Friday, July 17, 2015

A Movie And A Ball For A Hot Columbus, Mississippi Weekend

In the middle of the summer, there are still some community activities each weekend in Columbus, Mississippi.  Like many communities, once school begins (and the summer vacations end) there are plenty of activities. Still Columbus has several events this weekend for just about every taste. Let’s see what they are. 

The Lowndes County Imagination Library has a special movie presentation at the Columbus Lock and Dam Amphitheater on Wilkens-Wise Road at 8:00 p.m. Bring the children, and yes the very young ones too, to enjoy the movie “Paddington.” The movie is free and there is a refreshment concession available. Any child residing in Lowndes County who is under age five can register to receive a free book each month, compliments of the Lowndes County Imagination Library.

For those that do not know, the Lowndes County Imagination Library is part of Dolly Parton’s Imagination Library. The goal is to encourage young children to develop their imagination through reading. There are many individuals, businesses and civic organizations that underwrite the costs through tax-deductible donations. Someone will be at Friday’s movie for anyone wanting donation information.

The Hitching Lot Farmer’s Market on Second Street and Second Avenue North is open for business. Purchase the freshest in locally grown produce and homemade jellies, bread and even lemonade. The phrase "locally grown" means within a 50-mile radius of Columbus. That is a requirement to sell at the Farmers Market that a roadside vendor cannot make.

Eating great food is one method to enjoying a healthy lifestyle. Another is exercise. This Saturday the Frank P. Phillips YMCA has a wellness clinic at the Farmers Market. Find out the right mix of nutrition and exercise to stay away from the doctor’s offices. The market opens at 7:00 a.m. Saturday. It is also open after work Monday and before work on Thursday.

Black and White Ball is a semi-formal event benefiting the Columbus Police Department’s Night Out on Crime in August and the children’s toy drive around Christmas. Enjoy dinner and dancing to live music at the remodeled Trotter Convention Center on 5th Street North beginning at 7:00 p.m. Saturday.

There is racing action at the Magnolia Motor Speedway just south of the intersection of US-82 West and US-45 South this weekend. Drivers compete for the 12th annual Governor’s Cup, paying $10,000 to the winner for the Southern All Stars Super Late Models. Other racing classes include NeSmith Late Models, Street Stocks and Factory Stocks. The driver’s meeting is at 6:30 p.m. with racing half an hour later.

Does anyone have a housing need this weekend? Make a private preview appointment at least 24-hours in advance by contacting your REALTOR®.
_________________________________________

Andy Kalinowski is a REALTOR®, an Accredited Buyer’s Representative®, a Sales and Foreclosure Resource® and a Military Relocation Professional with CENTURY 21 Doris Hardy and Associates, LLC in Columbus, Mississippi. He has a Mississippi Real Estate license. Andy is also a member of the National Association of Realtors®. Contact him by cell (or text) phone – 662.549.3421 or by e-mail – andyk@dorishardy.com. He is also available for web video chat.

Thursday, July 16, 2015

How New Building Codes Could Sink Your Home’s Value

Building codes are changing faster and getting tougher. You could be in for a costly shock if you do a remodeling job and don’t check codes. Here’s what you need to know.

In November 2013, the city of Vancouver, B.C., modified the city building code and outlawed the doorknob.

That’s right: the good old doorknob.

Why? Because lever-type door handles are so much easier to use than knobs, especially for people with limited mobility. Ever tried twisting a doorknob with arms full of groceries? A lever handle can be opened with an elbow.

Twenty years ago, mobility and accessibility weren’t hot topics. Today, accommodating an aging population and those with limited physical abilities has altered the way our homes are designed. And the Vancouver code is just one example of how changes in society turn into laws that affect our homes.

Bottom-line: You don’t want to be asleep at the wheel if you’re remodeling, or worse, if you decide to sell and the inspector points out what’s not up to code.

But there is an upside.

4 Financial Benefits of Following CodesCode changes hike homebuilding prices initiallyup to 5% more than the cost of a house built to older standardsbut code changes can pay for themselves over time.

1. Lower insurance premiums. Bringing an older home up to disaster-prevention standardsretrofitting hurricane-proof windows in storm-prone areas; adding a steel roof in wildfire regionscan lower insurance premiums, says Michael Barry, vice president with Insurance Information Institute.

“Almost every insurer is going to look favorably on proactive steps a homeowner takes to reduce the likelihood of a loss,” says Barry.

Talk with your insurance provider to see if you get a break. Upgrades that can favorably affect your premiums depend on where you live and the potential disasters you face, but likely candidates include:
 – Fireproof exterior materials
 – Earthquake-strengthened foundations
 – Wind-resistant windows, framing, and roofing
 – Flood-proof landscape and drainage systems


2. Added value when you sellHomebuyers of the not-too-distant future will look favorably on houses that are built and remodeled to the latest standards of efficiency and safety.

A recent study of sales of new and existing houses by the Portland, Ore.-based nonprofit Earth Advantage Institute revealed that homes with third-party certification for sustainability and energy efficiency commanded an average 8% higher price than comparable new houses, and a whopping 30% higher for existing houses. Earth Advantage advocates for better building practices.

3. Better energy efficiency that saves on utility billsThe U.S. Department of Energy says changes in energy-efficiency requirements from the 2009 International Residential Code (IRC) to the 2012 version will pay for themselves in as little as a few years.

The Online Code Environment & Advocacy Network, a repository for building best practices and news, agrees. After analyzing costs and benefits for every state, the Network found that a house built to 2012 codes for energy efficiency would cost an average of $1,494 to $2,201 more than one built to the 2009 standards.

However, the 2012 house will see an average energy savings of $296 to $392 per yearannual savings that would increase as energy prices climb.

Easier-to-heat-and-cool houses mean less stress and maintenance on HVAC systems, plus the cherry on top: cozier homes.

4. Living in much safer housesCodes make houses more resistant to fires, storms, earthquakes, and other disasters. Stronger, more disaster-resistant homes last longer with less maintenance and fewer repairs than comparable homes built without guidelines, saving money in the long run.

Not only that, but those stronger homes benefit the surrounding community. With less storm damage, post-disaster cleanup is easier and there’s less burden on city services. That helps keep municipal budgets under control and translates to less property tax for homeowners.

In fact, studies from Texas A&M University and the National Science Foundation have found that every dollar spent on stronger wind and earthquake protection returns $3 to $16 in savings to the community.


What Does a Homeowner Need to Know About Codes?You can’t be expected to have an encyclopedic knowledge of building codes. But even if you’re hiring a general contractor, you should check with your local building department for information and advice on your project, including:
 – What codes directly affect the work
 – What permits are required
 – What’s required for plans and how to submit them
Your building department may have brochures that’ll guide you through the permitting and inspection process.

If You’re a DIYer or Acting as Your Own General ContractorBeing your own general contractor or doing all the work yourself shifts the burden of code knowledge over to you. If you’re inspected and not up to code, you might face an expensive tear out and redo.

If you try to sidestep codes (and permit costs) and get caught, you could be fined. For example, the city of Clarkstown, N.Y., recently proposed revamping fines for code violators, charging up to $15,000 and requiring jail time for repeat offenders.

Head off unknown code snafus by chatting up your project with your building department. Ask what codes affect your project, and where to get instruction for compliance. Think of your remodeling permit cost as payment for that know-how.

Why Do Building Codes Change?Codes change in response to new building technologies, new construction methods, new materials, and society’s needs. That last is important because the needs of society often trump the added expense a code change might cause a builder or homebuyer.

Building codes are changing at a more rapid pace than ever, notes Glenn Mathewson, a Colorado building inspector and certified master code professional.

“The 2000 IRC was about 560 pages,” he says. “The 2012 version is about 968 pages. New products, new technologiesin my opinion, we are close to being overwhelmed by code changes.”

How Have Building Codes Changed Our Homes?Headlining societal topics that have caused significant changes to building codes over the past 10 years include:

Water conservation: low-flow toilets, faucets, and shower heads; irrigation restrictions in times of drought.

Pollution reduction: particulate emission standards for wood-burning stoves; restrictions on open burning; reduced VOC allowances for materials, paints, and other finishes.

Ergonomic safety and convenience: increased illumination; smoke and carbon-monoxide detectors; stair construction and handrail design; emergency egress.

Preventing damage from storms and other disasters: High-performance, wind-resistant materials such as roofing and windows in areas at risk for storms; bracing and metal framing straps required in high-risk areas; earthquake proofing; flood prevention techniques.

Fire: Outlawing wood shake roofs in fire-prone areas; mandating fire-resistant doors between garages and houses.

Saving energy: new standards for insulation values; ductwork sealing; light bulb efficiency.



Other changes on the horizon:
 – Higher standards for energy performance in new houses
 – Better performance standards for wind and storm resistance
 – More restrictions on the amount of volatile organic compounds (VOCs) being emitted from building materials
 – Energy crediting for alternative energy sources

It’s a good bet that if you proactively upgrade your home to meet or exceed current standards in any of these areas, you’ll be making a solid investment.

Related:
____________________________________
John Riha wrote this article appeared on National Association of Realtors® web site and is used with permission. He has written seven books on home improvement and hundreds of articles on home-related topics. He’s been a residential builder, the editorial director of the Black & Decker Home Improvement Library, and the executive editor of Better Homes and Gardens magazine. Follow John on Google+.

Visit Houselogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.


Andy Kalinowski is a REALTOR®, an Accredited Buyer’s Representative®, a Short Sales and Foreclosure Resource® and a Military Relocation Professional with CENTURY 21 Doris Hardy and Associates, LLC in Columbus, Mississippi. He has a Mississippi Real Estate license. Andy is also a member of the National Association of Realtors®. Contact him by cell (or text) phone – 662.549.3421 or by e-mail – andyk@dorishardy.com.  He is also available for web video chat.

Wednesday, July 15, 2015

Inexpensive Foreclosures May Cost A Lot

Every real estate buyer has a common goal. They want a bargain. Do not tie the word bargain to a dollar sign. Retail stores can offer bargain prices but the housing market is different. Here it is important to join a dollar sign with the condition of the house. Let’s offer some advice to anyone wanting to buy a foreclosed property and literally save money.

Know The Type Of Foreclosure – There are two different types of foreclosures. One type of foreclosure allows anyone to purchase a house just by paying the back taxes. This is a tax sale. There is a notice of tax sale printed in the local newspaper and posted to the bulletin board at the court house. The county runs these sales. Real estate companies never get involved in any way. Real estate companies have no access to these properties and they have no information about the condition.

A more common type of foreclosure is a bank foreclosure. Here the owner failed to make mortgage payments over a long period of time. The bank pays the taxes to keep the county happy. The bank then sells the property at the fair market value, based on condition. Banks selling foreclosed houses normally hire two or three appraisers with knowledge of the local market for an opinion on the market value. The bank hires a local REALTOR® to market the property and find a buyer.

Also understand that a foreclosure is different from a short sale. In a short sale, the seller still lives in the house. The reason for the sale is to avoid foreclosure, so they sell short of the mortgage balance.

Move In Ready – Seldom does a foreclosed house offer the buyer the luxury of being move in ready. Most require some work. Before deciding to write a purchase offer, it is a good idea to bring someone with extensive knowledge about repairing a house. Whatever the repair estimate, it is a good idea to increase that estimate by 50 percent. The increase actually budgets for unexpected repairs that often times remain hidden behind the walls. It’s only during the renovation process that these deficiencies become visible.

Even though a buyer may have the technical ability and the time to make some or all of the repairs, there is another factor to consider.  Most mortgage lenders and insurance companies will not let a non-licensed handyman make electrical or plumbing repairs. The reason is safety. If a lender does allow a buyer to make repairs, also be aware that there is a “clock” on project completion. Rolling the repair costs into the mortgage is a more cost effective way to pay for the repairs.

Check Financing – Most lenders pre-approve a buyer to purchase a move-in ready house. If planning to buy and renovate, tell your lender before writing an offer. The reason is to be sure that the mortgage rules allow for this type of purchase. It is a mistake to think it’s possible to buy a foreclosed home on a mortgage and then make the repairs paying cash. Lenders want the buyer to move into the house immediately upon closing. This reduces the possibility of default. Why?

When a buyer believes they can make a repair, only to find out that all absolutely necessary repairs exceed the budget or technical ability, a buyer could simply say “I quit,” and leave the house in even worse shape than they purchased it.

Smart Repairs – Don’t get too carried away with making improvements to a foreclosed house. Make only cost effective repairs. Let’s provide a hypothetical example. Suppose a foreclosed house sells for $100,000 in a $125,000 neighborhood. If the total repair costs exceed $25,000 the buyer improved the house beyond the fair market value for the neighborhood.  However, if the repairs only cost $15,000, then the buyer has an $115,000 house in a $125,000 neighborhood. That is smart.

Consider Alternatives – It may be possible for a home buyer to find a move-in ready home in that same neighborhood for $110,000. That $110,000 is actually less expensive than buying a $100,000 and making $25,000 in repairs. That is why making a dollar sign as the sole “bargain” point is unwise and may be a very costly mistake.

Your REALTOR® has plenty of advice on what brings the best value, based on the individual needs of the buyer.
_________________________________

Andy Kalinowski is a REALTOR®, an Accredited Buyer’s Representative®, a Short Sales and Foreclosure Resource® and a Military Relocation Professional with CENTURY 21 Doris Hardy and Associates, LLC in Columbus, Mississippi. He has a Mississippi Real Estate license. Andy is also a member of the National Association of Realtors®. Contact him by cell (or text) phone – 662.549.3421 or by e-mail – andyk@dorishardy.com.  He is also available for web video chat.

Tuesday, July 14, 2015

What Is On A Credit Report?

Each month a bank sends their customers a statement. Most people check that statement to insure it is accurate. It is a wise consumer that periodically reviews his or her credit report. It is unfortunate when a simple mistake can deny a person with good credit something they really want. However simply checking the credit score is about the same as only looking at the ending balance on a bank statement. Take a few minutes to read the entire credit report – from the very top to the very bottom. That is exactly what lenders do. Let’s see what a lender reviews.

Who Are You – Reviewing a credit report at the beginning means starting at very top. Carefully review every piece of identification information. This may sound trite but incorrect identification information could be the key to explaining those unexpected surprises on the credit score.

Check the spelling on the name, address (including city and state). It is an easy typographical error to think someone lives in Massachusetts (MA) or Maryland (MD) rather than Mississippi (MS). Those letters are next to each other on the keyboard.

It is even easier to transpose the numbers in a street address, especially when the house or box number has three or more digits. If long numbers lend themselves to administrative errors, then think about that all-important 9-digit number called the social security number.

Here is the most common problem associated with inaccurate identification information. It slows down the loan processing time. That is because the identification information on loan application versus on the name on the credit report does not match perfectly.

Take the time to review the identification information on each and every credit report. It may be the best investment of a minute or two ever possible.

Validate Credit Limits And Balances – Here is the meat and potatoes of the review. The importance of accuracy credit limits and balances is paramount. That is because lenders weigh the amount of available credit versus the amount of used credit.  Let’s provide an example.

Suppose a credit card has a $500 credit limit. The unpaid balance is $400. This borrower used 80 percent of the available credit. Lenders look unfavorably at this. It’s important to reduce this debt as quickly as possible.

The same person has another credit card. The credit limit on this card is $5,000. The unpaid balance is $1,000. Lenders look favorably on this because the credit card holder shows borrowing restraint. This is still true even though the $500 versus $400 example in the previous paragraph is true.

Why would someone have just a $500 credit limit? Perhaps it is a merchant specific card that enabled a customer to make one of those famous, “(whatever the period)-days same as cash” purchases.

Who Is Looking At You – Whenever anyone requests a credit check, each of the three major credit reporting agencies enters that inquiry on the credit report. A routine check never does real damage to a credit report.

The condition to guard against is a credit check by an unauthorized agent. This could signal identity theft or at least a breach in privacy. There could be another unfavorable condition.

If there are repeated credit inquiries by different people that sell nearly the same product, such as a car or electronic appliance, a lender could rationalize that a person is going on a spending spree.

Be aware of who is requesting credit information and for what reason. Make calls or write to anyone requesting credit information without your knowledge or consent. If necessary, contact the credit card company and discuss a temporary deactivation of the credit account or changing the account number.

Delinquent Information – There are times when it becomes financially impossible to repay a debt on time. When this happens be certain that the credit report contains accurate information, even it is unfavorable to the borrower.

Be prepared to explain and fully document the reasons for late payment. One or two late payments probably will not derail any mortgage or loan. Lenders look for patterns. It is common for some lenders to forgive debt, especially if the borrower is honest and forthcoming about the reason for the delinquency. In this day and age, lenders want written proof.

What’s In The Public Record – There are some events recorded for the public to see. A common example is a marriage license. It’s constructive notice to the world of a legally performed marriage. There are other events recorded also. These include divorce, child support, liens, foreclosures, bankruptcy, or other judicial findings that award or penalize someone financially.

Hopefully this section of the credit report is blank. If there is information, be certain that it is about you and not someone else.
____________________________________

Andy Kalinowski is a REALTOR, an Accredited Buyer’s Representative®, a Short Sales and  Foreclosure Resource® and a Military Relocation Professional with CENTURY 21 Doris Hardy and Associates, LLC in Columbus, Mississippi. He has a Mississippi Real Estate license. Andy is also a member of the National Association of Realtors®. Contact him by cell (or text) phone – 662.549.3421 or by e-mail – andyk@dorishardy.com.  He is also available for web video chat.

Monday, July 13, 2015

The Questions Some Home Buyers Have

The purchase of a home is the largest and most complicated financial transaction most people ever make. No matter if this is a first purchase or subsequent purchase, the questions remain.

Should I Buy? – There are times when renting makes more sense. There is no crystal ball that accurately predicts the future. However, there are a few general guidelines to follow.

How long does the potential buyer plan to remain in the community? If the answer is for at least four years, then buying might be the right decision.

Are there going to be major changes to the household? Forecast future changes in household size as a result of marriage, births or children leaving home.

There are multiple on-line mortgage calculators to compare rent versus a mortgage payment.

What Is The Neighborhood Like? – This is a difficult question to answer because different people have different values and interests. Factors like “quiet” or “safe” mean different things. As an example, one person may feel the neighborhood is very noisy because of a nearby railroad track. Another person might realize the train only comes through once or twice a day and never in the middle of the night.

It is best to drive through the neighborhood at various times of the day and night and on different days of the week. Drive through during different weather conditions.  Talk to the neighbors. Seldom does a neighbor have a financial stake in the transaction.

Make an appointment to visit the local schools. Determine the commuting time to work. Find the location of quality of life services such as medical care, religious activities, shopping, restaurants, and entertainment venues.

Are Property Values Increasing or Decreasing? – The buyer’s agent can provide general insight into direction of property values. Many factors affect property values. What is the neighborhood market activity? What is the general neighborhood appearance? How do individual owners maintain their houses? Are the any foreclosures that could affect property values?  Again, there is no accurate crystal ball.

Is There A Way To Determine A Fair Price For The House? – A buyer’s agent has the ability to prepare a comparative market analysis (CMA). A well-prepared CMA gives a buyer a lot more information than just a fair price.

A CMA contains supply and demand information for comparable houses. The term comparable house means a lot more than just comparing house of nearly identical square footage. The fair market value for a house in pristine condition might be twice that of a house built at the same time and almost identical in size but in need of repairs or updating.

What Will The Seller Take? – Don’t ask this question verbally. It’s a waste of time.  Verbal offers lead to confusion and disappointment. Ask it in writing. Writing means on a formal purchase offer. That’s because there are a lot of things on a purchase offer for a seller to consider other than a number with a dollar sign in front of it.

When does the buyer want to close the transaction? Does the buyer have to sell something before they can buy this house? What happens if another buyer appears who has nothing to sell? How much earnest money does the buyer bring?  Did a reputable lender pre-approve the buyer for this purchase amount? What is the amount of seller concessions? Does the buyer expect the seller to repair deficiencies identified by a home inspector? What is the financial limit of those repairs? Does the buyer want a home warranty?

Each of those is a very important piece of information that the seller needs to know before making a decision. The written purchase offer spells all of that out. A counter offer contains this phrase, “The seller finds all the terms and conditions on the purchase offer acceptable except”. The written offer and counter offer defines what is acceptable and what is not. A verbal offer leaves too much unknown.

Is There A “Rent To Own” Option? – Rarely is this an option. No bank is willing to rent a foreclosed house. They want the house liquidated and off their books quickly. In an estate sale, a probate judge normally sets a date to have the estate liquidated and settled. Most property owners must sell one house and pay off the existing mortgage before they can buy another home. In each of these Instances, the “rent to own” option does not exist.

It never hurts to ask. Keep in mind the likelihood is probably less than five percent. Also remember that all “rent to own” sellers want a very short period to finalize the purchase – not more than one year so a tenant has time to get their mortgage pre-approved. There is no such thing as a 30 year rent-to-own.
______________________________

Andy Kalinowski is a REALTOR®, an Accredited Buyer’s Representative®, a Short Sales and Foreclosure Resource® and a Military Relocation Professional with CENTURY 21 Doris Hardy and Associates, LLC in Columbus, Mississippi. He has a Mississippi Real Estate license. Andy is also a member of the National Association of Realtors®. Contact him by cell (or text) phone – 662.549.3421 or by e-mail – andyk@dorishardy.com.  He is also available for web video chat.

Friday, July 10, 2015

Few Activities in Columbus, Mississippi This Weekend

It’s the middle of the lazy, crazy days of summer. School is out for another few weeks. Many are enjoying a summer vacation. That means there are just a few activities this weekend in Columbus and Lowndes County, Mississippi. Let’s take a peek and find out what they are.

Let’s venture to the extreme southwest part of Lowndes County. It’s the 8th annual Crawford Cotton Boll Festival along Main Street, just west of US-45 Alternate on Friday evening and all day Saturday. Enjoy food, crafts, games for the children plus entertainment. In addition there is a “back to school” drive for school supplies and a free-style and step toe dance competition. Big Joe Shelton, Caldwell Singers and Clark Family are just part of the musical entertainment.

The Hitching Lot Farmer’s Market on Second Street and Second Avenue North is open for business as usual. Purchase the freshest in locally grown produce and homemade jellies, bread and even lemonade. The phrase "locally grown" means within a 50-mile radius of Columbus. That is a requirement to sell at the Farmers Market that a roadside vendor cannot make.

Reid Nevins with 4H will be there for advice, provide ideas and answer questions. The market opens at 7:00 a.m. Saturday. It is also open Monday after work and Thursday before work.

Does anyone have a housing need this weekend? Make a private preview appointment at least 24-hours in advance by contacting your REALTOR®.
_________________________________________

Andy Kalinowski is a REALTOR®, an Accredited Buyer’s Representative®, a Sales and Foreclosure Resource® and a Military Relocation Professional with CENTURY 21 Doris Hardy and Associates, LLC in Columbus, Mississippi. He has a Mississippi Real Estate license. Andy is also a member of the National Association of Realtors®. Contact him by cell (or text) phone – 662.549.3421 or by e-mail – andyk@dorishardy.com. He is also available for web video chat.

Thursday, July 9, 2015

Hidden Costs of a Two-Story Addition

A two-story addition project is fraught with cost variables. Here’s how to anticipate the hidden costs and stay on track.

The perception of a two-story addition is that of a complex and expensive project fraught with “hidden costs” that will bust your budget. In truth, most of those costs are in plain sight if you identify and manage them early in the planning process. Others, such as surprise (but necessary) repairs, financing fees and loan interest, increased insurance premiums and property taxes, and fluctuating building materials prices, are less obvious or upfront, but can certainly affect your finances. Here’s a rundown of where hidden costs might be lurking.

The remodeling contract – The first place to watch for hidden costs is in your remodeling contract. Be sure to demand a fixed-cost contract that includes a detailed scope of work, a change-order policy, and a firm price that you’ve agreed to.

This type of contract does not include contingencies or allowances for “unforeseen” expenses, such as dry-rot exposed during demolition. It is the responsibility of the contractor to evaluate those possibilities beforehand and account for them in the contract.

If you don’t have a fixed-cost contract, additional work may add as much as 10% to your final cost — money you didn’t expect to pay. Similarly, a fixed-cost contract prevents paying unforeseen charges for building materials when prices rise unexpectedly during the construction process.

Those increases can be significant. Consider that between 2000 and 2009, the price of construction materials in general increased more than 36%, and 7.2% between 2008 and 2009 alone, according to the Bureau of Labor Statistics.

Specifically, recent fluctuations in big-ticket items such as structural lumber (up 63.6% within the first three months of 2010, compared to its 2009 year-end price), concrete (a 44.8% boost this decade), and asphalt roofing shingles (up 24% in 2008 and 18% in 2009), can hinder your efforts to stay on a financial track — and are reason alone to demand a fixed-cost agreement that locks in the cost of the materials for your project.

Be sure your contract has a change-order policy that spells out costs for any alterations to the project that you specify after the contract is signed. This protects the contractor, and also gives you a clear idea of what it will cost if you change your mind about aspects of the project.

Architectural fees – The cost for an architect to craft a two-story addition that integrates seamlessly into your existing home may be 15% of your total construction costs. If your budget is based solely on the cost of construction, you’ll need to account for the design fees as well.

Some construction outfits include design capabilities. These design-build firms fold the architectural fees into the construction budget, usually at a discount because you’re hiring them for the entire process. Nevertheless, you’ll still have to account for the cost of the design.

Related fees may include engineering services required by your local building authority, such as having a soils engineer evaluate steeply sloped yards, and areas where shifting or expansive soils are problematic. Specific costs vary, but additional testing runs $250 to $3,000.

Finance charges and loan interest – If you secure a loan for all or part of your addition, you’ll likely face loan origination and processing fees of about 1% to 2% of the total loan amount. The lender also may require appraisal and inspection fees, which will cost about $300 each.

In addition, any loan terms will include interest you’ll pay against the principal balance. As an example, let’s say you finance your $156,000 two-story addition project with a $115,000 home equity loan and $41,000 in cash. You decide to add those amounts to what you already owe on your existing mortgage.

If your existing mortgage is $160,000, the result is a refinanced mortgage of $316,000. A 30-year loan with a fixed interest rate of 5.15% will result in about $305,000 of interest paid over the life of that loan.

Increased insurance premiums – Your annual home owner’s insurance premium will (and should) go up as the result of any significant addition.

For reference, a $275,000 house with a $434 annual insurance premium will likely see that premium jump 50% or more, to about $650 per year, based on a $156,300 room addition. That premium is calculated with a 125% replacement value for the now-$431,300 home, which accounts for increases in construction labor and key materials costs — a calculation that should be revisited at the policy’s annual renewal.

Higher property taxes – Expect to pay higher property taxes when you add living space to your home. Typically, the value stated on the building permit application for the room addition will be added to your home’s valuation for the next tax year, thus increasing your annual property taxes.

An exact amount is difficult to estimate because other variables work into assessing the value of your home from year to year, such as fluctuations in the overall housing market. For instance, a 2007 room addition project in Boise, Idaho, that increased the home’s assessed value by 31% boosted its next year’s property tax by nearly 43%; a room addition project of similar value in 2002, however, increased that home owner’s property tax bill by only 15% the next year.

Landscaping repair – A two-story addition will no doubt affect your home’s landscaping. The new space itself will replace turf, shrubs, flower beds, and/or trees (and perhaps the cost to remove those features), while daily construction work — from foot traffic to heavy machinery and materials staging — takes its toll on what remains.

While there is no magic number for such costs, you can expect to pay hundreds to thousands of dollars to have landscaping restored around the sizeable footprint of a two-story addition. Limit the damage — and subsequent cost — by cordoning off a path to the job site and a staging area for materials. Also, create an allowance of several hundred dollars to put your yard in proper shape once the job is done.

Delayed decisions – Arguably your most important job as a client is to make informed decisions in a timely manner to help keep the project on track. That’s because some materials and products must be ordered in advance to arrive on the job site within a small window of the contractor’s overall schedule. Let those deadlines pass, and you risk delays or rush charges to make up the time.
____________________________________
Rich Binsacca wrote this article appeared on National Association of Realtors® web site and is used with permission. He has been writing about home improvement since 1987. He is the author of 12 books on home-related topics, is a contributing editor for Builder and EcoHome magazines, and has written for Remodeling, Home, and Architectural Record.

Visit Houselogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.


Andy Kalinowski is a REALTOR®, an Accredited Buyer’s Representative®, a Short Sales and Foreclosure Resource® and a Military Relocation Professional with CENTURY 21 Doris Hardy and Associates, LLC in Columbus, Mississippi. He has a Mississippi Real Estate license. Andy is also a member of the National Association of Realtors®. Contact him by cell (or text) phone – 662.549.3421 or by e-mail – andyk@dorishardy.com.  He is also available for web video chat.