here’s the story on probate sales in real estate.

Why a home is sold through probate court

A home is sold in probate court when someone dies intestate or without bequeathing their property. When that happens, the state takes over and administers the property’s sale.

The court wants to be certain the property is marketed and sold at the best possible price. To ensure this, the court requires certain steps, processes and procedures be followed.

Probate laws can vary from state to state, but any good real estate agent should be sufficiently knowledgeable about the ins and outs of probate sales.

Marketing a probate sale

In a probate sale, the property is marketed just like any other property. The probate attorney or the estate representative will hire a local real estate agent, sign a listing agreement, and show the property, just as they would a traditional listing.

Generally, the list price is based upon the listing agent’s suggestions as well as an independent appraisal ordered and issued by the court.

Making an offer

An interested buyer may make an offer on the property at any time. However, in the case of a probate sale, the offer must be accompanied by a 10 percent deposit. The estate representative will then accept or counter the offer, just like any other sale.

The offer is subject to the court’s confirmation. Even though the seller may have accepted a buyer’s offer, the seller is not committed to that buyer or their offer. The estate representative, through their probate attorney, will then petition the court to confirm the sale. A future date is chosen for the sale to be confirmed in the court.

Playing the waiting game

Once the sale date is determined, the parties now must wait a minimum of 30 to 45 days. During this time, the court requires that the property be properly advertised and marketed with the new accepted price. In California, for example, the court will take that accepted offer and raise it by 5 percent plus $500. The total becomes the new probate price to be marketed.

Going to court

In order for the sale to be confirmed, the court requires that the new buyer, plus any other interested party, come to probate court to confirm the sale. The property is then sold auction style with the opening bid being (in the case of California) the accepted offer price plus the 5 percent, $500 increase.

Sometimes multiple buyers show up to bid on the property in increments of $5K. If nobody shows up to bid on the home, the first buyer gets the property for their original offer price. If the property is sold to one of the bidders, they must immediately hand over a deposit of 10 percent.

The deposit may not be refundable

There are some things for buyers to be aware of when moving forward on a probate sale. Many times, the 10 percent deposit that’s required with the offer is not refundable unless the original buyer isn’t the final court confirmed buyer.

Also, since the seller is deceased, there usually isn’t anyone to disclose a previously leaky window, illegal work done on the property, plans for a major change to the neighborhood, or anything else that may negatively affect the property’s value. That’s why probate sales can be risky.

An early inspection is your best defense

Any serious buyer should have the property inspected from top to bottom before writing an offer. Yes, you’re gambling the price of the home inspection without knowing if your offer will even be accepted, or if you’ll be outbid by someone else in probate court. But would you rather gamble the cost of an inspection — or the cost of a house?

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