About Real Estate: With sales slow, offering home as ‘fixer upper’ is a bad idea
Home sellers who don#146;t make inexpensive cosmetic changes or easy repairs may risk a 20-percent drop in their sale price.Q. We are planning to put our home up for sale. It is structurally sound but a lot of little things need to be fixed, and it needs a new paint job. My wife is constantly busy with our three kids, and I am working 50 to 60 hours a week, so we don#146;t have the time to interview and get bids from contractors and certainly don#146;t have the time to make the repairs ourselves. Would it make sense to market the property as a #147;fixer upper?#148;
A. I rarely advise readers to sell their homes as #147;fixer uppers#148; because the price discount they would have to accept is too steep.
Even when the housing market is red-hot, properties that aren#146;t in tiptop shape typically fetch at least 10 percent less than similar properties that are in sterling, move-in condition. And with sales in most parts of the nation still slow, fixer uppers often are selling for 20 percent or even 30 percent less because buyers can be more choosy than they could a few years ago.
Your letter suggests you and your spouse are very busy, so I assume you will need to hire a real estate agent to market the home and then shepherd it through the time-consuming closing process. Ask the agent for two estimates: The first for how much the property might bring if it were put back in top shape, and the second for how much you#146;d get if you sold it in its current condition.
If you#146;re like most sellers, you#146;ll probably be astonished by the difference in the two estimates and then decide to fix the place up before putting it on the market. Your agent should be able to help find some reliable repairmen or contractors and might even be willing to coordinate or supervise their work.
Q. My bank recently sent me a letter stating that it will waive my monthly $5.95 checking-account fee if I agree to have my mortgage payment automatically deducted from my account. But if I agree to have the payment automatically deducted, will it have a negative impact on my credit score because I would not be writing a personal check?
A. No. Credit scores mostly are based on how timely a consumer#146;s bills are paid, regardless of the payment method.
Credit bureaus don#146;t even note how the bills are paid. That means that you won#146;t increase or decrease your score by writing a personal check, have the money automatically deducted from your account, or just pay cash.
Q. We bought a home near Las Vegas five years ago, but my husband got a new job in Virginia in June and was ordered to report within 30 days. The short time frame did not give us enough time to prep our Nevada home for sale, but we found a month-to-month tenant whose rent almost covers the monthly mortgage payment. Can we consider the rent #147;income#148; when we file a loan application to buy a house here in our new state of Virginia, even though the big drop in Nevada#146;s home prices has wiped out all our equity in the property?
A. You should include the rental income you are collecting from your Nevada property on the loan application for the house that you hope to buy in Virginia, but it#146;s not going to do you any good. That#146;s because most lenders require a borrower to have at least a 25 percent to 30 percent equity stake in a rental before they#146;ll count the income the property generates when considering a new loan application.
Your letter states that you don#146;t have any equity at all in the Las Vegas home, so the bank won#146;t include any of the income it produces even though the rent nearly offsets payments on the underlying mortgage.
Worse, when you apply for a loan to purchase a Virginia house, you#146;ll have to list the monthly mortgage payments for the Nevada property under the #147;liabilities#148; section of the application. This means you will qualify for a much lower loan amount, or perhaps even see the app rejected unless you are able to make an unusually large down payment or you and your husband make a large enough amount of money to prove you can comfortably handle two mortgages and all your other debts.
Your best bet now would be to put your old Nevada home up for sale. It would be ideal if you could go back to Las Vegas for a few weeks to choose a real estate agent and get any needed repairs under way while your husband remains at his new job. Otherwise, seek a referral from one of your old neighbors who recently sold or bought a home and were happy with the services that the agent provided.
If you instead let your old home go into foreclosure, it will leave a black mark on your credit record that likely would prevent you from getting a mortgage to buy a home in Virginia for at least another year or two.
Ÿ For the booklet #147;Straight Talk About Living Trusts,#148; send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960.
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