Should You Buy That Fixer-Upper?

by Kathryn Godby Oram

In commercial real estate lingo, a fixer-upper is called a “Value-Add” deal. Either term refers to a real-estate property that will require maintenance work (redecoration, reconstruction or redesign) and can usually be lived in as it stands.

The idea that you can add value to a property is why buying a 'fixer-upper' has so much appeal. Market data shows that while housing sales have increased, prices have not.

In fact, prices are not predicted to hit bottom until the first quarter of 2010. For buyers, rates are still historically low, prices are down, government tax incentives are due to expire, and there is an abundance of homes to choose from in every market. Yet despite the appeal of buying, many new buyers are afraid to pull the trigger and loose value immediately upon closing.
Read more Research & Statistics by the New Jersey Association of REALTORS »

Buying a “Value-Add” house, if done right, can be a hedge against falling prices. The potential exists to buy the cheapest house in a desirable area way below market price, invest some time and money for renovations, and raise the property's potential value to get a return on your investment.

Make sure you have a realistic idea of what you're getting into. Here's a few things to look for:

Chances are if you’re reading this, you’ve not gone the fixer-upper route before. Finding your subject property is not an easy task. Even the best house with the best renovations will not pay you dividends if it is not in a good locale. Keep playing that old Realtor tune “location, location, location”; A great yard, a well sited home and nicer more expensive homes in close proximity are guidelines. In this market look for a house that has been overlooked because buyers cannot see past the orange shag carpet, the scary kitchen and the overgrown garden. Put on a pair of rose-colored glasses and squint. You can see it. I know you can! The best fixer-upper is a home that is out-dated but has been maintained. If the house is not sold because it needs paint and a new kitchen then there is your winner!

Once you’ve decided on a specific property find a good inspector. Cull recommendations from friends or co-workers. You might also use a screening agency such as service magic, or go to the American Society of Inspectors for help in finding a competent inspector. Your inspection report is your Golden Ticket; it tells you whether to halt or go forward. It can be your guide to assess what the house needs and if the process is manageable or will be too taxing on you and your checkbook.

Your inspection will cover everything from the roof to foundation. Pay close attention to water, mold, septic, oil tank and structural issues. Lead tests, Termite and radon may or may not be included. Pest and Radon inspections are a necessity but check with your Realtor to assess weather or not you need a lead test.

With your report in hand walk through your prospective purchase with a contractor get estimates on all proposed work. Remember that budgets expand not just because of unforeseen problems but because you may want to add more projects along the way. Add 20% to the estimate if your plan is simple. The more complex your job, the more overages you may encounter.

Keep in mind that the house was standing when you bought it and the nasty bathroom won’t kill you. If some projects can be done over time than let them. Waiting is it’s own reward. Many homeowners, myself included, have had to scale back projects because of budget and then come to realize that their original ideas were not optimal. Sometimes living in a space for a while gives you a vision that you may not have had before. Think about doing projects in phases to give yourself time to save more money and space out your expenses.

Doing a Value-Add project is not for everyone. Take stock of your time, your desire, your talents and decide if this is the right move for you. Can you do dishes in the bathroom? Do you like to paint? Can you use a hammer? These are only a few of the questions you should ask yourself. In the end, you need to decide if you are the type that likes to do things yourself. If so, this will be a trying but rewarding and profitable experience. At the end of your project, though these things never truly end, you will have a home that is absolutely yours.

I walked into the closing of my first home and signed the papers and cried. I was young, newly married, pregnant with my third child and wondering that the heck I’d just gotten myself into. Years later, I have a wonderful house, it’s nothing like the one I bought. I didn’t move, I renovated and I kept going. I bought a dump on a great street. It had good bones but a sad face. I stood in front of that house and squinted and saw what that house could be. It’s almost there. People always tell me that I have a great house and I say, “It will be” Once you get the bug you keep improving, take pride in your work, and enjoy the journey.

I have six kids now and my old farmhouse works well for us, thank goodness. The reason is works is because I followed my own advice. I bought in a good neighborhood, I knew the floor plan would work for me and I was totally aware of the scope of the work that was needed. I never thought it would be simple or cheap and I never needed to have everything done immediately. That said, it was hard but it was worth it. While others in my neighborhood have loan to value ratios that are less than desirable, I am safe. Safe at Home.

Low Cost Improvements for a Quick Sale

by Laura Jacobus

Maybe you're not even thinking about selling your home right now. When the time comes, however, these lost cost improvements could make a difference.

First impressions are always important so you want to make sure the entry to your home shines. As the buyer approaches the front door, the last thing they want to see is an old, worn door with cobwebs hanging from above.

Right off the bat, most buyers are going to assume that if the home is not well maintained on the exterior, the interior won't be much better.

THE ENTRYWAY
Painting the front door or even replacing it if it's beyond help can make a real difference. A nice shiny door set always stands out. If you have vinyl siding and haven't cleaned it in a while, mildew, dirt and grime can accumulate. Giving it a quick spray can surprisingly make a big difference in your home's appearance.

PLANT SOME COLOR
Planting some flowers around the entryway can really make your property come alive. Choose a variety of colors that really stand out. Adding a few potted plants in a covered entry or a large enough stoop is always a nice touch, too.

PAINT THOSE WALLS
Painting is one of the cheapest, most effective improvements you can make in your home - especially if the colors aren't neutral to begin with. I know you love the pink entryway and purple bathroom, but most buyers may not appreciate it as much.

You may be thinking painting is cheap and the buyer can just do it later, but there are many people who just don't have the vision. They need to see it done. Painting your home with off white or earth tones is the best way to go. Remember: you're selling your home to appeal to the masses.

ADDRESS THE FLOORING
Flooring is a little more expensive, but will bring a better return on your investment - especially if you're still hanging on to the orange shag. Even if you have more modern carpet but don't have enough in the budget for new carpeting, a good cleaning by a professional can help dramatically. The same can be said for wood floors, too. A good scrubbing can go a long way.

CLEAN WINDOWS & TREATMENTS
Cleaning your windows can really spruce up your home. A bright home always shows far better than a dungeon. Removing heavy drapes and curtains can help brighten it up and breathe new life into your home. It's far better to have nothing than to have a pattern or fabric that was popular 20 years ago.

CHANGE OLD LIGHTING
Lighting is a subtle enhancement to make, but a buyer will notice if a home's lighting is outdated. There are some great lights that can be purchased rather cheaply in many lighting stores. Even little things like upgrading to brighter bulbs can make the difference that matters.

Dark or poorly lit rooms turn off most homebuyers. Although it's a little more expensive to add, recessed lighting can really change the look in a room. Recessed lights work especially well in kitchens and baths.

DECLUTTER YOUR HOME
This one can really go a long way. Buyers like spacious rooms they can envision their own belongings in. Getting rid of things you don't need or can put into storage while your home is on the market can transform the appearance of your home.

Hold a yard sale for those items that still hold value. For things you want to keep but will spoil how well your home shows, get a POD (portable on-site storage) or consider putting your stuff in a short-term storage facility.

Remember: not every improvement has to be expensive. Sometimes it's the small things that make the biggest difference in a buyer's mind.

Welcome to Morris County New Jersey Real Estate

MORRIS COUNTY, NEW JERSEY - Flanders NJ News is happy to announce our new section 'Morris County New Jersey Real Estate'.

Here you will find Weekly home buying and selling tips, articles and professional advice from Real Estate agents Kathryn Godby Oram, of Godby Real Estate and Laura Jacobus, of Remax Realty.

Look for great articles about Staging, Home Improvement Mistakes, Divorce Sales, Home Inspection, Mortage Loans, First Time Buyers, Best Time to Buy, Disclosures, Home Styles, and more.

Can't find what you are looking for? Drop us a line info@flanders-nj.com