Should I Buy a Fixer-Upper?

Sure! With one major qualification: you have lots of time and lots of money. While it sounds like doom-and-gloom, a healthy dose of reality is sorely needed.

MSN Real Estate explains the pros and (mostly) cons of embarking down the surprise-laden path of a fixer-upper. But one expert, the president of the American Society of Home Inspectors cuts right to the chase. He cautions:

First-time home buyers should probably steer clear of  a house that needs extensive repairs. Most people overestimate how handy they are and underestimate the cost or repairs. They end up taking on these large projects not being able to finish them.

Put simply: it’s easy to get in over your head. But if really think you’re up to the task, keep an eye out for these red flags:

• Old heating, air conditioning, and plumbing systems. Any dated house or fixer-upper will almost surely need a heating, air conditioning, and plumbing overhaul, and it isn’t cheap. 
• Old wiring and electrical systems. The same rules apply here: an old electrical system can be fraught with surprises (and danger), so you’ll probably have to jettison that too.
• Foundations fade away. Once-sturdy foundations eventually buckle after the house settles, the ground shifts, and tree roots intrude. Failing to spot a crumbling foundation means the onset of serious headaches.
• Mold. One small word that will make anyone run with their tails between their legs. Keep a very close eye out for this invasive and expensive intruder.

Also make sure you connect with an experienced contractor before you buy. Take a walk-through with someone who can provide realistic advice and prices before taking the plunge. 

Many gems start out as fixer-uppers, as yours can eventually make the cut. But please don’t dive in without taking an honest assessment of your ability to finish the job.

Investing Your Tax Refund Wisely

Using your tax return to get another tax return sounds too good to be true, but here it is: take your refund (if you get one) and put it toward energy-efficient appliances or upgrades that qualify for federal tax write-offs.

Not only will it help you next tax season, but energy-efficient appliances, windows, and doors will reduce your monthly utility bills throughout the year, boosting your savings and return on investment. What’s not to love?

Or, if you have energy efficiency down cold, sign your refund check over to your mortgage company. (Make sure it goes toward principal, not interest.) Paying your loan off early will save you thousands of dollars and years worth of mortgage payments.

If you can’t bring yourself to do either of these, and just want to splurge, see how far it’ll go toward a home renovation and have some fun!

When Buying a Home, Look to the Future

Not the flying-car, robot-maid future, just your future. As in: what your family and housing situation is going to resemble in five, ten, or even twenty years. Looking that far down the road may be difficult, especially for buyers with young families, but you’ll thank yourself later.

Houselogic offers sage advice. Geared toward building new construction, the same thought process applies to existing homes. Some key takeaways:

• The kids won’t be kids forever. That means the rec room that opens into the kitchen and living room, which is great for keeping an eye on little wanderers, may be less useful when the teenagers want some privacy, or you need a peaceful sanctuary to escape the racket!
• It’s a lot more expensive to finish a basement or attic from scratch. That unfinished basement may become an elderly parent’s guest suite or a young couple’s temporary lodging. If you’re starting with new construction, consider roughing in those areas for plumbing and electric in case you need to finish them quickly and cheaply later on.
• Storage. We always use more than we think we will. Unless you can toss stuff with discipline, you will only accumulate more, and fast. Don’t skimp on storage if you have the chance to add more.
• Flexibility is key. The more you can move, readjust, or take out, the more options you have. Instead of a fixed island in the kitchen, try one on wheels. Opting for modular shelving instead of built-in units lets you rearrange with ease (and without destroyed drywall).

It’s tough to know your housing needs ten years down the road, but thinking it over during your house hunt could save you from major a headache down the road!

DIY Nation

A joint report by the U.S. Census Bureau and Department of Housing and Urban Development reveals some interesting home-improvement trends. Breaking down where, and how much, money goes toward improvements (excluding “routine maintenance”), it’ll give you a good idea of what to expect for major projects.

New flooring, the most popular job with 18.8 million projects from 2009-2011, rang in at a median cost of $1,200. Overall, homeowners spent $359 billion on 119 million home improvement projects during those three years.

And in a nod to American do-it-yourself spirit, homeowners undertook 44 million projects without hiring professional help!

Take a look at the handy chart to see where things stand:

Why Credit and Debt Matter

Anyone who’s ever taken on a mortgage knows the application process can be a little overwhelming. And why not? A home is a big investment. But if you keep two keys factors on your side, you’ll be in for a much smoother ride.

Credit

Mortgage lenders will want to see your credit score and credit history. The reasoning is simple: they’re giving you a lot of money, and they want to make sure you pay your bills. Your credit history gives them the best indication of whether you do.

Your credit score is a numerical reflection of your past payment history and overall creditworthiness. If you get a clean bill of credit health, lenders will not only be more willing to work with you, but will offer you a lower interest rate because they are assuming less risk. Make sure your credit report stays accurate by reviewing it each year and as clean as possible by paying your bills on time.

Debt

While you will be taking on debt to buy your home (or, if not, this post doesn’t matter to you anyway!), too much debt is a red flag for lenders. They typically like to see 40% or less of your gross monthly income going toward debt repayment. That includes things like credit card debt, car loans, student loans, and other outstanding obligations. Once you have more than 40% of your income going toward debt repayment, things can get a little shaky financially, and that represents a big risk to lenders.

Help here by trying to avoid unnecessary debt in the first place, but also paying down (or off) what you can before applying for a mortgage.

If you proactively address credit and debt before getting a mortgage, you could wind up saving yourself thousands of dollars over the life of your mortgage.

$100 Entryway Upgrades

Got a foyer? Got $100? If so, you’ve got at least a dozen ways to liven up your home’s entryway! Courtesy of Houselogic, try spending a few minutes or a few hours–and under $100–to make a grand first impression on your guests and make your life easier!

1. Paint. Try out an accent wall or fresh paint color to make a bold statement.
   
2. Easy-Clean Flooring. After soaking up water, mud, dirt, leaves, and every other manner of outdoor debris, try swapping in bamboo or laminate flooring to make cleaning a snap.
3. Room Divider. Stuck without a separate foyer? Try a room divider to create an independent visual space.
4. Boot Tray. Keep shoes contained with a dedicated space–one you can pick up and dump outside!
5. Bench. Everyone wants someplace to sit down and lace up their shoes–give them a break with a comfy bench beside the front door.
6. Key Rack. Never losing your keys again sound like a tall order? Hang a dedicated key rack and deposit your keys as soon as you step inside.
7. Coat Hooks. Forgot fumbling around with hangers in the coat closet–keep them all on hand with a simple, wall-mounted set of coat hooks in the foyer.
8. Umbrella Stand. Welcome your guests in from the rain, but don’t let them soak your floor!
9. Console Table. Need a handy spot for a purse? Get a waist-high console table for easy access on your way out the door.
10. Cubbies. Great for kids and grown-ups alike, a little extra storage by the door never hurt anyone.
11. Mirror. Make sure your hair’s in place before you bolt out the door with a wall mirror.
12. Lighting. Swap out a ceiling fixture with a chic chandelier for an easy and stylish upgrade.

What’s Selling?

Happen to be listing an 1,860-square-foot, one-level home built in 1996? You just might be in luck!

Realtor reports on a recent study that reveals the type of homes buyers are purchasing. Across all buyers, the median home bought was 1,860 square feet and was constructed in 1996. First-time buyers opted for slightly older and slightly smaller homes, while repeat buyers purchased newer, larger homes.

Check out this helpful chart to see where your listing stacks up against what buyers are looking for:

It also reveals another story about newer homes–they’re getting larger, with a median of 2,200 square feet, and are primarily two stories.

Get Rich (Slowly) With Real Estate

Dreams of flipping million-dollar homes crushed by the slowed real-estate market? Hopes of using your house as an endless ATM machine dashed after being left with little equity? Don’t worry, that wouldn’t have lasted very long anyway.

As seasoned homeowners and investors know, the surest way to amass wealth in real estate is to buy it. Then hold it. The best part? This strategy works for both owner-occupants and investment properties.

Homeowners who hang on to their residences long enough will see appreciation. But by buying and selling every few years, those same owners won’t see the same upside of appreciating home prices.

And investors who can snag and properly manage cash-flow-positive properties will begin to reap dividends years down the road, setting themselves up nicely for a future income stream.

In the end, you just can’t count on a get-rich-quick scheme. Like anything else, earning wealth in real estate requires education and patience, but taking your time will pay off.

The Scoop on Seller Financing

It’s no secret that banks have reined in their lending over the past five years or so, making it tougher for some buyers to secure loans. If you have great buyers lined up, and don’t need your home’s equity immediately, consider seller financing.

Seller financing is no different than any other sale, except the sellers are loaning the buyers the purchase money. Typically, the buyer will still need a down payment and will have to pay closing costs and other incidental fees. But instead of getting a traditional loan from a bank, the buyers make their monthly payments to the sellers.

In most cases, the buyers will continue to pay the seller on normal 30-year terms for about five to seven years. At that point, unless there’s a very generous seller, the buyer will have to pay off the seller-financed loan, usually by refinancing through a bank.

But there are a few potential pitfalls. The first, and most important, is getting the seller’s mortgage lender to approve the sale (unless the home is owned free and clear). And the paperwork can get a little tricky, so make sure you enlist the help of a competent Realtor and real estate attorney. Finally, this technique turns sellers into creditors, not a good thing if they’re counting on the buyer’s payments to stay solvent.

But sellers don’t have to go at it alone. Loan servicing companies can handle the monthly billing and collection routine. And sellers holding a loan for a buyer with good credit and a solid down payment may even be able to sell the loan to third-party investors.

It’s a thriving market, so don’t overlook it if you have the ability to leverage it!

Top 10 Value-Adding Home Improvements

Want to make sure you’re getting the best bang for your buck? Use this handy chart from the California Association of Realtors to see where you stack up against the top ten value-adding home improvements!