Nolo's Essential Guide to Buying Your First Home (44 page)
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Authors: Ilona Bray,Alayna Schroeder,Marcia Stewart
Tags: #Law, #Business & Economics, #House buying, #Property, #Real Estate
BOOK: Nolo's Essential Guide to Buying Your First Home
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At the other end of the spectrum are major remodels, requiring structural upgrades, adding or removing walls or rooms, and more. Unless you’ve got a contractor in the family, we suggest avoiding these—especially if they contain health hazards (such as mold) or are virtually unlivable (perhaps with big holes in the floor or roof). Here’s why:
• The bank may refuse to approve your loan until a certain amount of repairs are done, and neither the seller nor you may be ready to pay for or complete these repairs.
• Major repairs can drain your bank account. You’re looking for a fixer-upper because the perfect house doesn’t seem to be in your price range, right? And don’t forget that construction surprises are inevitable, and usually expensive.
• Dealing with large-scale improvements can disrupt your life and strain your personal relationships. If this is your first home, you might not be ready to hire contractors; take time off work to supervise the maelstrom of activity; and deal with delays, no-shows, or cost overruns—especially if you’re living in the house.
The best bargain is usually a fixer-upper somewhere in the middle: one that can be made livable with a manageable amount of your own work or professional help. Think new paint, new flooring, and new windows rather than a new foundation and roof. When you find one that looks promising, be sure to:
• Make sure your plans are actually feasible. This almost certainly means checking with your city building department regarding height limits, requirements to bring old wiring and other systems up to code, setback rules, view ordinances, or parking restrictions.
• Ask architects, contractors, and engineers about the costs and feasibility of any major structural changes like adding a second story or a room.
• Have a serious conversation with anyone buying with you about the stress this project might cause. Discuss how you’ll cope without a functional kitchen or bathroom, or who would deal with the many different contractors and workers.
Expect the unexpected.
Noemi and Hugo bought a rundown house on a street where many young couples were buying and remodeling. Hugo explains, “Our plan was to live there through the remodel, stick around a few years, and then move into a bigger place. But almost immediately, we ran into complications. First, after the roof was torn off, we were told we’d need a special beam to get the raised ceiling we wanted. Meanwhile, rain poured in on our hardwood floors, which had to be replaced. This resulted in a trickle down effect (literally), with one delay after another. We ended up staying in our old apartment through the ten months of remodeling, paying both rent and a mortgage. We love our house, but we’re no longer planning on moving soon!”
Noemi and Hugo bought a rundown house on a street where many young couples were buying and remodeling. Hugo explains, “Our plan was to live there through the remodel, stick around a few years, and then move into a bigger place. But almost immediately, we ran into complications. First, after the roof was torn off, we were told we’d need a special beam to get the raised ceiling we wanted. Meanwhile, rain poured in on our hardwood floors, which had to be replaced. This resulted in a trickle down effect (literally), with one delay after another. We ended up staying in our old apartment through the ten months of remodeling, paying both rent and a mortgage. We love our house, but we’re no longer planning on moving soon!”
CHECK IT OUTIf tearing it down and starting over might be easier:
Check out
www.building-cost.net
, which has a calculator to help you estimate the cost of replacing an entire house.
Although profiting on the sale of your remodeled or fixed-up house may not be your first priority, it’s worth keeping an eye on. Not all upgrades excite buyers enough to pay more for—a new furnace, for example, rarely raises eyebrows. To check whether your planned changes will lead to profits, use the websites below.
CHECK IT OUTEstimate your remodeling costs, see cost-to-value ratios, or get general remodeling advice at:•
www.contractors.com
(under “Helpful Resources,” look for the “Cost Estimator”)•
www.nari.org
(includes tips on how to select a good contractor)•
www.remodeling.hw.net
(under “Facts & Figures,” click “Cost vs. Value Report”)•
www.hgtv.com/hgtv/calculators
, containing HGTV’s calculators and interactive designs for common remodeling projects. For example, you can enter a room’s dimensions and find out how much drywall to buy.
Ask around: You’re probably not the only person in your circle of friends or family who’d like to buy a house but can’t quite make the finances work. You may find an interested, compatible cobuyer (or two). If you’re living with roommates now, it won’t be a big change.
You might want to look for a structure containing separate units, such as a duplex. You’d potentially each have your own entrance, kitchen, and more. But your lives wouldn’t be completely separate—you’d still need to agree on major issues concerning your shared ownership, such as maintaining the roof and land.
Buy a home with my sister.
Meggan and her sister had both finished college and were looking to rent apartments in Worcester, Massachusetts. “But,” says Meggan, “the two of us got to talking. For the amount we’d each pay to rent separate apartments, why not just join forces and buy a multiunit house? Eventually we found a three-family home, built in the 1920s, with beautiful woodwork and built-ins. We split all the costs 50/50 (the mortgage, the expenses, right down to the lawnmower), and each took one floor. Some tenants were already living on the third floor—a dependable family—and they stayed on. Everything worked out great, and three years later, after my sister and I had both married, we sold the place for double what we’d paid for it.”
Meggan and her sister had both finished college and were looking to rent apartments in Worcester, Massachusetts. “But,” says Meggan, “the two of us got to talking. For the amount we’d each pay to rent separate apartments, why not just join forces and buy a multiunit house? Eventually we found a three-family home, built in the 1920s, with beautiful woodwork and built-ins. We split all the costs 50/50 (the mortgage, the expenses, right down to the lawnmower), and each took one floor. Some tenants were already living on the third floor—a dependable family—and they stayed on. Everything worked out great, and three years later, after my sister and I had both married, we sold the place for double what we’d paid for it.”
The cheaper alternative is usually to buy a single dwelling and share the entire space jointly, meaning you’d have less autonomy. With some looking around, you may be able to find a place with a layout conducive to independent lives, such as bedrooms in opposite wings.
You’ll have to make some major decisions in advance about the financial and other aspects of your shared ownership. The biggest financial question will be how you split the down payment and monthly expenses—an even split, or a percentage split based on the amount of money you each put in, the size of your bedrooms, or some other combination of factors? And remember that how you split ownership also dictates how you can claim the related tax benefits.
Another major question involves who gets the property if one of you dies: the other person, or someone named in the deceased owner’s will? And in a less dire scenario, what if one of you wants to move out—can that person rent his or her portion of the place, sell to any buyer, force the whole property to be sold, or need to offer the remaining owner a chance to buy the “property interest” (that’s legalese for an ownership share), either at its original or current value?
Think about these issues before buying, because the manner in which you describe your ownership on the property deed (in legalese, “take title”)—for example, as tenants in common or as joint tenants with right of survivorship—will legally determine the answer to some of them. For example, joint tenancy almost always involves a 50/50 split (depending on state law; see Chapter 11).
Cobuying is a huge commitment, and it’s crucial you choose the right person to share the responsibilities of homeownership and discuss issues like how often to mow the lawn or (unless you’re in a duplex) do the dishes, clean the bathtub, and vacuum the living room. Sit down with your potential co-owner to discuss such issues, Then, no matter how compatible you two seem to be, put your agreement in writing, most likely with an attorney’s help.
CD-ROMMake sure your discussion covers all the bases:
Use the “Cobuyer Discussion Worksheet” included in the Homebuyer’s Toolkit on the CD-ROM. A sample is shown below.
CHECK IT OUTDetailed information on buying a house with a nonspouse can be found in
Living Together: A Legal Guide for Unmarried Couples
, by Ralph Warner, Toni Ihara, and Frederick Hertz (Nolo).
Yes, it’s written mostly for romantic couples, but much of the information still applies to anyone living together, and the book contains useful sample agreements. If you’re a lesbian or gay couple, similar information is found in
A Legal Guide for Lesbian & Gay Couples
, by Denis Clifford, Frederick Hertz, and Emily Doskow (Nolo).
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