If you want a new home in today's market, before anything else, you need to know if you can qualify for a mortgage under the new, tighter standards.If so, the sooner you buy the better.Right now, three options are open to you:
- Homeowners, unable to sell their homes, will at least consider any offer
- Builders have lowered their prices to the point that you're able to buy homes at or near cost
- Bank foreclosures are at an historic high.
Homeowners Unable to Sell:
The primary issue with the resale market is that the $200k homeowner can't sell his home to buy the $350k home, so the $350k homeowner can't buy the $500k home and so on.It all starts with the first home sale, the first domino in the chain.The secondary issue is that when the lower price home does sell, the higher priced one isn't necessarily the best value in the next price range, so what's left is not the first tier option.
Builder Sale Prices:
Three things are key in this area:
- If the builder has been holding the home for awhile, a price at or near cost is a great deal as long as the builder stays in business long enough to fulfill the warranty, so it's in your own best interest not to try to steal it.You need him to stay in business.
- If the builder is just finishing the home, understand that the draws the builder gets from the bank are the same whether they install the best or the worst, so everything at the end was probably done in an effort to minimize cost, therefore two houses next door to each other by the same builder may not be of the same quality.
- If the builder is facing foreclosure, you are destined get the lowest quality he can deliver and very little, if any, attention to warranty.So, is this really a good deal?
- The prices you can get for foreclosures can be unbelievable, but are they good deals?Yes, some of them are.In fact, we recently found one so good that we had to buy it.However, we purchased it knowing that we were going to take out a dozen or so walls, completely gut much of the sheetrock, flooring, and kitchen and redo everything.As contractors, we could do that, but how many homeowners can do the same thing at a reasonable cost?We suggest that foreclosures only be considered in three scenarios:
- The home is near perfect for you as-is.
- You are handy enough that you believe you can do all (or most) of the work without having to hire contractors.
- You purchase the home with a pre-negotiated price from a contractor to do the work you want and warranty the house after your purchase.
For those of you who can't qualify for one of today's mortgages or really would rather stay where you are, the best deal going is to forget the foreclosures, etc. and remodel your home to fit your lifestyle.Think about the financial difference between remodeling your $350k home into a $500k home and purchasing a $500k home.To buy a $500k loan:
- Sell $350k home: Pay $21k in commission
- Pay closing costs: $4k
- Pay loan and closing costs: $8k
- Total invested to move:$183k ($150+21+4+8)
To remodel your own home will cost you only the cost to remodel: $150k.In short, you potentially gain an additional $33k (22%) of equity by remodeling the home you live in.So, where's the better deal?In this market, remodeling wins nearly every time.
Shawn H. Hughes
Specialty Spaces Atlanta