Anonymous
03/17/2014 21:40
Subject: HELOC for renovations - downsides?
Thank you for the response.
The bathroom is the original 1940s bathroom found throughout Arlington. Currently, the tub is broken and the only way to fix it is to break through the tiles. For personal enjoyment of fixtures that work, we are willling to gamble on the loss on this renovation just to have a working tub that isn't patched with mismatched tiles and using ancient fixtures.
The hardscaping is the orignial poured concrete front stairs, which list to the left at about 5 degrees and are cracked and broken. The house sits on a hill so I think not fixing them may hurt us more than the loss on the repair, but could very well be wrong about that. I will ask the realtor as you suggest.
The roof could wait. It has been patched, so it just doesn't look that great. I think we would get hit with the loss that you are talking about with this one.
Finally, the neighborhood is doing well. As with many Arlington neighborhoods, we only have two styles of houses - colonials and capes, which makes the comparisons pretty easy. We have had 5 houses go on the market since the holidays. Two went FSBO through the neighborhood listserv, two sold over asking at their open house and the last one is one of the best homes in the neighborhood and they are asking more that $100k over the others, so it is sittting and obviously not priced correctly. I'm not sure if this makes our neighborhood "hot" but we do know that there are interested buyers.
Again, thank you for the time and effort that went into your response. You brought up great points and we hadn't considered asking a realtor about the comps.
The bathroom is the original 1940s bathroom found throughout Arlington. Currently, the tub is broken and the only way to fix it is to break through the tiles. For personal enjoyment of fixtures that work, we are willling to gamble on the loss on this renovation just to have a working tub that isn't patched with mismatched tiles and using ancient fixtures.
The hardscaping is the orignial poured concrete front stairs, which list to the left at about 5 degrees and are cracked and broken. The house sits on a hill so I think not fixing them may hurt us more than the loss on the repair, but could very well be wrong about that. I will ask the realtor as you suggest.
The roof could wait. It has been patched, so it just doesn't look that great. I think we would get hit with the loss that you are talking about with this one.
Finally, the neighborhood is doing well. As with many Arlington neighborhoods, we only have two styles of houses - colonials and capes, which makes the comparisons pretty easy. We have had 5 houses go on the market since the holidays. Two went FSBO through the neighborhood listserv, two sold over asking at their open house and the last one is one of the best homes in the neighborhood and they are asking more that $100k over the others, so it is sittting and obviously not priced correctly. I'm not sure if this makes our neighborhood "hot" but we do know that there are interested buyers.
Again, thank you for the time and effort that went into your response. You brought up great points and we hadn't considered asking a realtor about the comps.
Anonymous
03/17/2014 21:18
Subject: Re:HELOC for renovations - downsides?
Well, the concern about you taking a loan to do renovations in order to sell is that most renovations do not increase the value of the house commensurate with the cost of the renovation. Kitchens and baths do the best and typically raise the value of the house about 80-95% of the cost. But many others (including the hardscape you allude to) are doing well if they reap 75% of the cost back. So, if you do $30K worth of renovations and it only raises the value of the house $25K will you be satisfied? It will also cost you more than the difference as even if you pay off the loan quickly, you will still be responsible for a certain amount of interest payment which only adds on to the loss of real dollar value.
An additional concern is that you need to be realistic about your neighborhood and market. If you are not in a very hot neighborhood either with one of the very few homes available or with a home that is a good bang for the buck, then you have the risk that you may end up with a low-ball offer being your only early offer. Are you willing and interested in putting $30K into your house, then getting a lowball offer that may be 20% or so below your list price? Are you willing to wait months or over a year to get a price closer to your asking?
I would definitely consult with a realtor (ideally one that you would end up using when the time came to finally list) and ask for a market analysis of the house as is. Then ask the realtor to evaluate the proposed renovations and how it would affect the sales price of the house. Pick a realtor who is very familiar with the neighborhood and you'll likely get an idea of the real return of renovations which, in my experience, rarely return as much as homeowners think they will.
An additional concern is that you need to be realistic about your neighborhood and market. If you are not in a very hot neighborhood either with one of the very few homes available or with a home that is a good bang for the buck, then you have the risk that you may end up with a low-ball offer being your only early offer. Are you willing and interested in putting $30K into your house, then getting a lowball offer that may be 20% or so below your list price? Are you willing to wait months or over a year to get a price closer to your asking?
I would definitely consult with a realtor (ideally one that you would end up using when the time came to finally list) and ask for a market analysis of the house as is. Then ask the realtor to evaluate the proposed renovations and how it would affect the sales price of the house. Pick a realtor who is very familiar with the neighborhood and you'll likely get an idea of the real return of renovations which, in my experience, rarely return as much as homeowners think they will.
Anonymous
03/17/2014 21:04
Subject: HELOC for renovations - downsides?
We are considering putting our home on the market next Spring. We have developed a list of updates that must be done to get top dollar (bathroom, hard scaping, roof, etc). We expect it to run about $25-$30k all in. These are items that we would be doing over the next year or two if we decide to stay in the home. And, if we spread them out over two years, we could pay for them in cash. We are currently tight on cash as we are aggressively paying off debt, which will be done in 4 months, so we are thinking of using a HELOC to avoid dipping into savings.
We are wondering if there are any downsides to using a HELOC that we aren't thinking about - besides a drop in the market that would push the value of our home below the outstanding debt? We currently have about $200k in equity without the renovations (conservative), and the updates would get us close to the top of the market for our house in our neighborhood, resulting in another $50k in equity based on two sales in the last month.
Any advice is appreciated. TIA
We are wondering if there are any downsides to using a HELOC that we aren't thinking about - besides a drop in the market that would push the value of our home below the outstanding debt? We currently have about $200k in equity without the renovations (conservative), and the updates would get us close to the top of the market for our house in our neighborhood, resulting in another $50k in equity based on two sales in the last month.
Any advice is appreciated. TIA