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Watch Out for These Surprises That Can Drive Up the Cost of Buying a Foreclosure Home

July 29, 2019


Buying a foreclosure home, also known as a distressed property, might seem like a less expensive way to get into your next place. These homes usually sell for about 15% below the home’s actual value. But buying a foreclosure property isn’t always what it seems. While it may look like a bargain, it could end up being more expensive (and more trouble) than it’s worth.

“On the surface, foreclosed homes can seem awfully appealing,” says Beatrice de Jong, consumer trends expert at Opendoor. “However, costs can be extremely unpredictable, and underlying damages could make a property undesirable.”

With big risks associated with foreclosures, a buyer could end up with a money pit, rather than an affordable new home. That’s why you should always budget for the worst-case scenario.

“It’s better to be pleasantly surprised than to not have the funds to solve the problem,” says Avery Boyce, a real estate agent with Compass Real Estate in Washington, DC.

Here are some of the hidden costs you need to look out for when considering a foreclosure home.

Home repairs

Foreclosures are likely to need some work—and the list of needed repairs and renovations can be long indeed. The worst part is, you might not even have a ballpark estimate of what repairs are needed until you receive the keys.

“The bank will be limited on the disclosures they can provide regarding the condition of the home and previous repairs done,” says de Jong.

In some cases, you can get a home inspection before finalizing the sale, but often, a foreclosed house is sold as is.

“Keep in mind that if the previous owners couldn’t make their mortgage payments, they likely also fell behind on regular maintenance,” de Jong says. “The home may have foundation problems, need a roof replacement, and require a heavy workload to bring the home up to code.”

The property could have also been sitting there, uncared for, for a while. You might have to factor in the additional costs from overgrown lawns, graffiti, weather damage, and more.

Paying too much in a bidding war

Buyers—especially those purchasing a home for the first time—should be careful to not get stuck in an expensive bidding war. Why? They could end up paying too much for a house that they can’t afford to fix.

There can be a lot of competition from other eager buyers, real estate developers, and flippers.

“For damaged homes that are priced well below market value, you will probably be competing with developers who plan to rip out everything anyway, and can afford to solve big unknown problems,” Boyce says.

Steer clear of a bidding war and avoid busting your budget on a home that needs more work than you can afford. Before making an offer, set your upper limit, and stick to that number. There will be other houses later on, and it’s often better to play it safe when it comes to foreclosures.

Challenges in getting funding

Even if you can get a great price on a foreclosure property, many buyers will still need a loan to help them purchase it. Before you make an offer on a foreclosure, don’t bank on being able to get a mortgage.

Some lenders simply won’t offer funding for foreclosure properties. The most common reason: The house is in such bad condition, it can’t pass an inspection.

“To get traditional financing, the home needs to be in really good shape,” Boyce explains. “All the utilities need to be on and testable, there can’t be holes in the drywall or floors, and there can’t be water inside the home.”

Plus, most banks favor all-cash offers on foreclosures because they have already lost money on the property and they don’t want to end up in the same situation again.

If you can’t do all cash upfront, it is likely to help to get pre-approved, and it also helps to be willing to put down 20% or more. This way, at least the bank knows you’re serious about buying the house and paying the mortgage.

No room for negotiation

When buying a home the traditional way, the seller may be willing to negotiate on the price. You submit an offer, the seller might counter, and in the end, you could end up paying less than the asking price.

“Dealing with the bank is a more formal and corporate process than dealing with a seller, so expect limited flexibility, if any, when negotiating on the offer price,” de Jong says. “Banks are not likely to budge on the price, since they are mostly concerned with recouping the costs from their investment.”

However, if you’d like to test the waters, Boyce suggests you ask your agent to search for past sales by the bank to see whether the sale price is lower than the list price.

“That will give you some insight into whether it’s worth submitting a lower offer,” she says.

Property tax increases

If, after learning about all these hidden fees, you’re still seriously considering a foreclosure, you’ll be aware that some properties will need to be overhauled. And while you might be ready to put some serious cash into the project, know that there’s an extra fee associated with a major home makeover: increased property tax. Fixing the house up will increase its value, and in most places, that means your property tax bill will go up.

This may seem like a no-brainer to some seasoned homeowners, but it’s important to remember this tax increase when budgeting for repairs. Don’t get stuck going all in on a home and finding yourself strapped for cash when it’s time to pay taxes.

The post Watch Out for These Surprises That Can Drive Up the Cost of Buying a Foreclosure Home appeared first on Real Estate News & Insights |®.

Paradise Found: These 5 Tips for Buying a Home on an Island Will Take You There

July 25, 2019


Quick question: How many times a day do you dream about quitting your job and moving to some idyllic island with turquoise blue water and a delicious umbrella drink in your hand? If you’re anything like us, it’s in the double digits (sorry, boss!).

It might seem out of reach as you sit, eyes glazed, in front of your computer. But here’s the truth: People move to islands all the time! Whether it’s Maui, the Bahamas, or Bora Bora, you, too, can buy a home on an island.

Before you sell your home and all of your stuff to afford your island venture, there are just a few details to consider. Here’s what you should think about before buying a home on an island, according to real estate experts who deal with island markets every day.

1. Consider all areas of the island—even the ones you don’t know about

Sure, everyone wants to live right on the water. But on many islands that can be very expensive. That’s why you might want to target the entire island, versus limiting yourself to a single area you know or have in mind, says Keith Gillispie, a real estate professional who buys and sells homes on Oahu, HI.

“Here, real estate is generally more expensive, lesser quality, smaller, more densely populated, and very competitive,” he says. “Even one island valley over from where you want to live could mean the difference of $200,000 in the price of your house.”

2. Be prepared for a whole new world of pests

You aren’t in Kansas anymore—literally. When moving to an island, think about the environment there and whether you’re willing to hack it with all of the native flora and fauna.

“Most islands have their own ecosystem that is different from city living in larger countries and areas,” says Tamika Todd, a real estate broker at Platinum Realty in Bermuda. “Within that ecosystem, you may find certain small or large creatures that reside near dwellings.”

And unless you want those critters to become your island roommates, you might have to shell out additional cash to seal your home. Think: screens, shutters, and regular pest control services, Todd says.

3. Visit—and stay a while

We know—twist your arm, right? But the only way you’ll really know if island living is for you is if you spend an extended amount of time there.

What’s more, your island might not have all of the amenities you’re used to at home. Some of you might think it’s worth it, but others could get fed up with the lack of available products—and the premium you’ll pay for what is available.

“Are you able to live without access to Starbucks, McDonald’s, and the local Ikea?” asks Odest T. Riley Jr., president of WLM Financial, who works with real estate on the island of Santa Catalina, CA. “Plus, things that we take for granted may cost 10 times as much to have shipped in to an isolated Island.”

4. Stay smart about your insurance policy

You’ll want to make sure your little piece of paradise is covered in the event of extreme weather, which is, unfortunately, often a reality of island life.

Depending on where you live, you might need to purchase homeowners insurance with supplemental hurricane coverage. And don’t forget about separate windstorm and flood policies. We know—all of that insurance can be costly. But you’ll consider it money well-spent when disaster strikes.

5. Factor in cost of living—and be prepared to downsize

Even if you can afford your dream island home, don’t forget to factor in all of the other costs of island living. It can vary widely, depending on where you’re buying your home. But a general rule of thumb: “The cost of living is much more expensive on an island as compared to the mainland,” Gillispie says.

That means property taxes, utilities, HOA fees, insurance, and even a gallon of milk could be more than what you’re used to.

“Because of the high cost of living and the huge expense of buying a house, families usually have to downsize significantly in order to save money on expenses,” Gillispie warns.

“Getting bunk beds or a bed that folds up along the wall during the day are pretty normal here. You may even need to be prepared to give up the den or the office you used to have, and plan to not have a garage or huge yard—both significantly drive up the cost of the home and are hard to find.”

The post Paradise Found: These 5 Tips for Buying a Home on an Island Will Take You There appeared first on Real Estate News & Insights |®.

Should I Buy a Condo? The Pros and Cons

July 25, 2019

should i buy a condo


If you’re a potential buyer in the real estate market, you may wonder, “Should I buy a condo?” Condominiums are generally less costly to purchase than houses or townhouses, and they can offer conveniences you might not otherwise be able to afford. In fact, some buyers who are priced out of single-family homes in high-priced markets may qualify only for mortgage loans on condos or co-ops.

Condominiums can be a good investment, especially if they allow you as a buyer to enter the real estate market. Qualifying for financing is much the same as getting a mortgage for a single-family home. If you are purchasing condos as investment properties, you should be able to find a lender as well.

Yet there are caveats to condominium ownership. Here are five things to think about before you take the plunge.

You don’t own the land

A condo building is a building or complex consisting of multiple apartments that are individually owned. The entire building is owned by an individual or a property management company, but condo unit owners do not hold the title to the land on which the structure sits. This means the value of the property you own will consist solely of your condo.

Don’t confuse a condominium with a co-op. With a condo, you own a specific part of the building structure, and the use of common areas. With a co-op, or housing cooperative, you own a share of the real estate. As a real estate shareholder, you have the right to live in a certain unit.

On the pro side, living in a condo means you have use of the real estate, but you won’t be spending your weekends mowing the lawn.

On the con side, you can’t change the landscaping and you have to share the common areas with other owners.

Increased amenities, decreased maintenance

Condo communities may offer amenities and common areas (e.g., pools, a garage, or tennis courts) that you may not otherwise be able to afford if purchasing a townhouse or standalone house.

Additionally, condos can relieve you of the need to manage the building maintenance and any amenities. Some interior issues such as plumbing and electricity may be managed by the complex’s community association. You still own your unit, however, so you can decorate and personalize more than you are allowed to as a renter.

If you’re used to fixing things yourself, however, you may not always want to wait for the association to do the job, or get pre-approval before you call a repairman. Also, the association may make a special assessment for large projects, which you may not always agree with.

Built-in social network

Socially, condos can be great owner-occupied properties for singles, couples, and families. Your proximity to your neighbors and access to shared areas mean there will be greater opportunities for you to meet new people.

On the other hand, you’re likely to have less privacy when you’re sharing walls and building access. Neighbors might be able to hear your conversations or see when you come and go.

Before buying, check to see if the other condo owners are friendly and seem likely to be people with whom you would get along. Make sure the building is constructed to minimize noise. If you’ve always lived in a single-family residence, consider renting a condo or apartment before you buy.

Homeowners associations can be bureaucratic

This is obviously a case-by-case situation, but some condo HOAs can be difficult to deal with or have high monthly association fees. Some HOAs can be politicized and hold you accountable for any perceived infringement of rules. Most associations will impose building maintenance fees, whereas in a single-family home you pay for expensive renovations or maintenance projects at a time when you can afford them.

Of course, more single-family homeowners also live with HOAs now, so HOAs are becoming harder to avoid. Ask around about what it’s like to live with an HOA before you join one.

Always take the time to be familiar with the association’s fees before you buy. You could also look at the minutes of the community association’s meetings to see if there are outstanding maintenance issues that are likely to be expensive.

If you are considering purchasing an investment property, be certain that the condo association will allow you to rent out the condo unit on a short-term or long-term basis, before you buy.

Be wary if there are many condos for sale in the building

Unless a condo community is a brand-new construction looking to welcome its first group of condo owners, you might want to think twice about purchasing in a community with many properties for sale. This could mean that there is a high level of dissatisfaction with the building and living conditions.

If more vacancies appear and things spiral downward, the association may fall behind on upkeep, and lose its reserve fund. More buyers avoid the condo complex. Lenders may even refuse to make loans for new purchases, or they may require a larger down payment. Even if all goes well now, you may have a difficult time when you want to sell or refinance.

If you do find your dream home in a community that seems slightly abandoned, try to chat with a resident or two when you tour the condo to see if there are any red flags.

Ultimately, keep these questions in mind: Do you like the condo’s size? Is it in the right neighborhood? Is the building properly maintained and are the amenities to your liking? Can you comfortably afford the mortgage, including homeowners association fees? These considerations will point you in the right direction of a condominium that has everything you want in a home.

The post Should I Buy a Condo? The Pros and Cons appeared first on Real Estate News & Insights |®.

Mercury in Retrograde: Your Guide to Buying and Selling While the Planets Go Crazy

July 17, 2019


If the sh*t really started hitting the fan for you right around July 7, you wouldn’t be the only one. Mercury is in retrograde until July 31, which explains why your mood might be all over the place and why you and your S.O. got in those epically dumb fights last week. It also explains why, as I was writing this piece, I found myself running to catch a flight at the changed (unannounced) gate, laptop open, coffee spilling down my shirt, only to end up having my seat moved to an aisle with the world’s unhappiest children.

But let’s back up for a second: Several times a year, planet Mercury is said to go retrograde—meaning it moves in an opposite direction to Earth. (“This backward movement is actually an illusion, similar to the one you experience when you’re in a car on the highway moving faster than a train alongside you,” according to Mother Nature Network.) Regardless, astrologers believe that this brief planetary upheaval also throws chaos into life down here on our planet.

While there’s no need to stock up on your favorite instant mac and cheese and prepare for the apocalypse, you might want to be a little extra cautious during this time, says astrologer and psychic Suzie Kerr Wright—especially if you find yourself about to make a particularly huge and consequential decision, like, say, buying or selling a house.

“Mercury rules our communication and thinking, so all of that can become murky,” Wright explains. “The period messes with our minds so we may misplace or lose things, we might feel a little off, or, if we’re rushing to send an email, we may reply to all instead of one person. We may find we’re a bit clumsier too.”

So how does Mercury play into buying and selling?

“Some people out there are more sensitive to Mercury retrograde than others,” explains Mary Dunne, real estate broker at Warburg Realty in New York. “In many instances, I believe a Mercury retrograde can add some complications or delay some aspects of the process, and generally highlight the need to read the fine print.”

With all of the craziness happening, you might start thinking a moving Mercury might wind up derailing the close on your new house. But both Dunne and Wright insist this isn’t the case.

“I don’t highlight the timing to clients unless it’s brought up,” Dunne says. “I just play more cautious around the time.”

And despite all of the spilled coffee and drama-filled days, Wright actually insists that Mercury in retrograde can be a positive thing.

“The real purpose of a retrograde period is to get us to slow down, rethink what we’ve been doing, revisit old ideas, and reconnect with ourselves and others,” she says. “It’s a break, not a curse.”

How to get through a retrograde sale

The key to getting through a big decision while Mercury does its business isn’t to hole up and hide away. Get out there and keep on keepin’ on—just do it thoughtfully.

“Make decisions from the perspective you had prior to the retrograde,” Wright says. “In other words, if you want a Craftsman home and that’s what you’ve always wanted, but you find a ranch during a retrograde you feel you can’t live without, step back. Think, think, and then think again. Is this really what you would want long-term and why did you want a Craftsman for all this time?”

Some fine print details to get you through the crazy

  • Check contract numbers twice, and double-check everything before signing anything.
  • Overcommunicate your expectations to everyone involved in the deal. That means your real estate agent, and possibly even your buyer or your seller. Make sure everyone is on the same page, and avoid any miscommunications.
  • Avoid last-minute changes. “Buying and selling during retrograde is fine,” Wright says, “so long as contracts have been drawn up before.” If any major last-minute changes take place, consider waiting until after retrograde to sign the paperwork.
  • Don’t be swayed by your own change of heart. Lots of folks are changing their minds right now, so don’t let your new inkling for a ranch make you throw out weeks of negotiating on your former Craftsman dream home.

The bottom line

Sure, weird stuff might happen during this period. But ultimately, everything is going to be OK.

“Starting something new in a retrograde period is not advised, but life goes on and you won’t die if you do,” Wright says. “Just double-check everything, and stay out of the panic mode.”

The post Mercury in Retrograde: Your Guide to Buying and Selling While the Planets Go Crazy appeared first on Real Estate News & Insights |®.

Is It Cheaper to Buy or Build a House? Compare the Pros and Cons

July 12, 2019

is it cheaper to buy or build a house


When you decide it’s time to put down roots and become a homeowner, you may wonder: Does it cost less per square foot to buy or build your own house? Unless you’re rolling in money, you’ll probably want to weigh the pros and cons of new versus old construction—and the price you pay for construction costs versus an existing home is only the beginning.

Here we lay out everything a home buyer needs to know about buying an existing home compared with building one from scratch or having it built by a general contractor.

Is it cheaper to buy or build a house?

First, consider the upfront costs.

If you buy an existing home: According to the latest figures, the median cost of buying an existing single-family house is $223,000. For the average 1,500-square-foot home built before the 1960s, that comes to about $148 per square foot. That said, the exact price can vary widely based on where you live. (Go to to see the price per square foot in your area.)

If you build a new home: The latest figures show that the cost to buy or build new construction will set you back an average of $289,415. That’s $66,415 more than the cost of an existing home! Still, you’ll get a lot more for your money. For one, new construction is usually more spacious, with a median size of 2,467 square feet—so the cost to build per square foot, $103, is actually lower than that of existing homes.

Another advantage of having a builder construct a custom home is you pay for only what you want, whereas an existing home may have interior and exterior features (e.g., a finished basement or a basketball court) you’ll pay a premium for, even if you don’t want them. But if an older house happens to be your dream home the way it is, that may be the more bargain-friendly route.


If you buy an existing home: Older homes have more wear and tear, which means certain things may need more maintenance—or, if they’re on their last legs, replacement, points out Michael Schaffer, a broker associate at Colorado’s LIV Sotheby’s International Realty.

Naturally, the cost of this upkeep isn’t cheap, so make sure you know the age of the main items. For example, the average furnace is expected to last 20 years and will cost $4,000 to replace. The typical HVAC system lasts 15 years and costs $5,000 and more to replace. Another biggie is the roof: The average shingled roof holds up for about 25 years. If you need to replace roofing, you’re looking at a bill of at least $5,000. Plumbing and septic systems can go for some time without a problem, but when something goes wrong, it’s an emergency.

With an existing home, unless you step into a high-end home with everything you want, you may want to start changing things, even if they are still functional. Home improvement shows make it seem simple to change countertops and flooring, or even overhaul floor plans. When you’re paying for material and labor costs for plumbing and drywall work, you may start to think your total cost might have been less paying a builder for a custom home in the first place.

If you build a new home: Considerably less upkeep is one of the primary reasons to build your own single-family home, because everything from major appliances to the HVAC system is new and under warranty. In fact, sometimes the entire home is protected for up to 10 years because a builder generally offers a construction warranty “for any problems that arise,” says Schaffer. Your interior and exterior maintenance outlay for a decade is potentially zero dollars. That can make up for some home construction costs per square foot that you paid by opting for a custom home.


If you buy an existing home: A major perk of older homes is mature landscaping with large trees and established plantings. That may not seem like a big deal until you consider that the U.S. Forest Service estimates that strategically placed mature trees can add tens of thousands of dollars to a property’s value and save up to 56% on annual air-conditioning costs.

If you build a new home: Builders often do little or no landscaping to new construction. It may take thousands of dollars—and many years—to get the yard you want. For instance, one 6- to 7-foot-tall red maple will cost about $120 (if you plant it yourself), which will then grow 2 to 3 feet a year. According to HomeAdvisor, the average cost of adding complete landscaping is $3,219.

Energy efficiency

If you buy an existing home: The latest U.S. Census found the median age of American houses to be 36 years. Older construction means dated windows and appliances—dollars flying out the window on wasted energy expense.

If you build your own home: Recent construction almost always beats older homes in energy efficiency, says Kyle Alfriend of the Alfriend Real Estate Group Re/Max, in Ohio. Homes built after 2000 consume on average 21% less energy for heating than older homes, mainly because of their increased efficiency of heating equipment and building materials. This translates into reduced energy expense every month, even with the higher square footage in many newer homes.


If you buy an existing home: The nice thing about old homes is that there’s context to your purchase: You can research the home’s previous sale prices, as well as prices of similar homes in the area (known as comparables, or comps) to get a feel for whether prices are rising or falling in your area. If the prices for your home and others in the area have been steadily rising, odds are decent that the trend will continue, which bodes well for you if you decide to sell later on.

If you build a new home: New house construction, particularly in up-and-coming neighborhoods, can be more of a gamble. Without a proven track record of lots of comps, there just aren’t enough data points to really know what could happen down the line. This is also true for all of the latest amenities you might ask the builder to install in your home (think self-cleaning toilets).

“Some trends die quickly, dating the home, and can negate any appreciation,” says Alfriend. So when in doubt, try to steer clear of anything that screams it’s a passing fad.

That said, if you pay reasonable home costs when you build a home, and your local community is thriving, you should be able to get a good sales price for your home down the line.

The post Is It Cheaper to Buy or Build a House? Compare the Pros and Cons appeared first on Real Estate News & Insights |®.

They Took What?! The Strangest Things Home Sellers Have Removed—and What Buyers Can Do

July 11, 2019

When Diana Abu-Jaber moved into her Miami home, she expected to find everything she had seen when she made her offer to purchase. Instead, she discovered that the previous owners had left her in the dark. Literally.

“The sellers took the lightbulbs,” she recalls. “They also took the batteries from the smoke detector, the knobs from the bathroom faucet, the curtains, and all the toilet paper. They even pried a clock out of the wall.”

Abu-Jaber isn’t the only new homeowner to find strange things taken from the properties they have just moved into. On various social media sites, buyers have reported missing closet rods, door stoppers, and shower heads.

Should home sellers be allowed to take these things with them when they move? We got the lowdown—and what you should do if it happens to you.

Figure out whether the items are theirs or yours

First, you should understand the difference between fixtures and personal property. Fixtures are items physically affixed to a property and therefore automatically included in the purchase agreement (unless otherwise excluded in the property listing). Chattels or personal property include anything movable, says Rona Fischman, a Realtor® and principal broker at 4 Buyer’s Real Estate in Cambridge, MA.

Buyers are legally entitled to receive all of the home fixtures as they appeared when the offer to purchase was made—so if a funky entryway light was there when you visited the house, it should still be there when you move in (unless you’ve negotiated otherwise).

“We’re really, really fussy: We actually write all that stuff out, because there are many things in that gray area between personal items and real estate,” explains Fischman, who works exclusively as a buyer’s agent. “The classic one is drapery: That’s chattel, but the brackets are fixtures, so decide in advance who’s getting the set.”

Be very specific about what stays and what goes so there are no misunderstandings.

“When buyers are ready to make an offer, we’ll ask, ‘Is there anything in that gray area that, if it was gone, you’d be unhappy about?’” she says. “And then we add it onto the offer.”

What to do if sellers take things anyway

If a bunch of things have mysteriously gone MIA, buyers do have some recourse, says Andrea Duane, a Realtor with Coldwell Banker in El Dorado Hills, CA.

She’s also experienced surprises during walk-throughs with clients.

“Once, we noticed all the kitchen cabinet hardware and drawer pulls had been removed,” she says. “The sellers wanted to bring everything to their next place, but you can’t do that. We went right back to the seller’s agent and said, ‘Your client did this. It wasn’t disclosed and these things were bolted and attached to the property—they need to be put back because they are permanent fixtures of the house.”

Monica Kemp thought she had come to terms with a seller who had mentioned she was taking the dining room chandelier.

“We were fine with that. However, once we closed, we got to our new house and saw she had not only taken the chandelier, but she didn’t replace it with anything—we just had wires hanging out of the ceiling,” recalls Kemp, who purchased that house before she became a Realtor with Coldwell Banker Residential Brokerage in Leesburg, VA.

“Now, because of my experience,” she says, “I know to include that if anyone is specifying they’re taking something, they have to make sure it’s replaced.”

In Abu-Jaber’s case, the sellers were getting divorced, and she opted to cut them some slack.

“It was a tough situation that made me so sad for them, so we didn’t ask for any of the items back, but we also ended up putting that house back on the market really quickly,” she says. “The fit was never quite right; we always felt a little unwelcome—it was bad juju.”

Beware: Sellers might remove items out of spite

Why on Earth would sellers bother to remove toilet paper holders, doorknobs, or switch plates? Fischman says such actions could indicate an underlying issue.

“When that kind of thing happens, it usually means you had a bad deal; somebody thinks they’ve been ripped off,” she says.

To avoid a sour situation, be proactive: Take photos during visits, describe all inclusions in the offer to purchase, and be respectful and reasonable during the negotiating process, Fischman adds.

And, while most closings happen without a hitch, it’s always a good idea to do one or two walk-throughs with your agent just to be sure everything’s in order.

Abu-Jaber, who’s moved several times, has learned a few things along the way.

“Usually, people are pretty reasonable and don’t strip the house bare—mine was an unusual experience and I wouldn’t suggest making yourself nuts trying to itemize every detail,” she says.

Plus, if you negotiate with the sellers, you could end up with some pretty rad finds. Abu-Jaber, in fact, has bought and sold all sorts of furnishings with their home purchases.

“If you get to know your sellers a bit, you can get some great deals, too,” she says. “We bought our much-loved dining room table for $25 from our seller.”

The post They Took What?! The Strangest Things Home Sellers Have Removed—and What Buyers Can Do appeared first on Real Estate News & Insights |®.

What Is a Cape Cod House? Hint: It’s on the Monopoly Board

July 9, 2019

what is a cape cod house?


Countless Monopoly games have been won and lost over the placement of tiny green houses (as well as slightly larger red hotels, but that’s another story). But if you’ve ever inspected these pieces of plastic, you’d see that they’re actually miniature versions of the popular home architecture known as Cape Cod design. All of which begs the question: What is a Cape Cod house, anyway?

Characteristics of a Cape Cod house

These New England homes are named, of course, after Cape Cod—the place that gave them their start. This beloved vacation destination is located off the coast of Massachusetts and is known for its breathtaking beaches and quaint little towns.

In the 1600s, Cape Cod gave birth to its namesake style of home, which was built to withstand harsh New England winters. As such, cottages in Cape Cod typically had the following features:

  • A simple rectangular shape and small (one-story) size, though some Cape Cod house plans are one-and-a-half level or three-quarter Cape (Due to the extreme cold of New England winters, the smaller the cottage, the easier and less expensive it was to heat.)
  • A steep, slanted, gabled roof (sometimes side-gabled) to help snow melt off
  • A central chimney in the middle of the home (all the easier to heat the space) connected to fireplaces in many rooms
  • Cedar shutters and shake shingles to protect against strong winds
  • Double-hung, multipane windows
  • Low ceilings, which also help conserve heat
  • A simple floor plan with a front door opening to a central hall, offering equal space on either side for living and dining rooms
  • No porch, roofline, or other ornamentation (except for simple clapboard siding, shingles, and shutters) (A typical early Cape home wouldn’t have dormers, though later iterations might include two symmetrical ones.)

Postwar Cape Cod boom

After soldiers returned home from World War II, Boston architect Royal Barry Willis was instrumental in the spread of Cape Cod homes in suburbs across the United States—starting in New England and moving westward. Young families flocked to them because of their affordability, especially during the Great Depression.

Modern takes on the Cape Cod style

The Colonial-era Cape Cod home style is still going strong today, both in New England and other parts of the country. A Cape Cod uses many different construction materials for roofs and siding, and may add features like porches or gables, but it retains the style’s traditional characteristics. Below is a gorgeous example of a Cape Cod–style home with dormers and a chimney in the Pacific Northwest:
Key Peninsula Residence

Photo by David Vandervort Architects
Capes fall into the midrange cost when it comes to building, as you can lose some livable space because of the architectural style (namely, the steep roof and its rafters). Still, it’s considered an affordable and practical housing style for both a main residence or a summer home, plus it features Colonial Revival flair.

If you want the feel of a New England Cape, a Cape Cod–style house may be available to shop for wherever you live. Or at the very least, you can divulge some fun trivia related to Cape Cod–style homes during your next Monopoly game.

The post What Is a Cape Cod House? Hint: It’s on the Monopoly Board appeared first on Real Estate News & Insights |®.

5 Common House-Flipping Myths You Should Never Believe

July 2, 2019


We’re willing to bet you’ve seen at least one episode of “Flip or Flop” or any number of other home makeover shows packing the HGTV schedule. There’s no denying the role they’ve played in motivating regular folks to get into the business of buying distressed houses, renovating them, and selling them. Easy-peasy, right? Fun, too! Glamorous, even.

But the reality is a bit more complicated than these heavily edited TV versions of real life would suggest. In fact, there’s an awful lot about flipping houses that the average investor probably doesn’t know. Below, we shed light on the myths about home flipping that buyers should never let cloud their judgment.

Myth 1: It’s easy to flip houses

We have real estate TV shows to thank for fueling the idea that it’s possible for anyone with a contractor and a sense of design to flip a house. The truth is, flipping a house can be a big challenge.

Just for starters, a contractor may not show up, or an insurance claims adjuster may not get back to you in a timely fashion. These are the kinds of things that can derail your project pronto.

And of course there’s always the possibility of hidden problems and repair costs.

“Problematic septic systems, rotten trusses, and unstable foundations can eat your profits alive if you’re not careful,” according to Brian Rudderow of the real estate investing firm Tactical Investing, in Colorado Springs, CO. “Every second of wasted time is another mortgage payment that you will be responsible for making.”

Myth 2: A house flip can be done quickly

On the small screen, home improvement gurus flip a house in a month or two, but Rudderow says house flipping can be an extremely complicated process, and sometimes a time-consuming one as well.

“You have to deal with homeowners insurance, taxes, utilities, permits, inspections, appraisals, title insurance and closing costs, possible HOA fees and special assessments, liens, insurance claims, shady contractors, materials being delivered late or incorrectly, and much more,” he says.

Experts can fully gut and flip a house in a month or two, but it’s because they have plenty of knowledge and experience under their belt.

Myth 3: Flipping houses is a way to get rich quick

Flipping houses can help you build wealth, but it’s not a path to immediately profitability.

“It normally takes first-time home investors much longer than they expect to complete a quality renovation, and they often make the mistake of forgetting that they will have to carry costs during the remodel,” says Andrey Sokurec, property investor, trainer, and owner of Homestead Road, in St. Louis Park, MN. Those costs include the actual price of the home, closing costs, and renovations.

On average, Sokurec says, an investor makes about $30,000 in profit on a flip. “But you also need to be prepared for the reality that you can actually lose money on a deal if surprises come up.”

Myth 4: More money, more profit

So, if $30,000 is the average amount investors make, you might think that flipping a more expensive house can yield substantially higher profits. But this is not necessarily the case.

“The more expensive a property becomes, the more limited your buying demographic becomes. This can mean longer holding costs,” says James Judge, an agent at HomeSmart in Phoenix who has designed and flipped over 50 homes in the past five years.

Myth 5: You need loads of cash to flip a house

Yes, an unlimited budget will make flipping easier, but that doesn’t mean you need a boatload of cash to pull off a successful flip. If you don’t have a large nest egg, Sokurec says, you can take out a home equity line of credit or get a business loan.

“Loans can come from a bank, mortgage broker, or private lender,” he says. In fact, most first-time investors borrow the money from friends or family. That’s because people without house-flipping experience will have a more difficult time getting financing.

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7 Myths About Buying a Foreclosure Home That’ll Surprise Deal Seekers

July 2, 2019

Steve Debenport/iStock

Considering buying a foreclosed home? Any home buyer looking to pay below market value should be paying attention to foreclosure listings. But the process of buying a repossessed home is full of misconceptions—and we’re here to help separate the false stereotypes from the reality.

These are some common myths that need to be set straight.

Myth 1: The house must be bought in cash

That all depends on what stage a foreclosure property is in, says Bill Gassett with Re/Max Executive Realty in Hopkinton, MA. If the home is in pre-foreclosure or “short sale,” the buyer does not need to shell out an all-cash offer.

“They can procure a mortgage just like any traditional sale,” Gassett says.

If the bank sells a property at public auction, the mortgage holder usually does require that the home is bought with cash and mortgage contingencies are not allowed in the sale.

If you don’t have a lot of cash on hand but know you’d like to buy a home in foreclosure, Bobbi Dempsey, author of “Idiot’s Guide to Buying Foreclosures,” suggests drawing from a line of credit obtained using current property.

When the foreclosure is a bank-owned property, Gassett says the bank is usually actively looking for an end buyer.

“The purchaser of a bank-owned property is almost always able to procure a mortgage as part of the contract with the bank,” he says.

Myth 2: Buyers forfeit their right to have a home inspection

Definitely not true! Buyers have the right to do a home inspection and ask for repairs, but banks or sellers aren’t required to make them, says Rob Jensen, broker and president of Rob Jensen Co., in Las Vegas. But home inspections are actually encouraged since nearly all banks sell their foreclosed homes in as-is condition, and want to avoid liability down the line.

“It is common for structural, electrical, and plumbing issues that pertain to the safety and integrity of the home to be repaired, but there’s no guarantee,” says Jensen. “Every bank and every deal is different.” However, don’t count on the bank to fix those cosmetic issues.

Jensen says paint, carpet stains, and other minor blemishes are not likely to be addressed.

Buyers considering a foreclosure should make sure the sales contract has a contingency clause that requires a passing home inspection. This way, buyers can either choose to accept any issues with the home or back out of the contract.

With courthouse sales, however, homes are sold as they are, with no inspection.

Myth 3: Foreclosure homes require huge overhauls

It’s incorrect to assume that all homes in foreclosure are in shoddy condition. A large percentage of foreclosures are the result of job loss, illness, death, divorce, or even fluctuations in the real estate market, which means many of these homes were well maintained and may need only minor touch-ups.

“It quite often depends on the attitude of who last owned the property and whether or not they went out of their way to destroy the place,” says Jensen.

Myth 4: Foreclosures sell at heavy discounts

A common belief is that a foreclosure home will sell for at least half of its original value. But remember, the bank still wants to make a profit. Buying a foreclosure home can save you green, but the seller will hold out for the maximum price possible.

Home buyers often make a beeline to foreclosures because they think they can get a home for pennies on the dollar. But, Jensen says, by the time they factor in the time and renovation costs, they may reconsider.

“Foreclosures can provide opportunity to save, but you usually need time and extra cash to take advantage of it,” he says.

Myth 5: Foreclosure homes carry hidden costs

The fear of hidden costs may send would-be buyers running, but it’s not necessarily a worthwhile concern.

“A lot of the costs involved are typical for any real estate purchase—things like inspections, appraisals, transfer fees, etc.,” says Dempsey.

Yes, repairs or liens on a foreclosure can prove costly, but a home inspection will reveal any potential problems during escrow (this is where that inspection contingency comes in handy).

Also, the property deed can be researched on a foreclosed home. And, buying a HUD home or REO (or real estate–owned property) means the Department of Housing and Urban Development is required to clear the title of liens before it resells the home. Lenders will usually clear them, too, but buyers should make sure of that before they purchase.

“Generally speaking, there are not any more hidden expenses in purchasing a foreclosed home than there would be in a traditional sale,” says Gassett.

Myth 6: Foreclosures lose value faster than regular homes

Foreclosed homes actually tend to rise quickly in value. With any home, there’s no guarantee it will deliver increases, but buying a foreclosure sold below market value can provide instant equity. And any extra work done to the home can only increase the value.

“There are a variety of factors that influence home values, including economic conditions, local market conditions, and the overall condition of the property,” says Andrew Leff, senior vice president and head of strategic alliance programs at Wells Fargo in New York City.

Myth 7: Buying a foreclosure is risky

Let’s be honest. Any real estate purchase comes with risk. Gassett says the only scenario where there’s some extreme risk is when buying at auction, since you are buying the property as is. Buyers are not able to conduct a professional home inspection and often not even able to see the inside of the property. Plus, they will be inheriting whatever came with the home.

“For example, if there is a lien on the property, you could become responsible for it. When buying a home at auction, it is essential to do a title search first,” says Gassett.

Leff says buyers should be informed before entering into any type of real estate transaction. This means aligning themselves with resources that can help them navigate the purchase and financing process with confidence.

“A knowledgeable real estate agent and lender can help ensure that a buyer is making an educated decision so that the property and any resulting financing is the right fit for them,” says Leff.

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Do You Get Your Earnest Money Back at Closing?

June 24, 2019

Can I Get My Earnest Money Back At Closing?

Sargis Zubov/iStock

Do you get your earnest money back at closing? If you’re buying a house and planning to finance the purchase with the help of a mortgage, the question is bound to come up. The short answer is: You don’t usually get your earnest money back at closing.

But hold on! Sometimes earnest money is returned at closing. What? Read on to find out what happens to your earnest money at closing.

What is earnest money, anyway?

So you’ve heard the term “earnest money” thrown around during the purchase process, and you’re not quite sure what it means? Sometimes called “good-faith money” or a deposit, earnest money is a sum that home buyers put down when they make their offer on a house, to show they’re committed to the purchase.

Earnest money (typically about 1% to 2% of the amount you plan to pay for the house) is put down by a buyer within five days of an offer being accepted by a seller. The money is then deposited into an account by an escrow agent.

Maybe you’ve heard it called “going into escrow“? That’s because the escrow officer will set the earnest money aside while you continue the steps of buying a house, such as getting an appraisal so your bank will approve the purchase or sending a home inspector to the house to ensure there are no reasons you should back out of the deal. They can’t touch that money during that time, and neither can the seller!

Do I get my earnest money back at closing?

If the appraisal comes through at a price that makes your lender happy, and the home inspection doesn’t turn up anything alarming, eventually you’ll get to closing—the end of the home-buying process—when you pay the seller and walk away with keys to your new castle.

This is when your escrow agent is going to pull your earnest money out of escrow. What happens with it next is typically dependent on the sort of earnest money that was put down, says Keith Lucas, broker and owner of the Charleston Real Estate Company, in Charleston, SC.

If you put down cash (which is nearly always the case), the earnest money is traditionally applied to closing costs or toward your down payment—the portion of the sale price that buyers pay on their own in conjunction with a mortgage.

But there are times when you might get the earnest money back. Maybe you have secured a loan with no down payment required, such as a Veterans Affairs loan or a mortgage backed by the U.S. Department of Agriculture. If that happens, the earnest money will be applied to closing costs instead of down payment. If there’s money left over after the closing costs are paid, you will get the surplus back.

But sometimes the earnest money isn’t actually money at all.

Wait a second. How can there be money that isn’t, well, “money”? It turns out, sometimes that good-faith deposit can just be something of “good and considerable value.”

“There are cases where a watch, car, boat, real estate, or precious metals have been used as an earnest deposit,” Lucas says. “In that case it might be returned to the buyer or liquidated by the seller and put toward the purchase price at closing.”

Bottom line: Even if you don’t get your earnest money back at closing, don’t worry! That big chunk of change you put down at the beginning of the home-buying process hasn’t disappeared. It’s been used to help pay for your brand-new house.

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