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Q:
Where
are fixer-uppers found?
A:
You
can find distressed properties or fixer-uppers in
most communities, even wealthier neighborhoods. A
distressed property is one that has been poorly maintained
and has a lower market value than other houses in
the immediate area. Ascertaining whether the property
you're interested in is a wise investment takes some
work. You need to figure what the average house in
a given area sells for, as well as what the most desirable
houses in that area are like and what they cost. Some
experts suggest that buyers who take this route try
to find a "cosmetic fixer" that can be completely
refurbished with paint, wallpaper, new floor and window
coverings, landscaping and new appliances. You should
avoid run-down houses that need major structural repairs.
A house price that looks too good to be true probably
is. A smart buyer will find out why before buying
it. The basic strategy for a fixer is to find the
least desirable house in the most desirable neighborhood,
and then decide if the expenses needed to bring the
value of that property up to its full potential market
value are within one's rehab budget.
Q:
Are
there programs for fixer-uppers?
A:
If
you need home loan to buy a "fixer-upper" and remodel
it, look at the U.S. Department of Housing and Urban
Development's Section 203(K) loan program. The program
is designed to facilitate major structural rehabilitation
of houses with one to four units that are more than
one year old. Condominiums are not eligible. A 203(K)
loan is usually done as a combination loan to purchase
a "fixer-upper" property "as is" and rehabilitate
it, or to refinance a temporary loan to buy the property
and do the rehabilitation. It can also be done as
a rehabilitation-only loan. Investors must put 15
percent down while owner-occupants are required to
come up with only 3 to 5 percent. HUD requires that
a minimum of $5,000 be spent on improvements. Two
appraisals are required. Plans and specifications
for the proposed work must be submitted for architectural
review and cost estimation. Mortgage proceeds are
advanced periodically during the rehabilitation period
to finance the construction costs.
Q:
What
kind of return is there on remodeling jobs?
A:
Remodeling
magazine produces an annual "Cost vs. Value Report''
that answers just that question. The most important
point to remember is that remodeling a home not only
improves its livability for you but its curb appeal
with a potential buyer down the road. Most recently,
the highest remodeling paybacks have come from updating
kitchens and baths, home-office additions and extra
amenities in older homes. While home offices are a
relatively new remodeling trend, for example, you
could expect to recoup 58 percent of the cost of adding
a home office, according to the survey.
Q:
Are
there gov't programs for rehab?
A:
The
U.S. Department of Housing and Urban Development's
Section 203 (K) rehabilitation loan program is designed
to facilitate major structural rehabilitation of houses
with one to four units that are more than one year
old. Condominiums are not eligible. The 203(K) loan
is usually done as a combination loan to purchase
a fixer-upper property "as is" and rehabilitate it,
or to refinance a temporary loan to buy the property
and do the rehabilitation. It can also be done as
a rehabilitation-only loan. Plans and specifications
for the proposed work must be submitted for architectural
review and cost estimation. Mortgage proceeds are
advanced periodically during the rehabilitation period
to finance the construction costs. For a list of participating
lenders, call HUD at (202) 708-2720. If you are a
veteran, loans from the U.S. Department of Veterans
Affairs also can be used to buy a home, build a home,
improve a home or to refinance an existing loan. VA
loans frequently offer lower interest rates than ordinarily
available with other kinds of loans. To qualify for
a loan, the first step is to apply for a Certificate
of Eligibility. Another program is the Fedeal Housing
Administration's Title 1 FHA loan program.
Resources: "Rehab a Home With HUD's 203(K)" brochure,
U.S. Department of Housing and Urban Development,
7th and D streets S.W., Washington, DC 20410.
Q:
What
are some resources for info on home improvements?
A:
If
you're getting ready to embark on a home improvement
project involving contracting help, "Ready, Set, Build:
A Consumer's Guide to Home Improvement Planning Contracts"
lays out a road map for selecting the right contractor,
obtaining competitive bids up to what to include in
a contract. There also is information on consumer
rights, liens and financing. The book is available
for $9.95 through Consumer Press and Women's Publications,
Inc., Dept. SR01, 13326 Southwest 28th St., Fort Lauderdale,
FL 33330-1102; (954) 370-9153.
Resources: Profiting From Real Estate Rehab, Sandra
M. Brassfield, John Wiley & Sons Inc., New York; 1992.
Remodeling magazine's annual "Cost vs. Value Report",
available for a nominal fee from the magazine; call
(202) 736-3447 to order a copy.
Q:
Are
there any special tax breaks for historic rehab?
A:
Qualified
rehabilitated buildings and certified historic structures
currently enjoy a 20 percent investment tax credit
for qualified rehabilitation expenses. A historic
structure is one listed in the National Register of
Historic Places or so designated by an appropriate
state or local historic district also certified by
the government. The tax code does not allow deductions
for the demolition or significant alternation of a
historic structure.
Resources: National Trust for Historic Preservation,
Washington, D.C.; (202) 588-6000.
Q:
What
are some guidelines to follow when trying to find
a contractor?
A:
While
hiring contractors recommended by friends is usually
a safe route, never hire a construction professional
without first checking him or her out first. If your
state has a licensing board for contractors, call
to find out if there are any outstanding complaints
against that license holder. Also, call your local
Better Business Bureau to see if there are any complaints
on file. If you are satisfied with the answers you
find there, interview the contractor candidates. Ask
what kind of worker's compensation insurance they
carry and get policy and insurance company phone numbers
so you can verify the information. If they are not
covered, you could be liable for any work-related
injury incurred during the project. Also be sure that
the contractor has an umbrella general liability policy.
If they pass the insurance hurdle, next check some
of their references. A good contractor will be happy
to provide as many as you want. Finally, don't let
yourself be rushed into making a decision no matter
how competitive the market may seem. Also, never pay
a deposit to a contractor at the first meeting. You
may end up losing your money.
Q:
Are
fixers a good idea in bad areas?
A:
Distressed
properties or fixer-uppers are everywhere, even in
wealthier neighborhoods. Such properties are poorly
maintained and have a lower market value than other
houses in the neighborhood. Many experts recommend
that buyers find the least desirable house in the
best neighborhood and then decide if the expenses
needed to bring the value of that property up to its
full potential market value are within one's budget.
Most experts say inexperienced buyers should avoid
run-down houses that need major structural repairs
and instead look for properties that only require
cosmetic fixes.
Copyright
1999 Inman News Features
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