Hardly Simple

It’s been a long time coming… Ok, it’s been almost 4 years to be exact. While I’ve been feeling paralyzed by both fear and planning tasks, I finally have a general plan for how my home renovation is going to go.

I envy those who can immediately renovate their space and call a contractor to do all of the work. While I know the stress that goes into working with renovations and outside contractors, the idea of calling someone for help and not explaining to them that I want them to teach me something sounds downright dreamy.

Meanwhile, I’m over here, googling the simplest thing for months and asking the most frowned upon questions of the construction people around me. It’s been cringe-worthy. The questions have been dumb, and some of the answers have been too. I have to keep reminding myself that everyone has to start somewhere and everyone sucks at the beginning.

It’s still a hard pill to swallow.

So I remind myself again and again of a quote from Sheryl Sandberg, the Chief Operating Officer at Facebook:

What would you do if you weren’t afraid?

Well… I’d renovate a little condo in Charlotte, NC. I’d ask all of the dumb questions and I’d make it through this entire process with all fingers and toes still intact, because that’s always a concern with power tools.

What does it buy you?

According to the Charlotte Regional Realtors Association the average price of a home sold in the Charlotte area as of the close of January 2019 was $268,271. Over the course of a year this tends to fluctuate based on market factors, but tends to round out to somewhere between 250,000 and 300,000. So what does an “average” home in Charlotte look like? Well, depending on where in the area you’re looking to purchase that can look VASTLY different. So, which home works for you?

315 Arlington Avenue #605, Charlotte NC 28203

This gorgeous 1 bedroom, 1 bathroom condo unit is located in the sought-after South End neighborhood, convenient to the CATS light rail, Uptown Charlotte and with tons of dining and entertainment within a short walk. The building boasts a pool, dog run, rooftop terrace and 24 hr concierge. The home is listed at 269,000 for 720 sqft of heated living area (priced at 373.61 per square foot). HOA fees (monthly) are listed at $321.

3112 Kemptown Square, Waxhaw NC 28173

3 bedrooms and 2.5 bathrooms awaits you in this airy 1,328 sqft condo within a mile of downtown Waxhaw NC. The community has a pool, clubhouse, fitness center and walking trails. Enjoy your own private patio and one car garage. This home is listed at 235,000 (176.96 per sqft) with monthly HOA dues listed at $181.50.

13602 Kensal Green Drive, Charlotte NC 28278

This home is already under contract, but I’m still going to count this Steele Creek 4 bedroom, 2.5 bathroom single-family home. This home has 2,968 sq ft of heated living area on just over a half-acre lot (0.6 acres according to the listing) with a two-car garage. This home is listed at 290,000 (97.71 per sqft) and has quarterly HOA fees of $85.

1907 Savannah Hills Drive, Matthews NC 28105

You can call this 3 bedroom 3.5 bathroom home in Matthews yours for the list price of 299,900. This 2,995 square foot home sits on 0.2 acre corner lot and has an updated kitchen including custom cabinetry and hardwood floors in the kitchen, dining area and large living area. The home is currently priced at 100.13 per square foot.

427 Steel Gardens Boulevard, Charlotte NC 28205

Want a townhome near the NODA Arts District? This 2 bedroom 2.5 bathroom end-unit in the Steel Gardens community has just over 1,400 sqft of heating living area, a two-car garage and a fenced back patio area for you to enjoy! This home is currently priced at 295,000 (200.68 per square foot) and has HOA fees monthly of $425.

Appraisal and homeowners inspection: what’s the difference?

When you buy a product or a service you always want to know what you’re buying and that it is of good quality. For everyday items like food, clothing and household goods if something isn’t the quality that you expect you can simply return it to the retailer or throw the items out and chalk it up to a learning experience. However, when purchasing a home there is no return policy and the only way to dispose of a bad purchase is to re-sell it, which comes with it’s own lengthy process and headache. So it’s important to understand what you’re buying when you invest in a home, and what the current condition is of that home.

To best protect yourself and your investment it’s best to get a home inspection, completed by a certified, trusted professional. Your home inspector is there as your advisor so you understand the condition of the home that you’re purchasing and can point out potential maintenance pitfalls or items that are not working as intended, which could greatly impact your quality of life while living in a home AND your checkbook due to the possibility of hefty repair bills.

If you’re taking out a mortgage to finance your purchase, your lender sends out their own inspector, which is known more formally as an appraisal. The appraiser will set up a time to walk through the home, but their reasoning for being there, the items they’re concerned with, and the report they furnish to the bank are much different. The appraiser is most concerned with whether or not a home’s value within the marketplace warrants the loan that the mortgage lender is about to extend on the property. If a buyer defaults on their mortgage, the lender forecloses on the home, which is then sold to cover the debt. Therefore, the lender wouldn’t want to lend $500,000 on a home that is only worth $200,000. That represents significant risk to the lender, so they hire a 3rd party professional to assess the value of the home prior to writing the mortgage.

Therefore, a home inspector is working on behalf of the buyer to understand the condition of a home and give the buyer insight into aspects of the home such as: electrical and plumbing systems, air heating and cooling systems, and structural integrity of the home.

Meanwhile, the appraiser is working on behalf of the bank to understand the overall value of a home, so if the bank must take possession to satisfy the buyer’s debt, that the home will have enough re-sale value to cover the unpaid portion of the mortgage debt.

If your lender assures you that there’s no need for you to purchase a home inspection, ask them the extent of their inspection and if you can see the style and format of the report they’ll be producing. More likely than not, it’s an appraisal and not an inspection aimed at protecting the buyer’s interests. So get your own professional to look out for YOU and your interests. Please get a home inspection 🙂

 

Inspection v appraisal chart

What could a year REALLY cost you?

Waiting a year for a lease to end or a promotion to be awarded can sound like a great thing when looking to buy your first home, but with  mortgage interest rates expecting to trend upward over the coming year, a small percentage increase could mean big money over the life of your loan.

When I talk about 1% interest it sounds tiny, but what if I told you that amounts to an additional 50,000 you’ll be paying to your lender if you’re gearing up to purchase a median priced home in Charlotte?

Now it sounds serious!

So here’s the scenario:

According to the Charlotte Regional Realtors Association, the median price of a home sold in Mecklenburg County was $250,000 during October 2018. Currently, mortgage interest rates are hovering around 5%, with increases expected in the next year. Based on these statistics and with the help of MortgageCalculator.org, here’s the math for what that actually means for someone buying a house today, and a the same house a year from now (of course I’m not taking into account price inflation… that’s a discussion for another post)

Here’s the math:

Today vs 1 Year

** This analysis is brought to you by MortgageCalculator.org and my super-sweet Microsoft Excel skills**

Assumptions: again, I assumed that the price of the home was the median price for Charlotte of 250k, and that the loan is a conventional, conforming loan (aka 3% down with PMI until the borrow has 20% equity in the home, at which point PMI goes away). I estimated property taxes, which were a bit high as compared to what I saw on recent sales in the MLS, but we’d rather be a bit conservative, right? Homeowners insurance for this example was a downright guess and is dependent on each home/homeowner/insurance company/etc.

What this means for you (even if you don’t like math): With all things being equal, a 1% increase in your mortgage interest rate could cause you to pay $152 more each month for the SAME HOUSE. And this $152 a month causes you to pay PMI for a longer period of time (because it takes longer to get to the required 20% equity in the home). On a yearly basis you’re paying an additional $1,825 for the SAME HOUSE. Over the entire 30 year life of your loan, this means you’re paying an additional $55,973 to your lender… why? because of a measly 1% increase in your mortgage rate.

 

What your homeowners insurance provider forgot to tell you

Now that we’re in the process of recovery from Hurricane Florence, whether that’s waiting for the water to recede, cleaning up the yard and streets, or simply finishing the hurricane snacks, this is the time to think about your insurance.

“Most homeowners’ insurance policies only cover damage caused by threats such as fire, windstorms, hail, lightning, and theft or vandalism.Though there are other policies that cover additional risks,floods and earthquakes are usually discounted from general homeowners’policies. Therefore, a separate flood insurance policy is required to cover damage caused by flooding.” – North Carolina Flood Insurance

Most homeowners don’t realize that flood damage isn’t covered under their regular  policy, and if you’re not in a flood zone, you’re likely not required by your lender to carry this insurance on your home. However, as we’ve seen with Hurricane Flo, just because you aren’t in a flood zone doesn’t mean that you won’t find yourself praying that the water stays out during a weather event.

According to FEMA, just one inch of flood water can cost $27,000 or more in damage. So, as you look around at your Charlotte neighborhood, how many people do you think are in sudden financial distress because of the hurricane? But won’t government disaster assistance help? Unfortunately, disaster assistance doesn’t help in the way you might think. Disaster assistance is often in the form of low-interest loans for homeowners, not usually outright payments that cover the full loss of property and any damage sustained.

The National Flood Insurance Program, a program backed by the federal government, allows homeowners to cover the insurance gap in homeowners policies, with flood coverage maxing out at $250,000 for around $700 per year.

While the addition of flood insurance will increase my homeowners insurance costs by roughly 50%, after seeing the effects of Hurricane Florence… Maybe this is money well-spent to mitigate the risk of costly flood repairs should another tropical depression/tropical storm/category hurricane find its way to inland North Carolina.