- Melissa Kellerman
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Thursday, February 25, 2010
"Many people are finding huge opportunities in fixing up foreclosures," says Tom Sullivan, founder of Lumber Liquidators, the nation's largest specialty retailer of hardwood flooring. "Most of these houses can be completely transformed with just a few improvements. Often, the fixes are easy enough to be do-it-yourself projects."
Here are some popular cost-effective options for breathing new life into a home in need.
Add new countertops.
The kitchen is one of the most important rooms in any home, since it is a space where people spend a lot of time - from cooking dinner to entertaining friends. One of the most dramatic changes that can be made to a kitchen is adding new countertops. It alters the appearance of the space by changing the color scheme, depth and texture of the whole room.
Countertops range in price depending on room size, type of material and mode of installation. In an average kitchen, a new laminate countertop starts at around $1,000, with granite or quartz ranging from $3,000 to $6,000. Butcher-block countertops are another attractive, yet cost-effective option. Williamsburg Butcher Block Company offers options in both maple and American cherry starting around $310.
Replace the bathtub.
Foreclosed houses frequently come with water stains left by standing water in sinks, toilets and bathtubs. Updating a bathroom by installing a new bathtub not only removes the problem, but, because the tub is a core item, it creates a more pleasant feeling in the room. Bathtubs are available in many different styles and sizes, so there is likely to be one that suits any taste, from traditional to contemporary. Bathtubs start at around $300, depending on the size and style.
"The introduction of so many new species, colors and types of wood flooring in recent years gives homeowners a lot of options when renovating a room at different price points," says Sullivan.
A home inspection is one of the most important steps you can take to make sure your new home is a sound investment and a safe place to live.
Mistake No. 1: Not having new construction inspected
Even experienced homebuyers sometimes make this rookie mistake. They assume that because a home has passed all local codes and ordinances, it must be in good shape. Don't be so sure, says Jim Troth, owner of Habitation Investigation LLC, a Mechanicsburg, Ohio, home inspection company. Troth once inspected a brand new home that had just passed the final municipal and county building inspections. But when he explored the crawl space beneath the house, he discovered someone had removed about 3 feet of the home's main support beam to accommodate duct work.
"The house was already beginning to sink in that area," he says.
The moral of the story: Don't assume your builder -- or the contractors -- did everything right just because the home passed code. An inspector is your last line of defense against major defects that could quite literally sink your financial future.
When you choose an inspector, you're selecting the professional who will give one of your biggest investments a full physical checkup. You want to choose someone you know who is competent, thorough and trustworthy. Unfortunately, too many buyers just go with the cheapest inspection company or the one recommended by their Realtor.
"The least expensive person is often the person with the least experience, ability and technical savvy," says Aaron Flook, owner of Pittsburgh-based A.M. Inspection Services LLC. "If you want a referral from your real estate agent, ask for two or three different names, then interview each one to determine who you feel most comfortable with."
Always ask about licensing, professional affiliations and credentials, and whether the inspector carries errors and omissions insurance.
Mistake No. 3: Not going along on the inspection
The written report you get from the inspector doesn't give you nearly as clear a picture of the condition of the house as you might think. Flook says buyers who don't go along on the inspection can overemphasize minor problems, or worse, not realize how serious a defect is.
Mistake No. 4: Not following up on the inspector's recommendations
Sometimes, buyers don't follow up on items discovered in the inspection before they close. Like the man who didn't grasp that the carbon monoxide coming from his water heater was a big problem, you may not realize how much it will cost to fix a given defect. Often inspectors will recommend buyers get an issue evaluated further, but the buyers wait to do it until after closing, says Kathleen Kuhn, president of the inspection company HouseMaster of Bound Brook, N.J.
"If buyers wait to have a system evaluated until after closing, it can turn out to be more expensive or a bigger deal than what they anticipated," Kuhn says.
Kuhn says you should always get several estimates on repairs before closing, and you should feel comfortable calling your inspector to discuss these estimates. "The inspector may be able to share some insight into the contractors' suggestions," she says.
A home inspector can tell you that an air conditioning system like the one in the home you're buying usually only lasts 10 years, and yours is 11 years old. But he can't tell you when it will fail. That's when you need to follow up with people who know more about each specific system about which you have questions.
And remember, the home inspector is hired by you. He's there to give you an honest, straight opinion about the house.
"The inspector is one of the few people in the buying process whose income doesn't depend on the home closing," Troth says. "They're paid to inspect, not to sell. So they're in a better position to be neutral."
Even when a new home has met code, it should have a home inspection.
Always ask about licensing, professional affiliations and credentials.
Follow up on the inspection report before closing on your house.
The pop heard ’round the world when the housing bubble burst brought a lot of bad news — from plummeting home prices to mounting foreclosures.
But with all bad times comes a slew of good lessons to be learned, says Shari Olefson, author of “Foreclosure Nation: Mortgaging the American Dream.”
Depressed home prices and low interest rates may have you wondering if the real-estate market has reached its bottom. Even if the worst is behind us, it makes sense to take in the lessons of the past few years so we can avoid making the same mistakes again.
Lesson No. 1: Adjust your expectations. Years ago, people purchased a home, lived in it all or most of their lives, passed it down to their children and enjoyed a gradual increase in wealth as the home gained value. But in the last decade, people bought a house expecting it to increase in value about 5 or 10 percent in a couple of years, and they’d move on to something bigger, says Brendon DeSimone, a real-estate agent with Paragon Real Estate Group in San Francisco.
If the housing-bubble nightmare has shown us anything, it’s that you can’t count on a home to be worth more than you paid for it when you’re ready to sell. “It’s back to basics,” DeSimone says. “You have to be in it for the long haul and you can’t be looking at your home value every month to see how much it’s gone up.”
Lesson No. 2: You can’t time the market. When home prices were skyrocketing, many people bought homes they could barely afford — or couldn’t afford — thinking they’d ride the wave of rising equity since the market was on the upswing. Likewise, today, many potential homebuyers are sitting on the sidelines waiting for the market to reach its ultimate low.
“You will never sell at the all-time high and you’ll never buy at the all-time low by planning it,” says Tim Burrell, a real-estate agent for Re/Max United in Raleigh, N.C. “The market will time you. You will sell, and on occasion you may happen to hit the all-time high or happen to hit the all-time low, but to study it and plan it and figure out and actually do it — it doesn’t happen.”
Instead, take a long-term approach to real estate and look for a home that enhances your life and will increase in value over time.
Lesson No. 3: Don’t treat your home like a piggybank. At the height of the real-estate market boom, “We had a whole bunch of people refinancing high-interest credit cards with a low-interest second mortgage on their homes,” Olefson says. Today, some of those people have lost their homes or are in danger of doing so because they were unable to handle the mortgage debt.
“As a country, we’ve all gotten way too comfortable with credit and having debt in our lives,” Olefson says. “But the problem really came when that morphed into our homes.”
As the market rebounds, “We need to promote the value of owning your home free and clear again, because residential real estate really is the backbone of our country. It’s the biggest asset for most people,” Olefson says. Likewise, instead of depending on your home for all of your wealth, continue to build up your cash reserves, Burrell suggests.
Lesson No. 4: Do your own research. Some people ran into trouble before the real-estate market crash when they took the advice of mortgage professionals without doing their due diligence and making sure the advice was in their best interest. The wisdom of speaking to a financial adviser, calling a nonprofit housing agency or even reading books on real-estate transactions before signing on the dotted line became apparent as homeowners struggled with changing terms on mortgages that they didn’t understand. It also makes sense to check the credentials of anyone advising you. “Be careful who you trust, take time to educate yourself, and first and foremost, if it sounds too good to be true, it probably is,” Olefson says.
Lesson No. 5: Think long-term financing. Adjustable-rate mortgages appealed to those who wanted the lowest possible interest rates and expected to be able to either sell their homes or refinance them before the mortgages reset. However, after the real-estate market crash, many didn’t have enough equity to refinance and houses began to sit on the market as prices went into a free fall. When it comes to financing, “you can’t just look at the next six weeks or two months or next year,” DeSimone says. “You have to say, ‘What happens to me in five years?’”
Ultimately, the real-estate market collapse was a lesson in learning to adapt, experts say. “When you see overexuberance, expect that it’s going to change,” Burrell says. “The only thing constant is change.”