At face value, the term short sale seems obvious — the sale of the house is short/quick. But in reality, short sales may take months and even years to close.
A short sale happens when money from the selling property fall SHORT of the debt (e.g., mortgage, liens) owed against the property.
In today’s market, when short sales happen it’s often because people either purchased their home or refinanced their mortgage when the market was high. Now that housing prices have decreased, when they go to sell the house they cannot afford to repay the debt, and the lien holders (e.g., bank, mortgage company) agree to accept less than the amount owed. The amount owed, or unpaid balance is known as a deficiency.
A short sale agreement does not necessarily release borrowers from repaying the debt and will often result in a negative credit report against the homeowner.
And as a buyer, a short sale may be a great purchase, but does not necessarily mean that you’re always getting a deal.
When trying to justify renovation ideas for our next project, I came across the 2011-2012 Remodeling Cost vs. Value National Report — which compared the average cost for 35 remodeling projects with the value they retain at resale.
While it was great to see statistics on the most cost-effective improvements (top five pulled out below), I also asked myself a couple of questions:
- Is the house in need of any “critical” updates? I suppose if the roof is leaking, and the septic reeks no one will want the house despite its great kitchen.
- Are the improvements we’re planning to make in-line with other “like” homes? Do we really need granite counters and inlay cabinets when our competition doesn’t have them?
- Are there any “curb appeal” issues with the home that can’t be fixed? If the house isn’t already yours, something things to consider could be the size of the yard and proximity to the street.
_ _ _ _ _ _ _ _
1. Replacing the entry door to steel
- Estimated cost: $1,200
- Cost recouped at resale: 73%
2. Attic bedroom (converting unfinished attic space into a bedroom w/ bathroom & shower)
- Estimated cost: $50,000
- Cost recouped at resale: 72.5%
3. Minor kitchen remodel (new cabinets / drawers, countertops, hardware & appliances)
- Estimated cost: $19,000
- Cost recouped at resale: 72.1%
4. Garage door replacement
- Estimated cost: $1,500
- Cost recouped at resale: 71.9%
5. Deck addition (wood, not composite)
- Estimated cost: $10,500
- Cost recouped at resale: 70.1%
Charlie driving us around to look for our next house.
But you sure as hell judge a house by its cover. So, what exactly did we do to fix up the outside of this lovely house?
- Filled the missing section of the driveway in with cement
- Installed new vinyl siding
- Switched out the old windows with new energy-efficient windows
- Replaced the roof
- Filled in the storage cellar and created a patio where the roof once stood
- Cleared out the front and back yards
- Leveled/seeded the front and back yards
- Finished the front walkway, and built steps to access it (novel idea)
- Installed new garage doors
We thought the sight of Bunker Hill couldn’t get any worse…and then we walked inside:
-The previous homeowner was a hoarder. We’re talking 5 refrigerators packed with expired canned food, books/newspapers dating back to the 70s, old tires (I mean because who doesn’t collect tires), machinist tools…
-The kitchen / bathroom desperately needed to be updated — 70’s gone wrong
-Scuffed hardwood floors barely visible through the clutter
But through all of this, what my dad saw was a solid structure, a great price and the perfect location.