One of the most exciting opportunities today for loan officers and real estate agents alike is the opportunity to sell off the glut of foreclosed homes on the market. However, a big problem with these potential deals is that since people are losing their homes because they can’t make the payments – unfortunately, they often have lacked the money for routine maintenance or repairs as well. Subsequently, once foreclosed upon, those homes hit the market needing some serious sprucing up!

But there’s a solution:

FHA’s Streamlined 203(k) program permits potential homebuyers to finance up to an additional $35,000 into their mortgage to improve or upgrade the home they are buying before move-in. With this new product, homebuyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser.

How Does It Work?

It used to be that you bought a home and then applied for a home equity loan to fix it up, resulting in two loans. But many lenders won’t make rehab loans. Some won’t fund equity loans at closing, especially if there is no equity.

• A Streamlined 203K loan is figured into the original loan balance, resulting in one loan.
• It can be an adjustable-rate or fixed-rate mortgage.
• The mortgage balance can exceed the purchase price of the property.
• Borrowers are not required to hire professional consultants, licensed engineers or architects.
• Lenders will appoint a Licensed Contractor to coordinate with the appraiser or home inspector to put together a list of recommended repairs / improvements.

Who is Eligible?

• New Home Buy (New Purchase)
• Existing Home Owner (Refinance)
• What Properties Qualify?
• One-to-Four, Single Family Residences (including HUD REO Properties)

What Type of Repairs & Improvements Are Eligible?

• The Streamlined 203K loan allows for simple repairs that can be easily estimated and completed.
• Many are considered light cosmetic repairs, but some will require hiring a licensed contractor if it falls out of the borrower’s area of expertise.

Painting and Repairs

Eligible Repairs & Improvements from HUD:

• Roofs, gutters and downspouts
• HVAC systems (heating, venting and air conditioning)
• Plumbing and electrical
• Minor kitchen and bath remodels
• Flooring: carpet, tile, wood, etc.
• Interior and exterior painting
• New windows and doors
• Weather stripping & insulation
• Improvements for persons with disabilities
• Energy efficient improvements
• Stabilizing or removing lead-based paint
• Decks, patios, porches
• Basement completion and waterproofing
• Septic or well systems
• Purchase of new kitchen appliances or washer / dryer

Special Conditions & Terms

• No minimum loan balance required.
• Borrowers must occupy the property.
• Property cannot be vacant for more than 30 days.
• Work must be completed within six months.
• Work must be professional.
• If job requires a permit, borrowers must get a permit and a sign-off.
• Work must commence within 30 days from closing.

Repairs Not Permitted

• Landscaping or yard work
• Major remodeling
• Moving a load-bearing wall
• Room additions or add-ons to the home
• Fixing structural damage

Requirements to Perform Work

• Borrowers can select among licensed contractors.
• The lender will review the contractor’s experience, background and referrals.
• The lender will want a copy of the contractor’s estimate and the agreement between the contractor and borrower.
• Borrowers can also arrange to do some or all of the work under a “self help” arrangement.
• Do-it-yourself projects require providing the lender with documentation supporting the borrower’s knowledge, experience and ability to perform the necessary work.

Links for further information:

HUD

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/203k/203kabou

FHA Loan Program Blogline

http://faq.bloglines.com/ref/FHA-Loan-Program.html

Open floor plans: Homeowners continue to favor large, open spaces and less-formal rooms. Those with dining or TV rooms separated from the kitchen are removing walls to create “great rooms” like the ones you’ll find in so many newly built homes.

Creating an open floor plan, like the above recent remodel, which opened up the old kitchen, seems to have a lot of staying power.

This is a trend that is becoming a timeless design as more families are spending more time at home cooking and entertaining within their own walls.

Bare floors: People are ripping out their carpeting and installing harder floor surfaces, such as ceramic tile, hardwood or engineered wood, and laminates. The hard surfaces are easier to keep clean, more stain repellent and less likely to collect dust. One exception: the bedroom, where carpet is still a popular choice.

Simpler designs: Less is more in 2011. Homeowners are getting back to basics with clean, simple, timeless designs that create a comfortable home that is less ornate and easier to maintain.

They are choosing updated products and styles that are affordable and functional.

Universal designs: People are considering how their remodel will affect them in their mature years. Bathroom remodels may include the installation of grab bars, curbless showers, wider doors, higher toilets and taller vanities. Whole house remodels focus on main-floor living, where at least one bedroom and bathroom are on the same level as the kitchen and laundry room.

Going green: How green a homeowner gets depends on how much he is willing to spend for upgrading to energy-efficient or environmentally-friendly products.

Still, more people are considering such products as tankless water heaters, dual-flush toilets, and super-insulating materials to conserve resources and money.

Reuse: While energy efficient products may still be out of reach for some homeowners, the trend of reusing products is not.

If you’re replacing your kitchen countertops with something higher-end, perhaps you can use that old laminate counter in a craft room or laundry room. When expanding your patio, you might be able to mix old concrete with new and embellish the look with new furniture and accessories. In remodeling, reuse definitely trumps recycling.

Muted colors: Dusty blues, muddy browns and muted purples are pushing greens, golds and bright colors from indoor and outdoor design palettes.

Homeowners are gravitating toward calm, comforting colors and are embracing such shades as gray, eggplant, taupe and earth tones. These are more timeless colors that won’t go out of style too quickly.

Phasing a project by getting a master plan and doing projects in phases can soften expenses and relieve inconveniences.

There is a theme with these remodeling trends: They either reduce spending or add value, longevity and durability. It’s likely it is the new economy that is driving these home-improvement trends.

When times are tough, we tend to choose practical products that will last a long time and won’t go out of style tomorrow.

The economy has changed the way we think, which is a good thing.

Even though it has taken some adversity to get our attention, we are glad to see sustainable, timeless designs and smart products finally making their way into the mainstream.

Expect to see this new inspection item in your home inspection report. Home inspectors will be required to report on the presence or absence of a working Carbon Monoxide detector just like they report on Smoke Detectors, and water heater strapping.

Since the bill also requires that the presence or absence of these devices must be disclosed when residential real estate is transferred, Home Buyers and Sellers will also see this new requirement on Transfer Disclosure Statements.

About Carbon Monoxide

You can’t see it, taste it or smell it. Known as the “silent killer,” carbon monoxide (CO) is the leading cause of accidental poisoning deaths in America. Any time a fuel-burning appliance malfunctions or is improperly installed, CO can seep into the home, leading to injury or even death.

Installation of Carbon Monoxide Alarms

Alarms should not be installed directly above or beside fuel-burning appliances, as appliances may emit a small amount of carbon monoxide upon start-up. A detector should not be placed within fifteen feet of heating or cooking appliances or in or near very humid areas such as bathrooms.

Installation locations vary by manufacturer. Manufacturers’ recommendations differ to a certain degree based on research conducted with each one’s specific detector. Therefore, make sure to read the provided installation manual for each detector before installing.

It is recommended that a carbon monoxide detector be installed on every floor of your home, including the basement and should be centrally located outside of each separate sleeping area in the immediate vicinity of the bedrooms.

Battery-only carbon monoxide detectors tend to go thru batteries more frequently than expected. Plug-in detectors with a battery backup (for use if the power is interrupted) provide less battery-changing maintenance.

Some CO detectors are available as system-connected, monitored devices. System-connected detectors, which can be wired to either a security or fire panel, are monitored by a central station. In case the residence is empty, the residents are sleeping or occupants are already suffering from the effects of CO, the central station can be alerted to the high concentrations of CO gas and can send the proper authorities to investigate possible carbon monoxide poisoning.

It is illegal for an unlicensed person to perform contracting work on any project valued at $500 or more in labor and materials. A license is not required to advertise and complete jobs valued at less than $500, but the advertisement must state that the individual is not a licensed contractor. Besides being illegal, unlicensed contractors lack accountability and have a high rate of involvement in construction scams. They also are unfair competition for licensed contractors who operate with bonds, insurance and other responsible business practices.

Unlicensed contracting is part of California’s estimated annual $60 to $140 billion dollar underground economy. These individuals do not pay taxes, don’t have insurance or bonds. Consider the financial liabilities you might face before hiring an unlicensed, uninsured operator or a licensed contractor who does not carry the proper workers’ compensation insurance.

Always verify and hire a licensed contractor for residential home repairs.

How do I find the right licensed contractor?

These steps highlight some of the different things you can do to help you find the right licensed contractor.

Make sure the contractor is licensed.
All contractor advertisements, whether it be an ad in the phone book or newspaper, a flyer that shows up at your front door, or the company’s name on the side of a truck, must have the contractor’s state license number. You can check license status on-line or call 1-800-321-CSLB (2752).

Shop around before hiring a contractor.
Get at least three written bids on your project, and make sure you’re comparing bids based on identical plans, specifications and scope of work. Do not automatically accept the lowest bid. In fact, you should beware of any bid that is substantially lower than the others. It probably indicates that the contractor made a mistake or is not including all the work quoted by his or her competitors. You may be headed for a dispute with your contractor if you accept an abnormally low bid. It is also possible that this contractor will cut corners or do substandard work in order to make a profit on the job.

Although an unlicensed operator may give you a low bid, the risks of possible financial and legal consequences you may face outweigh any benefits a lower bid may seem to offer.

Ask for personal recommendations.

Friends or associates may have recently had similar projects completed. If they are satisfied with the results, chances are you will be too. Other good reference sources include local customers, material suppliers, subcontractors, and financial institutions to check whether the contractor is financially responsible.

Verify the contractor’s business location and telephone number.

A contractor who operates a business out of the back of a pickup truck with a cellular telephone may be difficult to find to complete a job or fix something that has gone wrong after the last bill is paid. You can find a licensed contractor’s “address of record” on this website when you look up their license status.

Verify the contractor’s workers’ compensation and commercial general liability insurance coverage.

Ask to see a copy of the certificate of insurance, or ask for the name of the contractor’s insurance carrier and agency to verify that the contractor has the insurance.

In California, if a contractor has employees, they’re required to carry workers’ compensation insurance. The importance of this cannot be overstated. If a worker is injured working on your property and the contractor doesn’t have insurance, you could be liable to pay for injuries and rehabilitation. Your homeowner’s insurance may or may not cover those costs. You should check with your insurance carrier to make sure the workers’ compensation insurance coverage being provided by the contractor is adequate. Learn more from the California Department of Insurance.

Commercial general liability insurance is not required, however, it covers damage to your property. If the contractor does not carry general liability insurance, they should be able to explain how they would cover losses that would ordinarily be covered by insurance. If your contractor damages your property and doesn’t carry commercial general liability insurance, you or your insurance policy could end up paying for damages.

Winterized Notice

Why Winterize?

If you or a client has a vacant home on the market this winter, careful decisions need to be made to prevent expensive repairs from frozen plumbing. Last spring we inspected an unusually high number of homes with damaged plumbing (or worse) due to lack of, or improper winterization. One client spent well  over $3,000 on plumbing repairs, and then more to repair the walls, ceiling, and flooring that were damaged by water and the process of replacing the pipes.  Such water damage can also be a breeding ground for mold spores. See our previous blog about mold, “Got Mold?”.

The simplest solution and least  risky alternative to winterizing is to leave the heating  system running at a minimum setting (with the water  turned off of course). Though it might seem like a waste of money or energy at first glance, a minimal heating  bill will be less expensive than the cost of potential repairs if everything were to freeze up. Also, the rigors of  extreme winter temperatures and low humidity in a  winterized home stress the interior of the house  and the appliances. Wood trim and furniture dry out, and seals in appliances can dry and crack.

It is always prudent to turn off the  main water supply or well pump whenever you will be gone  from the home for even a day or two. On properties with  a well, a major leak can cause the well pump to simply  run itself to death in your absence, also causing  significant water damage.

On the other hand, exposed plumbing in some crawlspaces, or plumbing in homes with no central  heating may be at risk. In the case of older homes that  are poorly insulated and/or unevenly heated (or just  poorly constructed homes), then winterization may be the  safest bet.

Don't Let This Happen To You!!

Who Should Do the  Winterization?

It is true that many homes  are winterized every year without problem, usually by an agent with good intentions or a convenient handyman. However, big repairs bills may result if it is done only half way, or improperly. If a house is to be winterized, we suggest that it done by a professional.

Here are some basic steps needed to properly winterize a  home.

1. Turn Off Water. The  first step is usually easy; locate and turn off the  main water shut off valve, preferably one that is outside. If the property is supplied by a well, then also turn off the breaker to the pump system.
2. Water Heater. After  the water is off, turn off and drain the water heater.  There are a couple of different procedures that could  be followed to accomplish this step. Temperature  controls on gas water heaters should be set to the Off  position, as well as closing the gas valve. Electric  water heaters should be shut off at the breaker. A  faucet or spigot will need to be opened to allow air  to flow in as water is drained out.
3. Drain Supply Lines.  Water then should be drained from the entire water supply system, faucets and fixture shut off valves  left open. If the house is on a well, the pressure tank should also be drained.
4. Blow Out the Water  Supply Lines. Though gravity may be sufficient to drain the plumbing in many  homes, standing water will remain in some  pipes. Though the water is no longer under pressure, this remaining water could freeze and may strain some fittings. CPVC  could be prone to cracking. In extreme cold regions, we  recommend that water be blown out of the water supply lines with an air compressor. Many do-it-yourselfers  skip this step, and most get lucky. If the house is to  be winterized by a handy man or plumber, verify their  level of thoroughness by asking if they blow out the water lines. Using special fittings to connect a compressor to the house plumbing, the water supply lines would be cleared of water by systematically closing and opening faucets and valves starting with  plumbing fixtures most distant from the compressor and working backward.
5. Other Items to Drain.  Water softeners, filters, and water treatment systems may also need to be drained (the brine tank in a water softener can usually be ignored).
6. Anti-Freeze. Once all  the water supply lines are completely empty, flush the toilets until they are empty, then winterize toilets and other drain traps by filling them with a special  non-toxic RV type antifreeze solution (pink in color).
7. Other Appliances.  Keep in mind that water also runs through many appliances such as the washing machine and  dishwasher, as well as the water supply line to the  ice-maker in refrigerators. Each one of these will also need to be drained and/or disconnected. Some professionals also recommend anti-freeze be poured  into the bottom of the dishwasher and washing machine.
8. Turn Off Electrical.  Turn off all electrical breakers to appliances as well as any other unnecessary breakers, and post a reminder note at the panel to make sure the electric water heater and other appliances aren’t turned on before the water is turned on.
9. Heating systems. You wouldn’t think that a furnace would contain water, but  some do. High-efficiency furnaces (also called condensing furnaces) generate a significant amount of  condensation from the water vapor in the flue gases.  These systems, as well as air conditioners, have a condensate drain line. Sometimes the condensate drains  into a floor drain, but if there’s no drain available  the condensate drains into a small pump which pumps  the fluid uphill into the plumbing drain. Though there  is less chance of damage, these should also be looked at.
10. Special Heating  Systems. If the home has any sort of a more elaborate heating  system such as a hot water boiler, heat pump, or  radiant floor heat, then we recommend VERY strongly  that it be handles by a HVAC professional familiar  with these systems. These heating systems  sometimes circulate water instead of a  freeze-resistant fluid, or may interconnect with the plumbing system and/or hot water heater. It  should not be assumed that these systems could simply  be turned off without danger of damage from freezing.
11. Warning. Last of all,  post signs in conspicuous locations (“Winterized – DO NOT  Use Plumbing”).

De-Winterization is Just as Important.
When the house is to be occupied, the entire process must be carefully reversed  (de-winterized), such as turning off faucets and fixture shut off valves before turning the water supply or well pump (otherwise you can be in for a rude surprise).  We recommend you call a professional!

Molds in Homes Can Cause Health Problems and Structural Damage

The home buying and selling community is abuzz with talk about insurance and liability issues involving stachybotrys chartarum, also known as black mold or toxic mold. Some homeowners have even burned down their homes, and everything in them, because they felt it was the only way to eradicate toxic mold from their surroundings.

Juries have awarded huge sums of money to homeowners who initiated lawsuits against their insurance companies, with most awards given to people whose insurer did not pay for moisture-related repairs in time to prevent severe mold problems. Awards have also gone against home builders when juries felt that shoddy worksmanship contributed to the mold.

Most homeowner policies now include a clause that excludes or limits payments for mold-related issues. While mold is a problem, in most instances its growth can be prevented or stopped before it causes excessive damage.

What is Mold?

Molds are fungi that reproduce by releasing tiny spores into the air. Spores that land on moist objects may begin to grow. There are thousands of different types of mold and we encounter many of them every day, in our homes and outdoors.

What is Toxic Mold?

Toxic mold is a type of mold that produces hazardous byproducts, called mycotoxins. While individuals with asthma and other respiratory problems may have reactions to many types of mold, it’s thought that mycotoxins are more likely to trigger health problems in even healthy individuals. These toxins are believed to be linked to memory loss and to severe lung problems in infants and the elderly.

Floating particles of mold are invisible to the naked eye, so it’s impossible to see where they might have landed until they begin to grow. Loose mold particles that accumulate on items within a house are easily inhaled and can be a constant irritation to the people and pets who live there.

The toxic mold we hear most about is Stachybotrys chartarum, a slimy, greenish-black mold that grows on moisture-laden materials that contain cellulose, such as wood, paper, drywall, and other similar products. It does not grow on tile or cement.

Even if the mold in the home is not toxic mold, it can still be a problem, because any mold growing on organic materials will in time destroy them–and too much mold of any type smells bad and degrades air quality.

Mold thrives in damp, humid conditions:

• Bathrooms with poor ventilation. Install an exhaust fan if possible.
• Leaky water pipes. Repair them immediately.
• Roof leaks. Repair them right away.
• Flood aftermath. Repair as soon as possible. See: EPA’s Flood Info
• Clothes dryers and exhaust fans that vent under the house or back into the room. Vent them to the outside.

Got mold?

Flood Damage

Houses that have been flooded are at serious risk for molds, especially in areas when are high humidity and temperatures provide the mold with the perfect place to reproduce before cleanup begins. The houses flooded by the aftermath of Hurricane Katrina–some still sitting in water–are the perfect example of homes that will likely suffer extreme damage from mold.

Help Discourage Mold Growth:

• Install a dehumidifier in chronically moist rooms.
• Don’t carpet rooms that stay damp.
• Insulate pipes and other cold surfaces to discourage condensation.
• Install storm windows to eliminate condensation on glass.
• Cover crawlspace dirt with plastic and ensure that the area is well ventilated.

Professional Mold Removal

If the mold problem is severe you will likely need the help of a mold remediation company, someone who specializes in mold removal.

Before Buying/Selling a Home

In the past, air quality testing was ordered primarily to detect radon gas, but mold spore tests are becoming more common. Home inspectors might not perform mold tests, but can probably help you find someone who does. Mold testing costs vary between $300-$500 dollars.

If mold is in the air, find out where it’s coming from. Mold should be removed and repairs should be made to ensure it won’t come back. Real estate agents or attorneys may determine if a special contingency should be inserted in the contract that will allow you to back out of the deal if toxic mold or other molds are detected and cannot be thoroughly eliminated. Many standard forms used by real estate agents include the option of a mold contingency.

The Environmental Protection Agency (EPA) has changed its regulations for renovation, repair and painting (RRP) activities.  Some of you may already know that as of April 22, 2010, all contractors and renovators must be trained and certified in the EPA’s new lead-based paint work practices in order to conduct RRP activities on pre-1978 housing and child occupied facilities.

Previously, anyone who owned a home built prior to 1978 could opt-out of the lead-based paint rules if no children under the age of 6 or pregnant women would be living in the home.  Now, there is no longer an opt-out option.  If you are renovating, repairing or painting (“RRP”) a home that was built prior to 1978, either the house or the components of the home that are being worked on must test lead free by a Certified Risk Assessor, Lead Inspector, or Certified Renovator, or the lead-based paint work practices outlined by the EPA safety must be followed and you must be certified. Failure to follow these new rules can result in a fine of up to $37,500 per incident of violation. This penalty can be charged as both a civil penalty for failure to comply and a criminal penalty.  That’s a $75,000 per incident violation charge!  Obviously, it is worth your while to comply rather than be found out.   In addition, potential imprisonment for willfully or wantonly ignoring the requirements can be invoked.

Due to the influx of renovators and other workers requiring certification, the EPA has extended a grace period for those who have not yet obtained certification.  The EPA will not enforce its rules against individual renovation workers if the person has applied to enroll in or has enrolled in a training course by September 30, 2010 and has completed the course by December 31, 2010.  Firms will also not be fined for rule violations until October 1, 2010.  However, to be clear, if you are already certified, the EPA can and will be issuing fines for violations.

Who is affected by this lead-based paint regulation change?

Anyone who performs RRP activities for profit is affected by the change in regulations.  This includes property managers, people performing RRP activities to flip a home for profit, real estate agents doing repairs themselves, contractors and renovators.  If you are a Do-It-Yourselfer who is not planning on turning a profit on the property then you are exempt from these regulations.  However, the EPA does still advise to follow the safety precautions that they have outlines as lead-based paint dust is very harmful.  Basically, if you are performing RRP activities that disturb more than 6 square feet of paint indoors and 20 square feet or paint outdoors, then you must be trained and certified by the EPA.

Maybe you have not performed any RRP activities nor are you ever planning to in the future, you may still be affect by this change in regulation.  When selling, renting out, or leasing a home it is now a requirement to disclose any known information about lead-based paint and lead-based paint hazards.  This means that if the space you are renting, leasing or selling has been tested for lead-based paint, the test results must be disclosed.  If leasing out a pre-1978 property, a disclosure form about lead-based paint must be included in the lease.  Sellers must also include a lead-based paint disclosure in the sales contract and buyers are allowed ten days to check for lead hazards.

What is “disturbing” paint?

The EPA considers any action that removes paint from its surface in an area that larger than 6 square feet indoors and 20 square feet outdoors to be disturbing the paint.  This includes window replacement, weatherization, and component replacement in a home.  Such actions such as scraping, open-flame burning or torching, sanding, grinding, using a needle gun, abrasive blasting and sandblasting are all activities that will disturb paint, and therefore require you to be certified and the EPA’s safety instructions to be followed. Surprising they didn’t include cleaning with TSP.

What are the EPA’s lead-safe work practices?

The work practices outlined by the EPA appear simple enough.  One must (1) contain the area, (2) minimize dust and (3) clean up thoroughly when dealing with lead-based paint.  There are, however, very specific ways in which to perform these actions so that the lead-based paint dust does not spread.  In other words, when the government gets involved everything becomes complicated and expensive despite the sugar coating they try and put on their regulations.  Unfortunately with the heavy fines and risk of legal action for not following the rules it is prudent that every investor be up on on this regulation.

Liability Insurance

In addition, it is advisable that Contractors performing this type of work be covered by Contractors Pollution Liability insurance since this new law exposes contractors to increased liability that is not typically covered in a general liability policy.

Cal Pacific is both EPA trained and certified and is additionally insured with Pollution Liability Insurance. www.WeServiceProperties.com