BY AARON STELLA I’m still not in the house I purchased last April. It was, livable when I bought it, albeit in need of some serious face lifting, which always has its snags and surprises. Like, throwing up some dry wall should be a relatively painless process—unless there’s three layers of petrified wallpaper covering what were once beautiful plaster walls which means you have to frame out the whole house before dry walling; or, tearing out water damaged dry wall in the kitchen only to find a larger-than-life brick Jenga puzzle teetering precariously overhead because some brain trust didn’t use enough mortar when he built the damn kitchen add-on. (Sigh). The thing is, home owning, whether its a finished house flush with premium appliances or the black diamond of fixer-uppers, is a full-time commitment. Nothing to be afraid of, but it can be a helluva headache, so knowing your limits, both financially and mentally, is essential to finding the right house and preserving your sanity.
In our last edition, we tackled the mortgage pre-approval process for FHA loans. Now it’s time we gaze into the ol’ crystal ball to see clearly into your future of homeowning. What kind of house do you want to live in, and why? What do you notice when first cracking the door to new property? When I first began house hunting, nothing less than my dream home would do. Though, I hardly had the salary or the capital saved to afford the gussied up row home I wanted, which made touring one thrill-less dwelling after another feel more like trash picking than house hunting. In a certain sense, I didn’t know what I was looking at; in another sense, I simply lacked vision—the ability to see beyond the fissured drywall and mica countertops common to the homes within my price range.
Developing that vision, however, relies on your ability to understand how properties appreciate. Real Estate Rule Number One: Property value is only relative to its surroundings (aka “Location, Location, Location!”). Even if your house is a dump and stays a dump during your residency, if the location is good, your house will appreciate. To assess the value of a property, a realtor or appraiser pulls comps (comparisons) of surrounding properties within a three block radius that have sold in the past three to six months, either from public records, or, from TREND — a Multiple Listings Service database used by brokerages to facilitate the sale of properties. Then, the realtor or appraiser assesses the collective value of the property’s finishes and features, with which, in conjunction with the comps, allows them to determine the market value for a property. Alright, excruciatingly technical, I know, but it’s good to hear it explained, well, technically. In reality, however, buyers determine property value. In the same sense that you could live in a dump and have it appreciate, you can also sit on some serious swank while it stagnates or depreciates if nothing around is selling.
Needless to say, all the above was explained to me by my broker, and that’s what drove me to buy a home that would yield the maximum profit via appreciation. Now, out of the relatively finished homes we saw on our hunt, many of which I could’ve live in for a time and been happy, nothing really had the potential we were looking for — that is, until we stumbled upon this brick three-story row in the heart of the Newbold neighborhood, near the South Philly Taproom, at the corner Mifflin and Hicks streets. It offered over 1,300 square feet, 4 bedrooms, 1 bath, quaint back patio, eat-in kitchen, hardwood floors, and was priced like a donkey with a broken leg at the fair.
After touring the property and returning to the office, we ascertained that this zip code had been enjoying some serious appreciation over the past year, with no signs of stopping. Still, while livable, the house hadn’t been upgraded in decades. For its true potential to shine through, it would need some serious work, meaning I would need to find some serious cash. Well, I’ve never robbed a bank before, but desperate time calls for desperate measures. Maybe I could pay off my college tuition while I’m at it. Kill two birds with one stone, right? New house, no tuition. Supreme paradise. But before I pulled the pantyhose over my face, my broker me informed me about a special type of mortgage I could get call a 203K FHA loan. The loan provides the borrower with up to 35K for renovation costs (contractors, labor fees, materials, etc…). The best part is that the 35K gets lumped into the rest of your mortgage. It’s a really fantastic option for first time homebuyers looking for a leg-up with renovations. Still, the road ahead would be long and arduous: acquiring the mortgage wouldn’t be a cakewalk (no mortgage is, really) not to mention the headache of all the renovations, finding roommates and furniture. “Ah, hell,” I thought. Daddy saw what he wanted and he’s gonna get it somehow. Like all things, really, you might have to do the damndest Riverdance of your life, but first time home buying exposes some uncharted fathoms of fortitude you probably never realized were there. And where it starts, after you’ve picked your first home, is making a savvy offer, and getting the mortgage. All coming up next time, folks. Until then…
PREVIOUSLY: So You Want To Buy A Home
PREVIOUSLY: So You Want To Buy A Home Pt. 2