East Hills Flip

One persistent myth in real estate is that anyone can make money by buying a fixer-upper or foreclosure property at low cost, doing the renovation work themselves, and then reselling at a profit.

Many experienced contractors and career renovators do just that, but first-time buyers can get caught in a web of cost overruns, contractor disputes, and resale problems.

For many first-time buyers, a fixer is the only option, and sometimes the best option. Follow these basic rules of thumb when you consider buying fixer-uppers, foreclosure properties or other real estate "bargains":

Look for fixer-uppers with only cosmetic problems. Exterior additions or major defect repairs can be costly, and the expense of correcting major structural defects may not add a penny to the market value of the house. Fixers that have only cosmetic problems, such as ancient shag carpeting or bad wallpaper, are ideal for first-time buyers. Cosmetic repairs can be relatively inexpensive, and some fixer-uppers will pay back double their cost. Always have a fixer-upper carefully inspected before you buy.

Don't pay too much, especially if you want to resell quickly. If you overpay, you may suffer a loss when you sell. In terms of investment potential, the best time to buy a fixer is when the market has bottomed out and is turning around. The worst time to buy is when the market has peaked and is starting to decline. Estimate the value of the property you want to buy. Research the potential market for the restored fixer-upper, and make sure that your plans for the house don't result in an over-improvement for the neighborhood.

Estimate renovation costs accurately before you buy. If you miscalculate, your profit will dwindle. Ask your contractor for a detailed bid or do your own calculation. Have the property inspected as a condition of the purchase, particularly if you buy it in "as is" condition. You'll reduce the chance of having to fix unanticipated defects.

Evaluate the floor plan. With a good basic layout even the most hideously decorated house is an ideal fixer-upper. On the other hand, a house that seems a maze of rooms may have a defective floor plan that no amount of paint and paper will remedy.

Renovate wisely. In planning your remodel, keep resale value in mind--even if you plan to live in the house for some time. Kitchens, bathrooms and storage spaces are important to today's buyers. Curb appeal sells houses, so concentrate on improving the landscaping and front entry. Also, stick to neutral color schemes.

TIP:You may be able to get a seller to pick up all or part of the cost of home improvements if you negotiate for them as repairs required after a home inspection. Many sellers prefer to lower their asking price and sell the property "as is" instead of financing the repairs. This presents fewer problems for the seller and the buyer can close the deal easily.

Other Bargains: A Short Course

Some real estate investors make a career out of buying and selling foreclosure, probate and short-sale properties, but it's a dangerous business for the inexperienced. If you're a first-time buyer, consider working with an agent or lawyer who has experience in such properties.

Foreclosures If a buyer can't keep up with loan payments, their lender will foreclose on the mortgage and put the property up for auction. If the auction fails to produce a buyer, the property reverts to the lender, which then offers it for sale. You can purchase other foreclosure properties through the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). Check local legal ads and, in the case of FHA and VA properties, the Internet. CAUTION If you buy a foreclosure property, you may have to agree to an all-cash deal with no contingencies and buy the property "as is." Always get an inspection to avoid buying a house with major defects. You may also have to deal with eviction proceedings if the current owner hasn't vacated the property.

Probate sales

Probate property is sold to settle the estate of a deceased owner. These properties may be listed with an agent, though some sales take place at a court hearing. Because the estate's executor or a court administrator coordinate the sale, you may or may not get a bargain price. Their interest is to get the best price they can. If the heirs dispute each other over who has the legal right to the property, it may not be saleable until estate matters are settled. Always get an inspection to avoid buying a house with major defects.

Short sales

A short sale occurs when a lender reduces the amount of the loan payoff on a home, which it may do for a seller who can't cover the mortgage due and closing costs in order to sell. Many lenders prefer to clear such a loan from their books, even at a loss, to avoid the cost of foreclosure or having the house in their inventory. This can make for an attractive deal for a bargain-hunting buyer. Make sure your purchase contract includes a time frame (30 days) for the seller to obtain written permission from the lender to conduct a short sale. Prepare for a tough negotiation. As always, get an inspection to avoid buying a house with major defects.

Foreclosure filings skyrocket

Foreclosure filings skyrocket
Filings jump 58% in first half of the year and could surpass 2 million this year as the housing market weakens, according to a report.
July 31 2007: 10:38 AM EDT

NEW YORK (Reuters) -- U.S. home foreclosure filings rose 58 percent in the first six months of the year and could surpass 2 million this year as the housing market continues to deteriorate, a report said.

Foreclosure filings in the first half spiked from the same period last year to 925,986 as many overstretched borrowers have been caught between rising interest rates and falling home prices. The Federal Reserve has cited the faltering housing market as the biggest risk to economic growth.

The foreclosure filings were also up more than 30 percent from the previous six-month period, at a rate of one filing for every 134 U.S. households, said RealtyTrac, an online marketplace for foreclosure properties.
Most ruthless foreclosure states

Foreclosure filings include default notices, auction sales notices and bank repossessions and they were reported on a total of 573,397 properties.

"Despite a slight drop in June, foreclosure activity shows no sign of slowing down," James Saccacio, RealtyTrac chief executive officer, said in a statement Monday.

"If the current pace were to continue, foreclosure filings would surpass 2 million by the end of the year, which would represent a year-over-year increase of more than 65 percent," Saccacio said.
Mortgage brokers: The salesman factor

California had the highest number of foreclosure filings in the first half of 2007. Florida was second. Nevada posted the country's highest foreclosure rate, with one filing for every 40 households.

The foreclosure spikes in prosperous states with solid economies and job growth is a continuing departure from past delinquency patterns, that have followed mass job losses and plant closings in industrial states.

The problems in California and Nevada, as well as Florida, Arizona and other hot markets stem in large part from a speculative frenzy that sent home prices through the roof.

Homeowners bet they could buy a house and "flip" it quickly to make a profit. But when prices fell, they were stuck with properties they couldn't move.

When the housing market was hot, rising home prices also enabled strapped home owners to tap into their increased equity to keep pace with their debt obligations.

They could opt for a home equity loan or a home equity line of credit for quick cash, or refinance their home for a higher amount and receive cash back.

Many buyers didn't qualify for conventional fixed-rate loans and opted for mortgages with very low "teaser rates" that lasted only for the first two or three years of their loan. Interest rates reset, often to unaffordable levels, especially for credit-damaged consumers, the subprime borrowers.

When home prices fell, owners who had already taken out all the equity in their homes no longer had a ready source of extra money. Many fell behind on their mortgage payments and their lenders moved to collect.

Foreclosures started to spike and subprime lenders, in particular, began to experience many more delinquencies.

30-year fixed rate at 6.27%; 10-year Treasury yield at 4.8%

Long-term mortgage interest rates edged up Monday, and the benchmark 10-year Treasury bond yield grew to 4.8 percent.

The 30-year fixed-rate average rose to 6.27 percent, and the 15-year fixed rate increased to 5.94 percent. The 1-year adjustable stayed at 5.52 percent.

The 30-year Treasury bond yield was up to 4.95 percent.

Rates and bonds are current as of 7:15 p.m. Eastern Standard Time.

Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.

In other economic news, the Dow Jones Industrial Average climbed 92.84 points, or 0.7 percent, finishing at 13,358.31. The Nasdaq was up 21.04 points, or 0.82 percent, closing at 2,583.28.

Stock figures are current as of 7:30 p.m. Eastern Standard Time.

4191 Hidden Valley Ln

This remodeled unit sits on a 13,000 Sq Ft corner lot. Street parking is limited as there is no curb or sidewalk to speak of in front of the home. The front walkway is flanked by lawn. To the right is an expansive area of lush freshly planted sod. Referring back to my notes for that day, I described it as being “so green that I had to bend over and touch it”. To the left is a small spotty patch of what I assume was the original lawn, why wouldn’t they just plant the remaining 10Sq Ft as well?

The front porch is finished in a glossy waterproof seal with a somewhat strange flake finish that allows for grip when wet. The interior has a number of great touches. All of the wall textures have been redone. There are sparkling new granite countertops in the kitchen and bathroom. There is also some excellent tile work done in the showers. Rather small footprint for the size of lot.

There is a small detached studio unit in the rear that is currently rented out. Apparently it was laundry day as the clotheslines were covered in tightie-whities. Yes, underwear.

Overall I think the home has been remodeled nicely but the size of the lot has not been utilized. Listed a $809,000 and on the market for 29 days…

15131 GARCAL DR, SAN JOSE

I visited this listing about one week ago and was struck by a feeling that building this home was a very proud moment for the previous owners. The home is 47 years old and I don't think things have changed very much since it was built. You enter the complex through a door that leads you to the interior courtyard. To your right is a large entertaining area complete with built in barbecue -a definite luxury in 1959. Directly ahead is a detached game room (about 12X15ft). It's sliding glass door is jammed open and the laminate flooring bulges and buckles from what looks to be years of water damage.

The home itself is in good condition aside from it's obvious need for updating. The 3 bedrooms and 2.5 baths need work. As I was looking at the closet space I came across something amazing, -the original blueprints! And yes, originating in 1959, they were actually blue! As I looked over the simple yet clean plans my mind raced thinking about a couple embraced side by side at their kitchen table looking down at what their future home would be.

The lot comes in at just under 20,000 sq ft. Mostly usable with a slight downslope. Those familiar with Garcal know that it is a private road that is well maintained.

In the end, what was a grand estate has not aged well but the view atop the hill and the serenity that comes with a 20K sqft. lot might make it worth the now $989,000 price tag.

Bring your tool belt or your love for retro green carpet.

16120 ALUM ROCK AV

Someone has taken the time to put a good deal of work into this property. Every surface has been redone including wall textures and counter tops. The interesting thing about this property that sets it apart from most is it's 1bed 1bath guest quarters located behind the detached garage.

The main home is a bit small with only 2 bedrooms and 1.5 baths but what it lacks in square footage it makes up in the details throughout. New plumbing, stamped driveway, new granite and new exterior stucco.

I hate to use the cliché Real Estate term but this really is is "turnkey".

I've taken a look at it personally, give me a call if you would like to as well.