Are fixer-uppers a SMART Buy?

Rick Ripma  0:00  

Are fixer uppers worth buying? And would it work for you all this and more on Indy's Real Estate Gurus this week

Announcer  0:13  

Advisors Mortgage Group is proud to present in these real estate gurus hosted by Rick Ripma, the hard working mortgage guy, please contact Rick for all of your mortgage needs at HardworkingMortgageGuy.com That's  HardworkingMortgageGuy.com Now, here's the hard working mortgage guy, Rick Ripma.

Rick Ripma  0:40  

This is Rick Ripma, your hard working mortgage guy and this is Ian Arnold with Advisors Mortgage Group. If you have any mortgage questions or just want to talk to us go to go online to hard working mortgage guys.com. That's hard working mortgage guys.com, you can get all of our information right there. And thank you for joining us, we appreciate it. We're gonna go over fixer-uppers, not only are they worth buying for you to buy a fixer-upper to do a fixer-upper. But also it doesn't make sense to buy one that's already been fixed up. Correct. So we can go up? We're gonna go over both those before we do we're gonna go over kind of the moment kind of the numbers this week, what's going on in the markets? As far as how is that affecting our mortgage rates? And what is the outlook on mortgage rates? You know, what are the big things, there are several things that matter. Inflation is one of the big, big issues, jobless claims matter that kind of give us an idea of where things are going. And I wanted to go over the jobless claims for the week of 625, they came in at 231,000 initial claims, and that that was right in line, pretty much, you know what we've been seeing. And then it was 1.32 8 million continuous claims. Again, pretty much in line, they it was decreased by 3000. On those continuous claims, it decreased by 2000. On the weekly claims, however, they generally do update or, you know, they redo the numbers in a week or two, and then all of a sudden we'll get you to know what it really was. So we'll just have to wait and see again next week. The bottom line is the jobless numbers are getting worse a little bit this time they get slightly better. But that is one indication that it's everything is turning and that we're going towards a recession. There are a lot of indicators right now that we're going to be going into a recession.

Ian Arnold  2:37  

Yeah, but you even heard on the news even recently that some companies have started recently laying people off. I mean, I think Tesla announced that they were laying off 10% of their people and everything because costs are just going up dramatically. I mean, yeah, you're gonna have the open jobs for like the lower the fast food, the restaurant, all that stuff. Retail is hurting dramatically just like food restaurants. But those have been hurting ever since once epidemic, a pandemic started. But now I think now you're starting to see it with the costs going up, you're gonna see bigger companies put a hold on hiring people. And also you're gonna see some layoffs because it costs

Rick Ripma  3:19  

Yep, you know, it's a real problem. This is I was over the weekend, I needed to buy a thing to plug in for my computer. Okay, one of the walls plugs that I wanted more outlets to it. And I didn't want to, I really wanted to try to buy it locally. Okay, and it was an Apple product. So I went to Best Buy. And it was on Sunday. And I waited half an hour, maybe 40 minutes, that one person on he was waiting on somebody else. I never could get any help. I left went home and ordered it from Apple directly instead. Did I cut Best Buy out? Yep. Not that they care about a 30 $40 item. But what it tells me is I can't even go to the store what are these stores going to do? I go there when I can't get help. I can't. I wanted to make sure I was buying the right item. I just decided I'll just go buy it online. And that's what I did. And that's what most people do nowadays. That can't be helping the stores. But as let's get back to the other piece of what you were saying, you know, when you look at what's going on inflation is killing those the costs so they're laying off people, right? Well, inflation the way you get inflation under control, is you have to slow down the economy. Correct? Correct. And one of the ways they slow down the economy is a raise the federal funds rate which raises the cost of borrowing money in the short term. Okay, what we see is it tends to lower mortgage rates. Sometimes that takes a little while. But on the other side, what have mortgage rates done in the last three, four

Ian Arnold  5:07  

weeks or they've actually gone down a little bit? Exactly, they've gone

Rick Ripma  5:10  

down a little bit because they raise the federal funds rate. So when you heard when everybody heard, the federal funds rate went up, and they were reporting in the news that rates are going up. That was the federal funds rate, the overnight rate prime went up, and credit card borrowing probably went up. But mortgage rates actually benefited because it gets inflation under control. And if you get inflation under control, it slows down the economy. But bonds are a fixed rate investment, inflation eats away at that investment. So this is a good thing. I know I'm getting into deep, but I just it is a very, very positive item. And I want people to know that because I want them to know when you hear all this news out there, it's not all the doom and gloom that everybody's saying, we are going to go into a recession. But if you look at a recession, every time we see every recession, what happens with home prices, they go up, right, what happens with mortgage rates, they go down? Exactly. So rates go down. Mortgage home prices go up. We've seen an increase. What was the latest number I was looking at that night? Oh, yeah. Here's the latest number. And I think in Indiana, approximately this is I don't have Indiana's direct, but I think we're actually a little higher than this is over the last month. Homes increased in our area by 15.1%. Year over year total for the last 12 months. 12 months. Yeah, that's crazy. Yes. That's still crazy.

Ian Arnold  6:46  

No. And then you add that in. Alright, so yeah, they say the last 12 months. So let's, let's clip that for the last six, and so stays right around there. Last year, last year alone, we went up 19%. Right. So now you're saying we're going to be close another 16%? I think you and I talked earlier, we said it would be right around that 17% For this year, earlier. So that is I mean, incredible.

Rick Ripma  7:12  

I thought it would slow down a little bit more than it has, I thought I thought the increase wouldn't be quite as much. I really thought we'd end the year with about a 10 or 11% increase, which is still extremely hot. That is a huge number for our area. Just the month over month we increased 1.2% Yeah,

Ian Arnold  7:33  

I mean, that's unheard of

Rick Ripma  7:35  

The weird part is for those of us who've been around for a long time. And this, we know that this is unheard of. For those who've just been in the market for the last year or two. They think this is normal. And it's not it's at least it's not far, maybe it's a new normal, but I don't think so I think that it'll go more back maybe somewhere in between, hopefully, but we were three to 4%, year after year, on average for years.

Ian Arnold  8:01  

I mean, my hypothesis, I don't think it'll decrease. If it does, it might be one or 2% for a year or two. But I think it might be more of a plateau, so to speak, where it might hang around where you might only get 1% increase for a year. And it might happen that way for a few years. And then it'll adjust itself and start doing that three to 5%.

Rick Ripma  8:23  

Yeah, the only reason I am not so sure that's what's going to happen. I kind of think it's going to be hotter than that I think that the basics of the reason that we're seeing these increases in value. Basically, supply and demand are going to stay out of sorts for quite

Ian Arnold  8:43  

so when I say a plateau, I'm not saying it's going to happen the next month or two, I'm saying in two or three years, once that housing becomes more available. I mean, because that's the biggest issue, especially here in Indiana we have right but

Rick Ripma  9:00  

the basics of even the housing becoming more available, is we still have the age of 33, which is the average first-time home buyer and that's still huge, it was still a huge increase in bursts 33 years ago, and that goes on for two or three years. And that doesn't drop much. We still have the fact that we're 3 million homes behind what we should have built over the last 10 years. And with all those numbers, I just think that it's going to be I do agree it's going to slow down. I don't know if it's going to get to that one person. I mean, who knows it's, you know, everybody can have their opinion. The only way the only time we're going to know is later on when we look back and say hey, this is what it is. I just think it's gonna be a little hotter than that for a while. And, but there's only so much that's sustainable. You see that even in California, places like that when you see these huge increases, they'll get 50% increases, you know, 20 25% increases. But even when you get those types of increases, they've always had a somewhat of a crash Yeah. But this time, it's kind of different because the supply is so low compared to the demand. I don't know maybe when the recession hits the demand will slow enough. But it's like we said before if you have 200 houses available, and you have 600 people, 600 people trying to buy them, and it drops to only 400 people trying to buy the 200 houses, you're not gonna see too much of a change. No, I mean, it's maybe a little bit, maybe you're gonna get you to know, instead of 10 offers you get seven offers. I don't know, that's what we're seeing, you know, we're seeing the number of offers may be slowed down, but we're still seeing quite a few homes coming in at or above list. I saw the statistics. It's like 56% are still being sold over list price.

Ian Arnold  10:46  

House in my neighborhood, literally. And I think I said this last week, just sold two weeks ago. And they listed as I said, they listed on Friday sold it on Monday went 20 grand over, I talked to him finally 20 grand over asking.

Rick Ripma  10:58  

Yeah, that's crazy, isn't it? It's unbelievable. And

Ian Arnold  11:01  

yeah, so let's get into the whole fixer-uppers. So there are two different types of fixer-uppers, one, the house has already been fixed up. And so what that means is when you're out there looking at a house, you can tell somebody bought it by flipping three, four months ago, they're flipping it. So they already did the repairs for you, you're not having to do them. The other one is you find a house that might need a new kitchen might not do that, and you decide to fix it up. And the great news is there are programs for that. And we'll get into that here in a bit. But let's first let's talk about the already fixed-up homes. Right. So should somebody actually be scared? If you find out that that was a flip home.

I wouldn't be scared. I would be cautious. Because you need to make sure that the work that was done was not just the cosmetic work that needed to be completed if it was the cosmetic work that it was done correctly. So I think I think you always need an inspection. And I think you definitely I mean, it's hard to say yes, you absolutely should get one on a home that's been flipped, but because I believe you should always have an inspection.

Yes. I mean, let's be honest, an inspection costs maybe 100 to $200. That's like four or $500. Now, inflation. Oh, yeah, he got that number. All right. So even that, if it saved you from having a cracked Foundation, or you're the ACS going out or something like that, or something you cannot see, oh, it's well worth it.

Rick Ripma  12:42  

Absolutely. I've had people who have told me, you know, we're having an inspection, but we're there's no problem, this house is perfect. And the inspection comes back, and there's mold, or I just had one, come back. And there were termites, hey,

Ian Arnold  12:56  

we both worked in the car industry. And we've seen it both ways where the person trading or the car all this car has never had anything wrong with it nothing. You put it up on a lift, and it's leaking oil like no other. And you've seen it the other way where you go buy a used car, oh, nothing's wrong with this car. We had it. We did all this stuff too well, and you and next thing, you know, the water pumps leaking and the heated seats don't work. So I always get an inspection even on my cars. If you're willing to spend it on your car, why would you not do it on your house? Right,

Rick Ripma  13:28  

you should definitely spend the money but you definitely want it on a house that's been fixed up. Obviously, when you walk into one that's already been completed, and somebody's flipping that they want to make some money and that's fair, they took a house that probably needed work and they and they and they made it really nice. You just want to make sure that it's not just the exterior that looks really nice, the exterior behind both inside and outside, you know what you can see. So you have an inspection. And then also look at the work that was done just like if you had the work done on your own home, you know, inspect it. I had a painter come and paint and you know when you inspect it, you can tell whether the painter is any good or not. So you really have to have to inspect it. After the break. We're going to talk about whether you should buy a home and do the fix-up yourself.

Unknown Speaker  14:22  

Advisors Mortgage brokers licensed by Indiana Department of Financial Institution equal housing opportunity. NMLS 33041 Rick Ripma NMLS 664589

Rick Ripma  15:39  

Welcome back, and thank you so much for joining us. I'm

Ian Arnold  15:41  

Rick Ripma, your hard work and mortgage guy and I'm Ian Arnold with Advisors Mortgage Group.

Rick Ripma  15:45  

And if you'd like to get a hold of us, you can go to  HardworkingMortgageGuy.com That HardworkingMortgageGuy.com All of our information there, you can contact us from that website. So

Ian Arnold  16:02  

if we've been going on for almost half an hour now if you're just now tuning in to us can't

Rick Ripma  16:07  

tell time can you was about 15 minutes.

Ian Arnold  16:12  

But if you did miss the first part, great news, where are we still doing? We take our shows and put them on our podcasts. So you can easily go to indys real estate gurus on any local podcast and find us that sometimes you got to put an apostrophe s, sometimes you don't. But you can find us right there and listen to any of our shows, anytime you want. So you can listen to us at 3 am. If you need help sleeping and turn us on, we'll help you sleep.

Rick Ripma  16:37  

I think I haven't tried like by our names. And I think on some of it was actually easier to put in Rick Ripma Oh, you gotta spell it, or Ian Arnold. And it shows up. It seemed like it showed up. He's sometimes easier, not all the time because I've gone I've tried to go to most of them that were on, so many, you know, I just signed up for everybody. And it's just I find that it's not. Some of them. It's not easy to find us. So you might try by name. Or it could be that I don't know how to do it.

Ian Arnold  17:07  

So could be under Ian Arnold or Indys Real Estate Gurus. Right. So now we got the question or the week. Now it's time for questions with the gurus. The question of the week is brought to you by Debt Crusher mortgage, helping you relieve your stress of debt for your home and your all your debts you might have.

Rick Ripma  17:35  

And it's not really, you know, we're just we're changing the debt is the way that it is that Crusher mortgages us. It's just a mortgage product that we have that works really well to relieves the stress and you still have the debt, it just moves. So it may move. Just as an example. $700 worth of a payment to $200 worth of payments a $500 a month. Yep. You know, so it can be a life changer,

Ian Arnold  18:03  

which is which definitely, especially in this time of economy, helps out dramatically. I mean, if I'm saving you $500 Well, guess what? Your groceries, groceries went up quite a bit. And roughly they're saying about 25%. So if you spend $200 a week, I mean, that's an additional $50 And then look at gas prices, how much extra you're spending. I mean, that would definitely help out a lot of growth. So the question last week was what kind of band never plays music? Drumroll, please. I rubber band. I don't have a drummer. Oh, sorry. You failed again. Alright, so drumroll this week, what has one eye but cannot see. So again, tune in next week? And we'll have the answer to that. So we've been talking about the fixer-upper. So a little bit ago, we went through, all right, we just found a home and it's already been fixed up. Okay. And those are nice because you don't have to do a lot of the work. So But now, let's go into, I found this nice house, open that kitchen. It looks like my grandparent’s kitchen. And the bathrooms need to be redone what can people do?

Rick Ripma  19:17  

Well, you know, there are products, there are financing products that make this work. Let's I'm going to quickly go back to one that's already been fixed up. If it's already been fixed up, you do normal financing. Right? If you do conventional FHA one of the things you have to watch out though, is if you find somebody who's flipping a house, FHA is going to require that to be six months, even unconventional, that can create issues if it's a month or two after they closed on it so that you have to have from the time that person who just bought it closed to the time you can actually take an application on an FHA loan, it has to be six months. So that's one of the issues that can come up so a lot of times you'll see those flips that somebody's trying to sell and it's they won't sell it FHA and that's why I, okay. But if you're looking to fix up a home, we have a part of our company called Fix it mortgage. And on a fixed mortgage, we have a variety of products available that allow you to finance a home that needs to be that you want to do either needs repairs, or you want to do improvements on the home. The key here is you have to understand if you find a home that needs improvements or needs, let's say it let's say it's missing carpet in the house. And so it's just underlayment, the bare floor, right concrete, the four by eight sheets of plywood, which is underlayment, that kind of thing that's not financeable on a normal FHA, conventional product VA on any of those, or if it has, you know if it's missing its HVAC, HVAC because somebody removed it, or it or that doesn't have sinks or toilets or they aren't working, or there's anything like that anything that is considered making the home unlivable. Now, unlivable doesn't mean, somebody won't live there, because I have had houses appraised that were unlivable that somebody had been living in. Okay, but, but most of us wouldn't want to live that way. So it's what's considered unlivable. So this product allows you to finance it. So that's one of the benefits, it allows you to finance a home, that is not really livable at the time. Okay, that's number one. Number two, it allows you to finance the fix-up costs in the mortgage. So if you buy a house, let's say you bought a house, it's 200,000. And you have $80,000 worth of improvements that you want to do you want to read, you know, put in a new kitchen, redo the floors, whatever that happens to be, when you do that when you want to do that, now you have a $280,000 total investment in the house. Well, as long as the house appraises for gives us the equity we need, then we can finance it, or we can finance that entire amount.

Ian Arnold  22:09  

So but when they do the appraisal, it will be basically, if these things are done, right based

Rick Ripma  22:18  

on it's based on the improvement being done, which means then this is you have to understand this product, this product is no matter whether it's an FHA, which has a remodel product called a 203 K, or you have you know, the conventional products, there's a couple of those doesn't, it doesn't matter if you're a jumbo product, or even a VA product, any of those, they're not easy to do, meaning that it requires a lot of additional work from the borrower, also from us, but a lot of additional work from the borrower. It's one of the reasons that we have a part of our company that that's all they do, is because there is a lot of additional work and we have people who've done it for last time I saw is like 130 years combined experience. Jim, Jim Regan, The person who runs it is the most knowledgeable person I have ever met on this product, he actually helped them develop some of these products through conventional financing. He was on the call to the task force to do that they had to figure it out. So he knows what he's doing. But it still requires a tremendous amount of work or a tremendous amount of additional items. Mainly though, you have to have a contractor go into the house and inspect it and tell and you give them a list. This is generally how it goes. And we have the name escapes me. But basically, we have a person you have to hire a person who is certified to be your kind of your general contractor I'll call him it's not what it is. But that's what I'm going to call them. And they look at it. And then they'll tell you what has to be done. You can tell them what you want to be done. And then you have a contractor who bids it now this up this person, I'm talking about what I call the general contractor. They'll look at it, and they'll give us a price of what they think it's going to cost but and they can help you find a contractor. They're not contractors, they don't do the work. But they can help you find somebody or if you have somebody, you can use them. But we need to know the cost before we can even have it appraised. So what normally would take 30 days or less to close on a house may take 6090 or 120 days. And if in this market, I have found some people I've had some of these take more on refinances and purchases take forever because the contractors are just really slow to get to it.

Ian Arnold  24:46  

So when you go on this and you're mentioning the whole closed process, so they do close and then they start to work,

Rick Ripma  24:55  

right? Correct. Yeah, the work doesn't start until it's till it's closed. You can't even get into appraisal, so you can't close on it until you have to have an appraisal, but the appraisal is, is based on the completion of the home. So you have to have to work all the work that's going to be done to the appraiser can appraise it to how you're going to have it finished. So that we can then get, then you can underwrite it and get it close. So after all, that's done, you still have 30 days or, you know, 20 days or so before you can close. So it's very important that you give time for this. That's really my point.

Ian Arnold  25:26  

So speaking of the whole time thing, and I know we're cutting it close on time here soon. But I'd like to say this isn't a thing for everybody. But it is things for quite a few people. Because you've got to have the right mindset going into this. Just because it will take time. There are going to be if maybe anybody's done. I know Rick, you did some home renovations last year, there will be hiccups. And it's just about seeing that hurdle, stepping over and keeping going to the finish. But no is a great product. Yes. Do I recommend it? Yes. But we try to put people in the right mind spec that look, fixing doing a whole kitchen and everything like that. It doesn't happen overnight. People know,

Rick Ripma  26:15  

But you know, here's the thing. And the reason I may be coming off. I'm trying to educate people so that they understand the hard part of this product really, for us is that no matter what we say, after 60 days of processing, people get frustrated.

Ian Arnold  26:34  

Yes. Okay. And that's why I'm saying the whole mindset, you gotta have the right mindset. And

Rick Ripma  26:39  

you absolutely do and your mindset might depend on some of what you're going to be doing to the house if you're going in and you have a house that has no drywall up. It's just studs. That's a whole, that's a whole different mindset than if you have the house, it's totally livable, you're just going to go in, and you're going to improve, you know, put a new kitchen in and prove new baths, and maybe new flooring and paint, you know, I mean, it's a whole different there. It's different. So it's just one of those things that you just have to be aware. It is a great product, everything has its purpose. And if it's right for you, it could be the only way to finance the house.

Ian Arnold  27:21  

Yes, correct. Right. I mean, some houses do need a lot more work. And there's a reason why they might be selling it at that point in time is that hey, look, I don't want to do it. Well, the great news is you can have that done and not have to worry about the excess costs coming out of your pocket immediately.

Rick Ripma  27:37  

Right. I've had people now recently who buy a house. It's been sitting for 234. I think one was five years. Because it's hard to find a house so they find one that's five years, then sitting five years. Well, the house has been sitting for five years and needs work. Yes. You know, these a lot of work. Normally, what we're running up against at the end of the show.

Ian Arnold  27:55  

Yeah. So a reminder, if you did, if you're actually just now tuning in, I'm sorry, you missed this for the last 30 minutes. But, again, catch us on our podcast, real Indys Real Estate Gurus.

Rick Ripma  28:08  

And these real estate gurus you can find this almost anywhere. If you might need an apostrophe s on indies, you might not. You might also be able to look up Rick Ripma. It's Ripma or Ian Arnold. And find us that way.

Ian Arnold  28:21  

So next week, tune into us because we're going to do home appreciations. And how does it affect you? I know we briefly talked about it earlier, but we're gonna get we're gonna actually go in depth. Yeah. And

Rick Ripma  28:31  

that's a big topic. And it's a very important topic for people in this market. Well, thank you so much for joining us. Have a great weekend.

Announcer  28:40  

Brent NMLS number 33041. Recruitment NMLS number 664589. Ian Arnold's NMLS number is 1995469 equal housing opportunity, some restrictions apply?