A "handyman special" refers to a property that needs some work in order to be livable. The term "fixer-upper" is so widely used, that it might refer to even the most run-down and damaged houses. In this article, we are discussing the pros and cons of purchasing a property that only needs a small amount of work. Learn more about what to expect in our latest post!
The idea of buying a property at a great price can be very alluring. Often times this is how people are able to buy their home well below market value! However, just like any other real estate purchase, there are a few things you need to be mindful of. Here is a list of pros and cons to help you make the right decision when buying a handyman special in Los Angeles: Pros A Better Price The biggest draw to buying a handyman special is the amount of money you can potentially save. When a house needs some work, the seller will usually be prepared to take a lower price. Depending on how much it will cost for you to renovate, buying a handyman special can be a huge opportunity to find your dream home at an affordable price. Especially if you have the time and know how to put in some of your own "sweat equity," you may very end up with greater monetary equity in the house once you have completed the needed work. Less Competition When it comes down to it, there are fewer people in the market for homes that need work. Most people don't want to add in the time and expense of making repairs on top of all of the other costs of moving and buying a home. You will likely have fewer people competing with you to buy the house, which in turn leads to more negotiation power and a lower overall price. Make it Your Own If the house needs some work to the kitchen or bath, it will give you the freedom to design things just as you wish. So not only will you save money when buying a home, but you will also get to pick out the tile and other fixtures too. It is also the perfect time to paint or replace the carpets... before any furniture is moved in. Many people buy fixer-upper properties simply for this reason: they are able to truly make the house their home. The Neighborhood of Your Dreams Maybe there is a neighborhood you have always wanted to live in, but it's just a little bit outside of your current budget. You can often find a handyman special in the area allowing you to buy a home in a neighborhood you want, at a much lower price should you have chosen a move-in ready house. Cons You Will Spend More Than You Planned For Well, most likely. It is smart to pad your renovation budget by at least 20%. You will inevitably encounter additional costs or find other things you want to fix along the way. Factor these "unexpected" costs into your renovation budget so you aren't blindsided or forced to live in a house that is incomplete. You Might Be In Over Your Head Sure, HGTV makes it seem easy. Jim and Susan find a dilapidated mess and 30 minutes later they are living in a dream home. The reality of it is that it is rarely this easy. Between logistical hangups, construction permits, problems with deliveries and issues with contractors, you might find that fixing up a home comes with its fair share of headaches. That said, if you are prepared for these things going into the sale, you will be able to save yourself a lot of time, money and frustrations. So is this a project you want to take on? Spend some time weighing out the options and maybe it will be for you!
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We are, at the time of this writing, approximately 10 years or so from the 2008 financial crisis, a crisis that was primarily created by the proliferation of low quality real estate loans. Underwriting standards were reduced to the extent that just about anyone with a pulse could get a loan, with no other qualification needed.
“Liar Loans” or NINA loans (standing for No Income No Asset Verification needed) meant that someone working at a $10/hour job could get a loan to purchase a $700,000 house, even though based on the borrower’s assets and income they had no way of affording the payments on that loan. Through complex structures of debt securitization created at the top levels of Wall Street banking firms, these loans were then packaged up and resold to other investors as completely safe assets, even though they carried a huge risk of default. That ultimately led to the near collapse of our financial system and all the repercussions that came with the recession that followed. In the wake of the financial damage that ensued, lawmakers saw to it that many new regulations were put into place so that the same kind of loose lending could not continue and put us in a similar situation again. Borrowers had to meet stringent underwriting conditions and be well qualified based on income, assets and credit scores. The pendulum may have actually swung back too far, and there are good arguments as to why some lending programs that had previously existed might be brought back to a limited degree. But there are other areas of the economy where subprime style lending has grown again - in the auto industry, student loans, and in something related to housing through the PACE (Property Assessed Clean Energy) financing options. The program began as a way to allow homeowners to finance clean energy upgrades to their homes. There are limited qualifications needed, so someone who would not qualify for a regular loan can qualify for this financing. And one of the more interesting aspects is that the loan is paid back through payments attached to the property taxes for the property that was improved. Attaching itself to the property taxes puts these loans in a 1st position above all others, effectively allowing them to leapfrog over any existing 1st lien loans that may already exist on the property such as the loan that may have been used to purchase the property. Banks and mortgage lenders are most likely not going to be fans of these loans as they reduce their security interest in the property. Some things to be aware of is that these loans carry a higher interest rate than you would typically have on your other mortgage financing. As these loans have proliferated and people are more aware of them, they will likely be required to be paid off if you choose to sell your property, as new buyers or lenders are not going to want to assume liability for these debts. Since they are paid through your property taxes, it is easy not to notice the loans at first - it may be months before you will have to make the first payment since property taxes are only paid twice a year. Your property tax payment could jump dramatically higher depending on amount of the loan you get. For some more perspective on these products here is a story published by the L.A. Times on the matter: https://www.latimes.com/business/la-fi-pace-loans-20170604-story.html Bottom line is to be aware of these programs and take time to review all the terms and conditions before you jump into something like this. The contractors selling their services and the financing along with them may be genuinely trying to provide a good service, but they will not know your overall financial situation and may not take the time to learn enough about it. Calculate exactly how much these payments will add to your annual budget and make sure you can comfortably afford it. And be sure to read all the paperwork and fine print before committing to one of these loans, so you don’t end up in over your head. |
Bright Idea House BuyersWe specialize in solving real estate problems - we are a local family owned business that purchases houses throughout the southern California area. Archives
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