Question: Are there gov't programs for rehab?
Answer: The U.S. Department of Housing and Urban Development's Section 203 (K) rehabilitation loan program is designed to facilitate major structural rehabilitation of houses with one to four units that are more than one year old. Condominiums are not eligible.
The 203(K) loan is usually done as a combination loan to purchase a fixer-upper property "as is" and rehabilitate it, or to refinance a temporary loan to buy the property and do the rehabilitation. It can also be done as a rehabilitation-only loan.
Plans and specifications for the proposed work must be submitted for architectural review and cost estimation. Mortgage proceeds are advanced periodically during the rehabilitation period to finance the construction costs.
For a list of participating lenders, call HUD at (202) 708-2720.
If you are a veteran, loans from the U.S. Department of Veterans Affairs also can be used to buy a home, build a home, improve a home or to refinance an existing loan. VA loans frequently offer lower interest rates than ordinarily available with other kinds of loans. To qualify for a loan, the first step is to apply for a Certificate of Eligibility.
Another program is the Fedeal Housing Administration's Title 1 FHA loan program.
Question: Can you deduct the cost of home improvements?
Answer: What you spend on permanent home improvements, such as new windows, can be added into your home's cost basis, or amount of money invested in a home, which reduces capital gains when it comes time to sell. Capital gains are determined by the difference in price from the time a home is purchased and the time it is sold, minus the cost of any permanent improvements.
However, the 1997 tax changes virtually eliminates the capital gains tax for most homeowners (the exemption is $250,000 for single homeowners and $500,000 for married homeowners.).
Still, it is worthwhile to save all receipts for permanent home improvements just in case. They also can be useful documentation when it comes to marketing your home when you sell.
Question: How can I improve the value of my property?
Answer: The biggest factor outside of a homeowner's control is market conditions. But other issues -- including the condition of the property, specific home improvements and neighborhood stability and safety -- can influence property values.
The greatest rise in home prices occurs when the economy is strong and the number of home sales is increasing. Though markets vary, that has occurred several times in recent history -- including the early 1970s, late 1980s and late 1990s.
Specific home improvements can increase the value above the cost of the improvements. According to Remodeling magazine, which publishes an annual "Cost vs. Value" remodeling report, a remodeled bathroom returns 81 percent to the owner, a bathroom addition, 89 percent and a master bedroom suite, 82 percent. Remember, quality pays. Well-planned and well-executed remodeling jobs are a good investment while bad work seldom enhances value or livability.
The safety and security of a neighborhood can affect property values, too. If you live in a high-crime area, an organized community watch program not only will lower the crime rate but give home values a boost, too.
Answer: Experts generally agree that you can plan on annually spend 1 percent of the purchase price of your house on repairing gutters, caulking windows, sealing your driveway and the myriad other maintenance chores that come with the privilege of homeownership. Newer homes will cost less to maintain than older homes. It also depends on how well the house has been maintained over the years.
Question: Should I add on or buy a bigger home?
Answer: Consider these questions before making a choice between adding on to an existing home or moving up in the market to a bigger house:
* How much money is available, either from cash reserves or through a home improvement loan, to remodel the current house?
* How much additional space is required? Would the foundation support a second floor or does the lot have room to expand on the ground level?
* What do local zoning and building ordinances permit?
* How much equity already exists in the property?
* Are there affordable properties for sale that would satisfy housing needs?
Ultimately, the decision should be based on individual needs, the extent of work involved and what will add the most value.
Question: What are the pros and cons of adding on or buying new?
Answer: Before making a choice between adding on to an existing home or buying a larger one, consider these questions:
* How much money is available, either from cash reserves or through a home improvement loan, to remodel your current house?
* How much additional space is required? Would the foundation support a second floor or does the lot have room to expand on the ground level?
* What do local zoning and building ordinances permit?
* How much equity already exists in the property?
* Are there affordable properties for sale that would satisfy your changing housing needs?
Ultimately, the decision should be based on individual needs, the extent of work involved and what will add the most value.
For more information, check out "The Do-able Renewable Home," a free booklet available from the American Association of Retired Persons, Fulfillment Department, 601 E St., N.W., Washington, DC 20049; (800) 424-3410.
Question: What kind of return is there on remodeling jobs?
Answer: Remodeling magazine produces an annual "Cost vs. Value Report'' that answers just that question. The most important point to remember is that remodeling a home not only improves its livability for you but its curb appeal with a potential buyer down the road.
Most recently, the highest remodeling paybacks have come from updating kitchens and baths, home-office additions and extra amenities in older homes. While home offices are a relatively new remodeling trend, for example, you could expect to recoup 58 percent of the cost of adding a home office, according to the survey.
Question: What repairs should the seller make?
Answer: If you want to get top dollar for your property, you probably need to make all minor repairs and selected major repairs before going on the market. Nearly all purchase contracts include an inspection clause, a buyer contingency that allows a buyer to back out if numerous defects are found or negotiate their repair.
The trick is not to overspend on pre-sale repairs, especially if there are few houses on the market but many buyers willing to buy at almost any price. On the other hand, making such repairs may be the only way to sell your house in a down market.
Question: Will a neighbor problem reduce the value of my property?
Answer: While it may not reduce the actual value, a cluttered landscape next door can detract from the positive aspects of your home. Review your local laws, which should be on file at the public library, county law library or City Hall.
A typical "junk vehicle" ordinance, for example, requires any disabled car to either be enclosed or placed behind a fence. And most cities prohibit parking any vehicle on a city street too long.
It also may be worthwhile to check into local zoning ordinances. An operator of a home-based business usually is required to obtain a variance or permanent zoning change in residential areas.
In addition, if a neighbor's repair work produces loud noises, he may be breaking local noise-control ordinances, which are enforced by the police department.
Before bringing in the authorities, you may want to make a copy of the pertinent ordinance and give it to your neighbor to give them a chance to correct the problem.
Resources:
* "Neighbor Law: Fences, Trees, Boundaries and Noise," Cora Jordan, Nolo Press, Berkeley, Calif.; 1991.
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