Lake at Home - Karissa Webster tag:lakeathome.com,2009-04-14://1 2009-05-09T18:04:44Z Lake at Home entries from Karissa Webster. Movable Type Commercial 4.25 Rehab Loans: The Fix for the Fixer Dilemma tag:lakeathome.com,2009://1.26 2009-05-09T18:01:19Z 2009-05-09T18:04:44Z Karissa Webster http://lakere.com/real_estate_agents/agent_roster.php?agent=karissa It's a classic dilemma: you found the perfect fixer home for you, but it needs some serious work, something crucial enough to the performance of the home that the banks won't lend on it without the work being done.  The seller can't afford it: after all, if they had the money to do the work it would have already been done (and likely they wouldn't be selling the home).  Do you take a chance and pay for work before closing in order to get the loan to buy the house?  What if something happens and the deal falls apart?  You're out the cash and the seller now has an improved property to sell at a higher price to someone else. 

 

The solution is a rehab loan (also known as a remodel or renovation loan).  These loans are a highly useful tool that many people don't know are available: not all banks offer them and they are tricky for inexperienced loan brokers.  But the process is intuitive: you find a house that needs work, you write up an offer, negotiate a deal, then bring in a certified inspector who helps you do the numbers and create your list of necessary improvements and their costs.  You submit the paperwork to the bank, they send out an appraiser who determines what the value of the home will be after you have completed the improvements.  If the numbers add up, you're in business.  It's not as difficult as it would sound: on FHA rehab loans they will lend on acquisition cost (which would be the purchase price and the cost of the repairs) or 110% of the future appraised value.   When the deal is all said and done, your money for repairs will be in an account held by the lender and released to you as the work is completed.

 

As one would expect, there are a few extra hoops to jump through and the fees for these loans are a little higher: after all, the bank is taking a greater risk lending in this scenario.  But the rewards are tremendous: buyers can get into homes that otherwise would be unavailable to them, and often at great prices.  Consider all those fixers out there that are terrific deals but many people think are unavailable to them because they don't have the cash to do the needed work.  Rehab loans are a strong solution in a market full of opportunities.

]]> Rent or Buy? tag:lakeathome.com,2009://1.17 2009-04-28T23:12:00Z 2009-04-29T00:03:11Z Karissa Webster http://lakere.com/real_estate_agents/agent_roster.php?agent=karissa If you're stuck in the quandary of, "Should I buy or should I rent?" there are a number of things to consider.  Such considerations may include current interest rates, how long you plan to stay in the home, and what not only the real estate market is doing, but what the rental market is doing as well.  A terrific website I found through The New York Times does an amazing job of running the numbers:  http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html?_r=2#

Plug in the relative numbers: rent, purchase price, down payment, interest rate & annual property taxes (figure about 1% of the purchase price) and the program will pull up a timeline showing you at what point it pays off to have bought.  You can play with the home appreciation rates and rent increases to see how they affect the outcome of the numbers.  While we can't say for certain what will happen with the Seattle real estate & rental markets, we can look at how we have done historically and we can watch day-to-day to see what the current trends are.  The real key is that information is knowledge -- get as much of it as you can.  

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