Month: February 2016

Do you have what it takes to be a flipper?

Posted on by Teresa Boardman
blue house
blue house

Unfortunately right now there are not enough fixer uppers on the market, but there is a lot of interest in “flipping”.   It reminds me of 2005 when home buyers would walk into my listings with clipboards taking notes. They would tell me how they plan to buy a house for cheap and fix it up and sell it and make a lot of money. Some of them got their ideas from television shows that make it all look so simple. In 2008 – 201o I was touring homes that were owned by banks that had been partially renovated by house flippers and then abandoned. As home values dropped like a rock the would be flippers walked away.  I’ll admit housing crashes don’t come along every day or even every few decades but house “flipping” is still a great way for people who don’t know what they are doing to lose money.

I have worked with people who renovate and resell houses. The expert house flipper who doesn’t have time for TV, looks at the house and estimates how much it will cost to make the improvements. He is actually very good at this and has a lot of experience doing work himself and hiring others. Sometimes houses are fixed up and rented out so that the buyer can hold them for a couple of years and then resold.

When buying a house to flip the investor knows how much he can pay for it.  If the house is listed for more than what the investor is willing to pay and if a more favorable price can not be negotiated the house flipper moves on.

People interested in becoming professional property flippers need to understand that there is a lot of competition out there and often the best candidates for rehab are sold by the city and others never go on the market. Often buyers believe that they are the only people who are looking for a bargain or who have the idea to fix up a house and resell it.

Most of the people I know who fix up homes and resell them do not make a huge amount of money on each project but they make enough and usually they enjoy what they do.  There are also people who lose their shirts and their real estate too. Sometimes investors spend more on rehabbing a house than it can be sold for.

Real estate agents are often approached and asked for investment advice. Most real estate agents are not qualified to give that kind of advice but some will give it anyway.

Buyers should have any home they want to buy inspected but that is even more important when buying a home that has been flipped. Sometimes investors spend a lot of money on the cosmetics and almost nothing on the mechanicals.  The house with the pretty kitchen may have a leaky water heater and an elderly furnace that will need to be replaced soon.

Be careful out there.

Seeds

Posted on by Teresa Boardman

It is Friday and Fridays are for fun. Here is a very early sign of spring. If you have been waiting until the spring to put your home on the market I hope you find the photo inspirational. My job would be a lot easier if I had some houses to sell. 🙂

Seeds
Seeds

 

Getting Mom’s house ready to sell

Posted on by Teresa Boardman
green carpet
Green sculpted carpet

Over the years I have sold three homes for my family.  One of the challenges of selling a home that is or was owned and lived in by an elderly person is making it look as appealing as possible to younger home buyers. Sometimes the homes look as if time stood still.

The first hurdle can be getting the owners to give up some decorating choices they made long ago. My mom doesn’t know that I had the wallpaper boarder removed from the kitchen repainted or she would be upset about it.  Often “grandmas” house is in good repair and is an excellent opportunity for first time home buyers to fix some of the cosmetics and build equity.

As a seller I don’t want to put any more money into the home than I have to. Here are some of the things I did that were fairly inexpensive that helped sell grandma’s house:

1. Clean everything

2. Repainting in light neutral colors.

3. Replacing old drapes with sheers in shades of white.

4.  Replacing any window shade or blind that was anything other than white or just remove them.

5. Buy new shower curtains, towels and coordinating rugs for the bathrooms.

6. Replace light fixtures and shades.

7. Remove wall paper and paint walls.

8. Remove worn carpeting to expose hardwood floors. It is better to have wood floors that need a little work than worn carpeting.

9. Remove worn linoleum and replace.

The list isn’t really prioritized by importance but it is  in order of how much the project is likely to cost. It is important to have budget and to stick with it. If the improvement won’t help sell the home faster or for more money it isn’t worth doing. it is the smallest improvements that give the greatest payback. Cleaning and painting have the highest ROI. Removing a wall paper boarder can have a tremendous impact.

It is also a good idea to have furnace or boiler serviced and have any repairs done that are needed. As a rule anything that leaks should be fixed and there are usually other obvious repairs too.  Sometimes small maintenance issues result in low offers.

 

How to find Truth in housing reports

Posted on by Teresa Boardman

If you are  buying or selling a home that is within the city limits or St. Paul you need a truth in housing report.  The home owner pays to have an inspector who is a approved by the city do a complete inspection of the home. The inspection is required under city ordinance.

Here is a secret that many Realtors don’t know.  Anyone can view a truth in housing report on the internet. You can also look to see if the home owner has had any city permits for work on the house.

If you are a buyer and want to know more about a home before going to see it look at the truth in housing report.  The older homes in St. Paul often have multiple comments or code violations.  Home owners are not required to fix anything except all homes must have a hard wired smoke detector.

Sellers can get a list of the most common deficiencies and fix them before the inspection. It isn’t a bad idea for buyers to check out the list of common deficiencies so that the truth in housing reports make more sense.  I think I have seen a zillion of them.

Not all municipalities require truth in housing reports and in some municipalities like Minneapolis and South Saint Paul sellers are required to fix anything on the report that is considered hazardous.

In Saint Paul all open permits on a home must be closed before the sale can be closed. Usually it is just a matter of contacting the building inspector and having him sign off that the repairs were done correctly.

I have found that I have to check for open permits for my buyers because the law requiring that they be closed isn’t enforced very well and it is possible that no one will notice that the home has open permits.

Slush
February Slush

Closings don’t always happen on time

Posted on by Teresa Boardman

The final step in the home buying process is a closing. Here in Minnesota that means the buyers and sellers meet at the title company and sign a bunch of documents. The money to purchase the home is wired to the title company, checks are cut and the buyer walks away with house keys and a garage door opener and the sellers walk away with a check.

Closing are on time more often than not but they can be delayed and the most common reason for the delay are issues with the buyers financing. When buying a home I encourage buyers to ask for a closing date that is at least 45 days after the date of the offer for any buyer who requires a loan.

The National Association of Realtors conducted a nation wide survey of delayed closings.  Issues relating to financing can include problems with the house or with the buyer.  Underwriters sometimes require repairs especially if the buyer is using FHA financing. Other times the buyer is slow to respond to requests for information needed for final approval. Problems with the appraisal occur when the lenders has the home appraised and the value is less than the amount that the buyers have offered.

Not all delayed contracts actually close. Sometimes buyers and sellers have a disagreement and can not come to terms and as a result they cancel the contract. Occasionally buyers and sellers come to an agreement on price and then one party or the other changes their minds. I had that happen on with a seller I was representing last year.

chart
Delayed closings