What is considered a fixer upper?

Home Forums Purchase Program What is considered a fixer upper?

Viewing 15 posts - 1 through 15 (of 15 total)
  • Author
    Posts
  • #64487
    TheLongJourneyHome
    Participant

    I cant find anything that specifically denotes something as a ‘fixer-upper’. I googled it, and there does not seem to be a specific definition I can point to. I mean there are some that are clearly fixer uppers because they arent currently livable, but one of the locations I’m looking at, it is currently livable, but I would definitely consider it a fixer upper, but I dont know if my definition is even remotely reliable.

    #64489
    Nelsont
    Member

    Defining fixer upper is like defining color to a blind person.

    There really is no definition beyond a house that needs work. Naca allows all levels of work needed so what you want to get into is entirely up to you. What you can’t do however is expect to live in a house that needs major repairs. Naca will require the house to be livable and up to county regulations before you can close. There are situations where the repairs can be waived and/or delayed as long as they are not categorized as health or safety issues.

    #64490
    TheLongJourneyHome
    Participant

    I asked because NACA says they’ll include rehab with the mortgage. The current place I’m looking at needs some fixing up, but its livable. So I dont know if its worth further looking at this place. I dont want to go thru week to find out its a waste.

    #64491
    Nelsont
    Member

    Rehab for naca is simply money added onto the loan to finance any repairs. If you buy a turnkey house that needs a new hot water heater you will be required to have it replaced. If the seller will not replace it then you will need to spend your own money. You can get a rehab loan to include the cost of replacing the hot water heater in the purchase of the house.

    #64502
    TheLongJourneyHome
    Participant

    Sorry, these phrases dont mean anything to me. What does turnkey mean? I googled it, and the responses dont seem to be remotely related to housing.

    Are you saying the rehab is included for repairs the previous owners refuse to do? or is there a guideline I can look at for reference?

    #64508
    Nelsont
    Member

    Turnkey means there is nothing needed to do.

    The rehab loan is for any repairs you need to do that the owner will not. The total cost of house including rehab cannot exceed your approved monthly payment. So you cannot buy a house close to your top end and expect to renovate it. If the house needs a complete overhaul you can expect to look for houses that are $50000 to $100000 below your maximum because that’s roughly what it would cost to rehab it.

    #64515
    Peapod0609
    Member

    @TheLongJourneyHome I am not quite sure what you are asking here.

    With NACA, you can finance as much or as little rehab into the loan as you want, given that it fits your affordability and the home clears the HAND department. If you are wondering if you can roll some rehab into a loan even if the home is livable, the answer is absolutely, yes! With NACA it isn’t just “fixer uppers” that you can include rehab for. If you don’t like how they did the kitchen, you can re-design a new kitchen and roll it into a loan, you can finish an unfinished basement, etc. So I am not sure why you are so stuck on the term “fixer upper,” because that doesn’t really mean anything when it comes to NACA and your loan.

    Also, “turn key” generally means a home that needs no work at all and is ready to move in. I hope this answers your questions and simplifies things a little bit.

    #64548
    TheLongJourneyHome
    Participant

    Maybe I misinterpreted everything.
    My conversation with the people from NACA led me to believe that it would be a good idea to possibly look for a ‘fixer upper’, because they would include an extra 10% on top of the loan for the fixes.

    that is to say, if I found a house for 5000, they would loan 5500, with the 500 going towards repairs. Maybe that is not the case, but I’m sure I didnt make this up in my head.

    Thats why I was asking for the definition. Can anyone reference me to the website so I can get a proper understanding. It sounds like its not in my interest to find a fixer upper if thats not the case.

    #64549
    Nelsont
    Member

    So yes that is possible to get the extra 10%. But you don’t automatically. The extra 10% is due to estimates going over budget. With that said as mentioned there is no defined definition. If you need or want to spend any money for any reason on work on the house you are looking at a rehab loan. Most people don’t buy a house and finance contracting work if the house is in tip top shape. But you can.

    Whoever told you to look at fixer uppers probably had in mind a house that hadn’t been updated in 40 years and needed a little TLC. Just like with a foreclosure property you can get a good deal because the houses in that category after all work is done often end up costing less than a house that has already been renovated. But not always. You just have to take the time and look into it for each and every house.

    Let’s say you find a house that belonged to an elderly person who passed away recently and the family is trying to unload it. The house might be worth 250k but they are asking 200k. Now since the person was say 90 years old the house looks like a time capsule to the 1970s. To make the house look like it was built in 2020 it might cost 50k. So now you spent 250k on a renovated house that is now worth 350k.

    Only you can decide if it’s worth looking into things like this.

    #64551
    TheLongJourneyHome
    Participant

    Well yea, thats the exact situation i’m running into. houses are livable, but from the stone age, this is why I was wondering the details on that 10%. Because these houses definitely need some work (and living in LA, im kinda forced into a house that no one else really wants, everythinge else has 14 bids before i even arrive).

    thanks, ill probably ask more later, ill def have questions.

    #64579
    Peapod0609
    Member

    There is no “definition” of fixer upper , and that still kinda misses the point lol. I think they are just telling you to find a cheaper home, even if it needs some work, and then just rehab it. It is generally cheaper to find a less expensive home and do some work on it than to find a turn-key, fully recently done home sometimes. I think that is all that they are getting at. You don’t need to find some “definition” of fixer-upper.

    I would look for a home that is on the lower end of your price range that looks like it has everything you need, but just may be outdated. Then use some money to update it. I think that’s what they are getting at. Forget the term fixer-upper.

    #64693
    TheLongJourneyHome
    Participant

    Okay, forget I said fixer upper.

    Who (or when) is that determination made? I guess i’m looking for a guide of some sort that would clarify exactly when the 10% would or wouldnt qualify. Like a reference sheet, or general guidelines I can show to my agent for future reference.

    #64698
    Peapod0609
    Member

    I believe any rehab done to the home qualifies you to get a loan for that extra 10% of the post renovation value. I don’t believe there are any guidelines or reference sheet to follow. If I am not mistaken it is for any rehab work done.

    As long as all of that fits into your affordability, you should be good to go. And by affordability, I mean your monthly payment. As long as what you are buying fits into the amount NACA approves you for, you should be fine.

    #64700
    Nelsont
    Member

    It won’t be made until after you submit your contract offer. Once you do you will have 10 days including the weekend to have your home inspection completed and the report uploaded to your file and sent to the HAND department. The hand department will reach out to you and assign you a HAND coordinator. The HAND coordinator will review your inspection report within 2 or 3 days and report back to you with an itemized list of required repairs and recommended repairs each with an estimated (albeit overpriced) cost of repair or replacement. It’s at that point where you need to determine if you are going to make the repairs yourself or negotiate with the seller to make the repairs. Any repairs you decide to take on will need to be budgeted into a rehab loan. That’s when you take the list provided you of naca approved contractors and call around to make appointments for them to come out and make estimates. They will need to upload the estimates to your file and that’s when HAND will determine what’s approved for your rehab budget. At the same time you will need to provide a wishlist to HAND of any work you want done that was not on the inspection report such as remodeling the kitchen along with the estimates and design plans. The 10% would only come into play if the total of the estimates plus the offer price of the house comes close to your maximum approved budget.

    #64713
    TTrumble
    Member

    Hello TheLongJourneyHome,

    Let’s get back to the basic definition of what the rehab/repair program is for and what it can do.

    Under the HAND program, your loan can be for as much as 110% of the “subject to” (post-renovation) value of the home. The idea is that this gives you a lot of leeway in choosing a home that you may really want, but that may need a lot of renovations or repairs to make it truly liveable, up to current standards and meeting your specific needs.

    With this leeway, you can potentially buy a home that you really love but needs nearly a total “gut rehab”. Or one that needs specific items done to make it functional for a disabled person. Or just a variety or repairs and practical upgrades to make it a safe, solid, comfortable home.

    So, you could buy a foreclosed, abandoned home for $40,000 for example, that is in need of $125,000 in work to become a quality home once again. As long as the post renovation value of the home is at least $150,000, you could actually get a $165,000 loan (110% of $150,000) to buy and repair the home as long as that $165K is within your affordability. (We’re able to squeeze in the extra 10% because the home will almost certainly appreciate fairly quickly beyond the $150,000 value because of the restoration and also the community stabilization factor.)

    (That would definitely meet any of the variety of vague descriptions of “fixer upper”. In the case of a home, it would simply mean a house you can buy at a real bargain because it needs a lot of work.)

    Or if you buy a $200,000 home that needs $10,000 of work, you can get a loan for the entire $210,000 as long as the home appraises and it is again within your affordability.

    Luxury items like pools, sports courts and the like are not allowed. Nor should you ever use this to buy appliances, since you will effectively be financing the appliances for 30 years, well beyond their useful lifespan.

    You can have certain, limited “wish list” items included an many cases too. You’ll learn about that later on in the process.

    Just to see an example of a fixer upper taken to a hilarious extreme, look up a 1986 movie starring Tom hanks and Shelley Long called “The Money Pit”. 😉

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    • This reply was modified 1 year, 10 months ago by TTrumble.
    • This reply was modified 1 year, 10 months ago by TTrumble.
Viewing 15 posts - 1 through 15 (of 15 total)
  • You must be logged in to reply to this topic.