Home ownership in a down economy
A SmartHippo reader asks:
“I am unemployed and burning through my 401(k) to pay my mortgage. I’m looking to sell, but my house requires some repairs. Would it be wiser to take $10,000 of my savings and fix my house up for the market to get the best price or put my house on the market “as is” at a lower price with a few repairs needed because folks are looking for bargains? Basically – is it inefficient to put much needed money into a house when you probably can’t get a good price in this market anyway?”
This month’s expert answer is a two-fer! That’s two experts with two great answers. The first provides some justifications on cost-effective repairs, while the other provides advice on seeking a different type of loan to address this specific problem. First answer is courtesy of Jeanne O’Keefe of the Columbus Team:
This is a difficult question to answer because each real estate market is very specific and different… Even within a city, neighborhoods can vary greatly and experience different market conditions. If you are in this situation, your best bet is to meet with a good realtor in your area for the best answer, but I will provide options you might consider:
To start, do you think that by spending $10K, the house would be in showcase condition and glean the offer they need to move on? If yes, it may be worth it, but it’s still a calculated risk.
If no, I wouldn’t recommend spending dwindling resources and consider selling as is–but put your best foot forward. The house should sparkle like new, even if it’s not. At minimum, make sure every inch of the home is immaculate, clean and fresh. A fresh coat of paint and remove old carpet if nothing else!
Another option to consider is, if you can, accomplish most of the repairs on your own, without hiring contractors. If it’s nothing to complicated with a bit of research and raw materials you may be able to do most of it yourself. However, leave complicated tasks—like wiring—to the experts.
Again, it’s a complicated issue—so seek personalized professional advice before spending any money. This is a very difficult and stressful time for home sellers and when compounded by unemployment it’s important to stay positive. I wish you good luck!
All the best,
Jeanne O’Keefe
TheColumbusTeam
Keller Williams Capital Partners Realty
Phone: 614-431-0911
Fax: 614-896-2503
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And next is Kevin Sweeney, a senior loan officer:
If the repairs aren’t too major, you may consider selling as is and suggesting the buyer use a FHA Rehab loan to finance the cost of repairs. The most popular these days is the FHA 203k and 203k streamline. The only difference is the streamline is capped at $35,000 worth of repairs and cannot be structural (adding rooms/changing foundation of the home).
Aside from the FHAs, we also do some portfolio stuff for the non-traditional type of deals. You’d go about this the way you would a normal loan application. The bad thing is, not that many realtors are aware of these products which I feel is a great way to move some of those rougher listings they may be sitting on.
Here’s a great link http://www.fhainfo.com/fha203k.htm which goes into detail about the 203k loans…
(editor’s note: I just found this other article that provides more details as well. Good luck!)
Kevin M. Sweeney
Senior Loan Officer
National City Mortgage, a Division of National City Bank
7204 Glen Forest Drive, Suite 102
Richmond, VA 23226
(804) 288-1050 ext. 223 (office) (877) 216-2039 (toll free)
(804) 288-6880 (fax)
(804) 477-5779 (cell)
Kevin.Sweeney@ncmc.com
www.ncmc.com/KevinSweeney
