Is an FHA 203K Rehabilitation Loan the Right Fit for You?

One of the quickest, though not the easiest, ways to build equity in a home is to buy a home in distress and rehab it. Investors often refer to this process and “fixing and flipping” a property. They buy distressed properties, bring them back to life and sell them quickly for a tidy profit. It’s a tried and true real estate investment strategy, but it’s not just for real estate investors. Individual homeowners can use the “fix it and flip it” strategy without actually flipping the property and the FHA 203k loan program makes this easier than ever.

What is an FHA 203K Loan?

Essentially, an FHA 203K loan is a government backed loan that allows you to include both the initial purchase price of the home as well as any renovation costs. You have one loan and one closing rather than a series of micro loans and one big loan.

As with other FHA loans, you are required to put down at least 3.5 percent of the total value of the loan. Other FHA requirements are also in effect. You will need a credit score of 640 or higher, a maximum debt-to-income ratio of less than 43 percent and the full loan amount cannot exceed the maximum FHA loan value cap for your area.

In addition to the typical paperwork that goes along with an FHA loan, you will be required to provide a detailed proposal covering the improvements you plan to make to your new home, a thorough cost estimate and a timeline for when those improvements will be completed.

Before the lender agrees to finance your purchase and proposed renovations, an appraiser will value the home as it is and give an estimate of the market value of the home after your proposed improvements are complete.

Streamlined or Traditional?

There are two forms of the FHA 203K loan: the streamlined and the traditional.

The streamlined FHA 203K loan is used to purchase and rehab homes that do not require structural repairs. Proposed repairs cannot exceed the $35,000 cap.

A traditional FHA 203K loan is used when structural repairs will be made. Generally, there is a $5,000 minimum for repairs and no cap.

Both forms of the FHA 203K loan require the homeowner to begin repairs within 30 days of close and all repairs to be completed within six months of close.

All forms of repair and rehabilitation are allowed with an FHA 203K loan with the exception of luxury items like saunas, swimming pools and other luxury additions.

The Downside of the FHA 203K

First of all, you are required to stick to your proposed schedule and cost estimate. This means that you can expect regular inspections of the work site, and that can be a hassle.

In addition to the periodic inspections, as with all FHA loans, you will be required to pay mortgage insurance for a minimum of 11 years and this can increase the cost of your loan significantly. Your interest rate will also be higher than a traditional FHA loan. Closing an FHA 203K loan takes longer and is more expensive than a traditional FHA loan. There is more paperwork involved and there is an additional $350 processing fee.

Even with these drawbacks an FHA 203K loan is still an excellent tool for the average homebuyer looking to invest their money in a property that needs a little help and quickly build up his or her home equity. An FHA 203K loan is definitely something to discuss with your lender. You should always weigh your options before committing to a loan.

Feel free to contact me for an appointment today and I will be happy to answer any questions you may have, help you to determine how much house you can afford, and help you to find your next dream home.

Patty Ross
831-236-4513
pattyre@comcast.net
www.pattyrosscarmel.com

Photo courtesy of geraldbrazell/Flickr.com.

Understanding What it Takes to Sell a Luxury Property

Selling luxury real estate is an art form and requires an attention to detail that is near obsessive as well as the assistance of an expert realtor. Buyers that are willing to invest millions of dollars to acquire a luxury home know what they want and they are determined to get it. The slightest problem or misstep and they will go on their merry way.

So, how do you ensure that you avoid any of these missteps when selling your luxury property on the open market?

Here’s a step-by-step guide to help you with selling your luxury home regardless of the market.

Get Your Property Ready to Show

When selling any property, it’s an accepted practice to clean the property to get it ready for showing. With a luxury property, this process intensifies tenfold. It’s not enough just to clean a luxury home; it needs the white glove treatment. Most sellers choose to hire a professional cleaning crew to go over the property with the proverbial fine-toothed comb. Every little detail must be perfect.

The same is true for the grounds. Once again, a professional landscaping crew is normally hired to make sure that all the hedges are uniform, the flower beds are refreshed and full of new, colorful flowers and the grass is fairway perfect.

Beyond just simply cleaning, many people choose to professionally stage their properties. Staging is the process of creating a look using furniture, artwork and other embellishments to create a look that is appealing to the discerning luxury homebuyer. It replaces furniture that may be dated with modern furniture. Essentially, it updates the entire look of the house.

Yes, this will cost money, but studies have shown that luxury home sellers that go through this process typically sell their home from between five and 20 percent more than those that do not.

Professionally Photograph and Film Your Property

Photographs used to sell a luxury home should be taken by a professional home photographer. Most luxury home buyers – or their agents – begin the home search online, and the only thing they have to judge a property by is a photo. Make sure that your photos stand out by using a professional photographer.

Because luxury properties are unique and possess so many distinctive architectural features and amenities, it is difficult to convey and accurate representation of the property with just still photos. That is why many people choose to also incorporate a video of their property in their marketing materials. Like the photos, make sure this video is recorded and edited by a professional. It will pay off in the end.

Market Your Property

Marketing is essential to sell a luxury property. The pool of potential buyers for luxury properties is understandably small. You must do your best to ensure that as many people have the opportunity to view your property as possible in order to improve your chances of finding the right buyer. Make sure that your agent is distributing your property through a variety of online outlets such as the local MLS, Trulia, Zillow, etc. Also, do not neglect to advertise on foreign real estate sites. A large number of luxury property buyers live outside of the United States.

Put the Word Out Through Brokers and Friends

As a luxury homeowner, your friends and their friends are part of your potential buyer pool. Make sure to get the word out to your network of business colleagues and friends that you are interested in selling your property. Some sellers even go so far as to host a party right before they put their home on the market or right after. They invite all their friends as well as well-respected brokers to the party. This gives the seller the chance to get the word out while the house looks its absolute best but in a relatively informal setting.

Show the Property

Be prepared to show your property as often as it takes to sell it. Don’t expect that your property will sell within the first few weeks. If it does, that’s great, but be prepared for the process to take a while. Luxury home buyers are picky. Don’t be offended if everyone doesn’t love your house. Be persistent and the right buyer will come along.

Showing your home is made much easier with an expert real estate agent on your side. He or she will handle all the showings. You don’t even have to be there. You can be away at the office or on vacation while your agent is showing the property. In fact, it’s normally better for both parties if the owner is not present while the house is being shown.

If you follow these steps, you will sell your luxury real estate, and you will command a top price. So, there’s no reason not to do your best to put your home in the best possible light, market it aggressively and show it until it sells. Contact me today if you are ready to sell your home. I will be happy to go over any questions you may have and help get the selling process started.

Patty Ross
831-236-4513
pattyre@comcast.net
www.pattyrosscarmel.com

Photo courtesy of Sean Stanfield at Flickr.Com.

Protecting Yourself and Making Sense of the HUD-1 Settlement Form

With the amount of paperwork that is shuffled at a real estate closing, it is easy to become intimidated when it comes time to close a real estate transaction.

Don’t be intimidated. Most of this is the standard boilerplate and legalese. Most closing attorneys will breeze through this, expecting you to just nod and agree.

There is one area of your closing papers that you need to pay close attention to though: the HUD-1 or settlement form.

The HUD-1 is a government-mandated settlement statement that breaks down the costs of the real estate transaction in exhausting detail. This is an important document because it details how the end amount that the buyer and seller owe is calculated, and any miscalculation can mean that one party owes thousands more than they should.

So, let’s break down the HUD statement piece by piece. It’s only about two pages, so it shouldn’t take long.

The First Section

The first section of your HUD-1 settlement form will cover the basic information about the loan that will be used to purchase a specific piece of real estate.  In sections B through I you will find the buyers, sellers and lenders names. You will see the address of the property and a legal description if necessary.  The settlement company will be listed. The closing date will be listed. The loan will be described in exhausting detail.

Most of this is pretty simple stuff, but mistakes are made. One area to pay close attention to is the “Loan Type” section. Make sure the box that is checked is the correct one.

The Second Section

Section two of your HUD-1 settlement form will summarize the costs of the buyer and the seller. Section J deals with the buyer’s costs. It bears a strong resemblance to a tax form. Fields 100 through 120 detail the various sums the buyer owes. Line 120 will show the total. Fields 200 to 220 deal with amounts credited to the buyer with 220 being the total. 300 to 303 calculate the final amount due from the buyer using line 120 and 220 to calculate line 303 – the final amount due.

Section K deals with the seller’s side of the transaction. It will detail and total any reductions in the final amount due to the seller at close.

Check these figures carefully and make sure they are accurate.

The Third Section

Section three details the various settlement charges such as brokerage fees, lender fees, title insurance, escrow deposits, recording fees, etc.

Once again, make sure these fees are accurate and do not hesitate to ask questions of the closing attorney if you have any.

The Fourth Section

This is the Good Faith vs. Reality section, and many real estate professionals feel that this is the most important section for the buyer – and for good reason. In this section you will find a line-by-line comparison of the estimated costs of the loan versus the actual costs of the loan.

The final line will have a dollar amount and a percentage that the actual amount varies from the estimated amount. Most of the time this percentage is minimal, but on occasion, lenders make mistakes. If the amount exceeds 10-percent, the borrower is entitled to a refund for the overage.

The Final Section

The final section of the HUD-1 settlement form deal with the particulars of the loan. It will cover loan amount, interest rate, monthly payment, amount of insurance, etc.

So, that’s it. The HUD-1 form only looks intimidating. In reality, it’s very simple, and you shouldn’t feel intimidated as you check it line by line. It’s a very important document. Make sure to read it to protect yourself. Contact me today for a consultation. I will be happy to answer any questions you may have and/or help you find the home of your dreams.

Patty Ross
831-236-4513
pattyre@comcast.net
www.pattyrosscarmel.com 

Photo courtesy of Alexander Owens at Flickr.com.

5 Problems With Your Home that Will Only Get Worse

How would you feel if I told you that the problem you just paid $5,000 to fix could have been solved with just a few hundred last year? Pretty bad, right? Let’s be honest, you would be kicking yourself.

Each year, thousands of homeowners across America experience what I just described. They put off fixing a small problem until it became a very big and very expensive problem.  Then, they had to pay the bill. Don’t make the same mistake.

Here are five small issues that could become big problems if you don’t address them quickly.

Poor Drainage

After a good rain, check around your home to make sure that the rainwater is being channeled away from your home and not pooling around the house or overflowing the gutters. If you do notice that water if pooling or overflowing the gutters, check your entire gutter system for clogs, leaks, corrosion and gaps. Poor drainage can lead to foundation problems, rotting siding and even mold and mildew problems if it gets into the walls.

Damaged Roof and Siding

Your roof bears the brunt of any storms, and so, it’s the most susceptible part of your home to water infiltration. Siding has almost as much exposure, and what your roof and siding protect is very expensive to fix and replace. One day, when it’s nice and sunny out, take a pair of binoculars out and inspect your roof shingles or tiles for signs of damage. Are shingles curling or missing? Are tiles cracked and gone? You might also want to get a ladder and climb on the roof to check the flashing. If you notice any problems, have a professional repair them.

The same goes for siding check for damaged siding regularly. Pay special attention to areas around you gutters, windows and eaves. You can seal these gaps with caulk.

If water gets into your attic or into your walls, it can cause structural damage that can cost thousands to repair.

Termites and Ants

These critters might be small, but they can of plenty of damage in a short amount of time. Termites and ants love moist conditions. That’s another reason that making sure the area around your home is draining properly. Experts advise that you should have a professional check your home at least twice a year for signs of termites, but termites and carpenter ants can cause a huge amount of damage in six months. It’s a good idea to inspect your property yourself between inspections.  You can check for termites by poking a screwdriver along the mudsill. If it goes through or in, you have termites. Carpenter ants leave little piles of sawdust in their wake.

Mold and Mildew

Remember a few years ago when everyone was petrified of “toxic” mold. Good luck selling a home if there was even the slightest evidence of mold. Well, since that time, people have come back down to earth about mold and mildew. It’s no longer a death sentence, but it is still something people need to keep an eye out for as it can be evidence of larger problems. Generally a mold and mildew situation occurs when either moisture is trapped in the walls or under carpet or there is a persistent damp environment – like a leaky pipe that goes unnoticed for weeks or months.  If you notice mold and mildew in your home, first cut off the source of the moisture. Then, you can treat the mold and mildew problem. Most small problems – under 10 square feet – can be effectively treated with a solution of one cup chlorine bleach to one gallon of water. Larger outbreaks will require professional assistance. So, it’s always a good thing to catch a mold and mildew problem early. Bleach costs a couple of dollars a gallon. A professional remediation service costs thousands.

Cracks in the Foundation

Oh, no! There’s a crack in the foundation. Don’t worry. It might be nothing. Houses settle over time, and cracks do appear. Most of the time they are no big deal and do not affect the home’s value in the slightest and are not a safety hazard. Still, a crack is something to keep an eye on. As a general rule, vertical cracks are okay. Horizontal cracks are bad. If a sharpened pencil can fit into a crack up to the yellow, that’s not good. If a crack measures over 3/16^ths of an inch across, that’s not good. If you have any concerns, you should mark the crack with chalk or a piece of tape and monitor it for a few months. If it continues to grow, call in a professional structural engineer to take a look at the problem before it becomes a major structural issue.

Protect your real estate investment. Don’t let minor issues with your home turn into major, expensive headaches. Keep an eye on these problems areas --- and others that might be specific to your region – and your real estate investment will appreciate – not depreciate. Contact me today for a consultation. I will be happy to answer any questions you may have, and/or help you determine the value of your home.

Patty Ross
831-236-4513
pattyre@comcast.net
www.pattyrosscarmel.com

Photo courtesy of Eric Haney/ Flickr.com

Low Budget Remodeling Projects Make a Big Impact in Your Home

Home remodeling is an easy way to update a house you just bought, bring new life to your existing living space, or fix up your property before you sell.

If you’re not careful, professional home remodeling projects can cost tens of thousands of dollars. You don’t need to call in the professionals, though. There are many small projects you can do yourself that will add value to your home and make your house more livable, without breaking the bank. Here are a few ideas to update your home without spending a lot of money.

• Make a big impact by painting the exterior of your house. If you do the work yourself, your only cost is the paint and a few brushes and tools. This is an easy way to spruce up your home from the outside and improve your curb appeal.
• The kitchen is another place where you can spend thousands of dollars for complete remodel, or just a few dollars to brighten it up. Give your kitchen a facelift with new paint on the walls. Replace old appliances, and your kitchen will automatically look updated. You can also make a dramatic change in your cabinets by repainting them and replacing your hardware.
• Increase your storage by installing closet organizers. You’ll not only make better use of your closet space, but the rest of your home will look larger when you can put everything away.
• While you’re painting the exterior of your home and your kitchen, go ahead and paint the rest of the interior. Fresh paint will brighten your space and make your home look new.
• Finish the job by taking care of your flooring. Professionally cleaning your carpets, or doing it yourself with a steam cleaner, will make them look new again. Wooden floors and tile can benefit from a deep cleaning, as well.

If you’re preparing to sell your house, you can tackle these easy and economical jobs around your home. Contact me today if you’re ready to put your home up for sale. I’ll help you determine the value of your home and advise you on the best remodeling jobs that will get you the best price for your house.

Patty Ross
831-236-4513
pattyre@comcast.net
www.pattyrosscarmel.com

Photo courtesy Felixco, Inc., FreeDigitalPhotos.net.

Six Questions to Find Out if You Are Ready to Buy a Home

There comes a time in everyone’s life that they begin to think about putting down roots and buying a house. Buying a home is a big event, and the largest purchase most of us will ever make.

It’s important to make sure you’re ready before you buy a house. Here are some questions to find out if you’re ready to make the commitment and own your own place.

1. Do you plan to stay put for several years? Ideally, experts say that you should plan to stay in your home for 5 to 7 years to make buying a house pay off. If you think you’ll need to move before that time, you might be better off renting.
2. Are you are in control of your finances? Owning a home means paying your mortgage on time every month, and paying for your own repairs. You’ll need to be able to budget your money to pay for a home.
3. Do you have a stable income? If your income fluctuates, you may have trouble making your monthly mortgage payments.
4. Do you have savings? You’ll need savings to cover your closing costs, home maintenance, and anything you need for your house like curtains or furniture. You’ll also need savings to cover emergencies, such as storm damage.
5. Do you have good credit? A good credit score will ensure you get a good interest rate on your mortgage. If you’ve had a bankruptcy or missed several payments on credit cards or loans, you may need to wait on buying a home until you can repair your credit.
6. Are you handy around the house? There’s no landlord a call for repairs when you own your own home. You are responsible for fixing your own leaky faucet, broken dishwasher, or backed-up sewer. You’ll also have to take care of maintenance like yard work and painting.

If you can answer yes to these questions and are still excited about owning your own place, you’re probably ready to buy a home. Contact me for an appointment to get the process going. I’ll be happy to help you determine how much house you can afford, and help you find your dream home.

Patty Ross
831-236-4513
pattyre@comcast.net
www.pattyrosscarmel.com

Photo courtesy ponsulak, FreeDigitalPhoto.net.

KRXA Radio Show #258 - May 2014 Spring Fling!

The Spring real estate market came early to the Monterey Peninsula.  After a rather calm winter season, we are now seeing a steady influx of buyers and sellers in all Peninsula areas from Big Sur to Marina. 

It’s nice to see a healthy market again, but it is also a bit frustrating (and exciting) when we have to deal with multiple offers.  Regardless, we need to be prepared to deal with any kind of market, since we never know what’s coming when. 

We have finally struck a nice balance between regular loan transactions and cash sales.  Distressed sales are rapidly becoming a thing of the past.  They will always be around but not in large numbers like they were.

Let’s take a look at a snapshot of the individual housing markets for each of our 10 market areas. 

Carmel:  Everything UP in Carmel, listings, pendings, activity, prices.  A very active and stable market, fast on its way to full recovery from the years of setbacks we experienced a short while a ago.

South Coast (Carmel Highlands to Big Sur):  We are seeing a strong renewed interest in coastal property.  A larger inventory plus the mystique of the entire coast is drawing buyers from around the globe. 

Carmel Valley:  A very active market with a big infusion of inventory and one of the highest number of pending sales.  With its warmer weather, the Valley seems to be more popular than ever. 

Pebble Beach:  Not much change here.  Still doing better than last year.  Although average sales are higher, it tends to vary more due to the large number of high end sales at any given time. 

Monterey:  Lots of action in Monterey.  The turnover of inventory is good with only a modest increase of the average price of a home there over the last two months.  One can find a wide variety of homes there almost any time of year. 

Pacific Grove:  A strong market with an activity level of 41%, a good number of pending sales and a modest price increase over the last two months.  Pacific Grove has definitely been discovered. 

Del Rey Oaks:  No change in average price over the last two months.  A very stable market with only 2 pending sales.  Dollar for dollar this community is clearly the best value.  An inventory of 6 is about as big as it gets. 

Seaside/Sand City:  Inventory has increased recently, which gives this market something to work with.  Average price is up a bit, but nearly all homes here are quite affordable.  It’s the lowest priced area in our local market and multiple offers abound. 

Marina:  Inventory is typically low creating a good deal of competition.  In fact, actual sales prices of homes here have been running 1% above asking prices. Both Marina and Seaside have the highest activity levels in our market, running about 50% (half of inventory is pending at any given time) 

Monterey-Salinas Highway:  Being an extremely diverse area it is difficult to properly represent it statistically.  One thing we can say with confidence is that the activity level is currently 34%, which is a strong showing in this market. 

Here are the numbers for Monterey County as of April 2014:  

TRENDS AT A GLANCE	MAR 2014		PREVIOUS MONTH	YEAR-OVER YEAR
Median Home Price	-0.1%	$530,000	$530,500	+47.2%	$359,950
Average Sales Price	-23.9%	$713,961	$938,212	+22.1%	$584,859
No. of Homes Sold	+15.5%	164	142	-36.9%	260
Pending Properties	+16.8%	362	310	-26.1%	490
Foreclosures Sold	-14.3%	6	7	-85.7%	42
Short Sales Sold	-7.7%	12	13	-79.3%	58
Active Listings	-4.0%	594	619	-12.0%	675
Active Foreclosures	+14.3%	16	14	-56.8%	37
Active Short Sales	-39.5%	23	38	-83.8%	142
Sales Price vs. List Price	0.0%	97.9%	97.9%	-0.3%	98.3%
Average Days on Market	-1.8%	69	70	+13.6%	61

 

0 NORTHEAST DOLORES STREET, Carmel by the Sea 93921
Class:	Single Family Residential	List Date:	04/29/2014
Beds:	2	List Price:	$1,195,000
Baths:	2 (2/0)	Sale Price:
SqFt:	1,187 (Assessor)	HOA Fee:
Lot Size:	5,000 Sqft (Assessor)	X-street:	1st
Elem Dist:	Carmel Unified
High Dist:	Carmel Unified
List Agent:	Patricia J Ross
List Office:	Sotheby's Int'l Realty-Rancho
Direction:	Ocean Avenue north on Dolores. 3rd house NE of 1st.
Remarks:	Sophisticated, updated and ready to move in, this 2010 remodeled "Country Comfort" says it all. Open floor plan, high ceilings, beautiful hardwood floors on a large lot convenient to town and beach. Low maintenance landscaping perfect for second home or bring the kids and enjoy Carmel full time.

  

Open this Friday, Sat and Sun 2-4!

Patty Ross
831-236-4513
pattyre@comcast.net
www.pattyrosscarmel.com

Click here to listen to Patty discuss the latest trends in Northern California Real Estate including the communities of Carmel, Carmel by the Sea, Carmel Valley, Marina, Monterey, Pacific Grove, Pebble Beach and Seaside