How to Set a Home Renovation Budget

Ready for a kitchen renovation? Anxious for a bathroom remodel? The easy part is knowing your goal for home remodeling – whether you’re trying to keep up with your growing family, add office space, or increase your home’s value.

But figuring out how to plan a home renovation that doesn’t break the bank can be tricky.

Here are five key steps in planning your home remodeling project.

1. Estimate home renovation costs

As a general rule of thumb, you should spend no more on each room than the value of that room as a percentage of your overall house value. (Get an approximate value of your home to start with.)

For example, a kitchen generally accounts for 10 to 15 percent of the property value, so spend no more than this on kitchen renovation costs. If your home is worth $200,000, for example, you’ll want to spend $30,000 or less.

Kitchen remodel with kitchen cabinets painted.
A kitchen remodel should cost no more than 10 to 15 percent of your home’s value. Photo from Offset.

Something else to keep in mind: Contrary to popular belief, kitchen renovations offer among the lowest return on investment, according to analysis from Zillow Talk: The New Rules of Real Estate. Every dollar you spend on a kitchen remodel increases the value of your home by 50 cents.

The highest return on investment? A mid-range bathroom remodel.

2. Consider home remodeling loan options

If you plan on borrowing money to fund your home renovations, there are a number of loans out there to help with just that.

  • Refinancing. Depending on your current interest rate, you might be able to refinance your mortgage at a lower rate and/or for a longer loan term, which could lower your monthly payments and help you save up for your renovations.
  • Cash-out refinance. If you have enough equity, you could also consider a cash-out refinance, which means refinancing your existing loan for an amount that’s higher than what you owe. Going this route, you pay off your original mortgage and have cash left over. Use a refinance calculator to see if refinancing makes sense for you.
  • HELOC. If refinancing sounds like too big of a leap, a home equity line of credit (HELOC) might work better. A HELOC works a lot like a credit card in the sense that it has a set limit that you can borrow against.
  • Home equity loan. Although it sounds similar to a HELOC, a home equity loan is a bit different. This loan requires you to take out all the cash at one time. They’re often referred to as “second mortgages” because homeowners get them in addition to their first mortgage.

Refinancing, getting a HELOC or taking out a home equity loan are all big decisions, and it can be tough to know which one makes the most sense for you. As with any new loan, consult with a lender to see which option is best for your situation.

3. Get home renovation quotes from contractors

Some contractors will give you an estimate based on what they think you want done, and work completed under these circumstances is almost guaranteed to cost more. You have to be very specific about what you want done, and spell it out in the contract – right down to the materials you’d like used.

Home renovation plans for remodeling a house.
Make sure that contractors’ estimates include the full scope of your project. Photo from Shutterstock.

Get quotes from several contractors, tossing out the bid from the one who gives you the lowest estimate. Going with this choice could be asking for problems, as low-priced contractors are known to cut corners – at your expense.

4. Stick to the home remodeling plan

As the renovation moves along, you might be tempted to add on another “small” project or incorporate the newest design trend at the last minute. But know that every time you change your mind, there’s a change order, and even minor changes can be costly. Strive to stick to the original agreement, if possible.

Couple looking at renovation plans while remodeling a home.
Even minor changes to your remodeling project’s scope can add significant costs. Photo from Offset.

5. Account for hidden home renovation costs

Your home may look perfect on the outside, but there could be issues lurking beneath the surface. In fact, hidden imperfections are one of the reasons renovation projects end up costing more than you anticipated.

Rather than scramble to come up with extra money after the fact, give yourself a cushion upfront. Factor in 10 to 20 percent (or more) of your contracted budget for unforeseen expenses, as they can – and do – occur. In fact, it’s rare that any project goes completely smoothly.

Top image from Zillow listing.


Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Originally published June 4, 2015.

The post How to Set a Home Renovation Budget appeared first on Zillow Porchlight.

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Quiz: Should You Renovate Your Home or Sell?

Most homeowners have that one thing about their home that they wish were different.

“My house would be perfect if it just had one more bathroom.”

“I love my house – except for the kitchen layout.”

“If I had more storage space, I could live here forever.”

For some owners, their home’s fatal flaw exists outside the four walls. Maybe the house backs up to a creek that floods whenever it rains, resulting in a squishy backyard perfect for breeding mosquitoes. Or perhaps the home is located on a busy street that generates too much traffic noise. It could just be that the house is too far from the homeowner’s job, and the long commute has gotten old.

If you’re feeling discontented with your home, you may be thinking about renovating … or getting out entirely. Before you knock down walls or put your home on the market, check out our quiz – it could help you think differently about your situation.


The post Quiz: Should You Renovate Your Home or Sell? appeared first on Zillow Porchlight.

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Can’t Buy a House With Cash? You Can Still Land the Home

All-cash buyers are active in many markets, and they can strike fear in new home buyers. The cash buyer can perform and close quickly and provide sellers with a sense of comfort.

But, does this mean a solid buyer putting down 20 percent or more shouldn’t attempt to compete with the cash buyer? Absolutely not.

What if you can’t buy a house with cash?

The truth is, a buyer getting a mortgage can still compete against a cash buyer and win.

These are the questions that can make the difference:

  • Do you have a 20-percent down payment?
  • Are you well employed?
  • Do you have cash reserves in addition to your down payment?
  • Do you have very little debt?
  • Do you have good credit?

If you answered yes to most or all of these questions, your purchase should be as bulletproof as a cash buyer’s.

Paying cash for a house doesn’t guarantee a buyer will win over the seller. Well-qualified buyers who put in a little extra effort can seal the deal.

How can you compete against a cash buyer?

  • Be up front about your finances. Make your offer as strong as cash by providing the seller the confidence they need to accept your offer. In addition to a pre-approval letter from your lender, be open to allowing your agent or lender to provide financial information with your offer. Tell them what you make, and how much money you have in the bank. Show bank statements and even a copy of your credit report. Overload the seller to show them that you’re as solid as the cash buyer.
  • Ask your lender to get a head start on the mortgage. See if your mortgage professional can move the process along sooner. Send the lender a copy of the preliminary title report, if available. If you’re buying a condo, find out if a condo questionnaire is available and give it to your lender. If you take any of these steps, let the seller know. Of course, if you have not already, provide the necessary financial documentation to your lender right away.
  • Shorten the loan and appraisal contingencies. Ask your lender how quickly they can send an appraiser to the property, and how long the loan would take to turnaround. In some parts of the country, loans are being approved in less than 14 days – sometimes even 10.
  • Pre-order an appraisal. This may not be as easy with a bigger bank. But smaller banks, direct lenders or mortgage brokers can line up the appraisal in advance. At the time your offer is written, tell the seller the appraisal has already been ordered. If you can get the appraiser out within 24-48 hours of coming to terms with the seller, it’s half the battle.
  • Inspect quickly. Along with the quick appraisal and loan contingencies, get your inspector in and out. Shelling out a few hundred dollars and getting the inspections done within days of having your offer accepted shows the seller you mean business. It also gives them comfort that they’ll get over the biggest hurdle quickly.
  • Overpay. Cash buyers nearly always expect a discount from the seller simply because they’re offering cash and are a sure thing. As a result, the cash buyer will often make a lower offer. To increase your chances, top the cash offer, even if means paying a little more than you think the home is worth. If a seller is faced with a few thousand dollars’ difference, the seller probably wouldn’t risk it. But what if your offer is five percent higher than the cash buyer’s? The seller, perhaps wanting the best of both worlds, may ask the cash buyer to raise his or her offer. Some cash buyers will offer more, but not always enough to match. If you plan to live in the house for many years and it’s the home of your dreams, paying a little more to get the deal might only translate into $20 per month over the course of a long-term mortgage.
  • Make yourself known to the seller. Some buyers write “love letters” to sellers, hoping to appeal to their personal side. Does this work? Sometimes! If you’re competing with a cash buyer, particularly an investor who plans to rent the home out, it can’t hurt to get a little personal. The seller almost always wants to know more about the potential buyer. Ask your agent to write a cover letter and an introduction. Let the seller know who you are, why you like the home and what your intentions are. It usually works.

Do the best you can and be realistic. Make sure your financial “‘house” is in order. Work with a good local real estate agent, and start working with a local mortgage professional well in advance. Structure your offer to show that you’re ready to roll.

For more home-buying tips, check out our Home Buyers Guide.


Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

from Zillow Porchlight

U.S. Homeowners Spend $15,000 in Hidden Costs to Sell a House

Selling a home not only takes time, but also costs money. To help with budgeting, Zillow and Thumbtack identified several common – but often overlooked – seller expenses.

From closing costs to home prep projects like carpet cleaning, U.S. homeowners can expect to spend more than $15,000 on these extra or hidden costs to sell the median home, according to Zillow and Thumbtack’s Hidden Costs of Selling Analysis.

Closing costs

The two largest closing costs are agent commissions and, in most states, sales or transfer taxes.

Nationally, sellers spend $12,532 for both closing costs on the median home. Sellers should also prepare for a variety of other smaller closing costs, including title insurance and escrow fees.

Home prep costs

Most sellers will complete at least one home improvement project before listing.

While some sellers prefer to complete these projects themselves, those who outsource can expect to spend more than $2,650 nationally to cover staging, carpet cleaning, interior painting, lawn care and house cleaning – five of the most popular seller home prep projects.

Location, location, location

As with all things real estate, these extra costs can vary significantly by region.

In San Francisco, homeowners can pay more than $55,000 on the median home to cover these combined closing costs and maintenance expenses – the highest among the markets analyzed.

Compare that to Cleveland, OH where home sellers pay just over $10,000 for the same costs.

Estimating profit

Even though selling a home costs money, most (73 percent) of sellers are still satisfied with the transaction, according to the Zillow Group Report on Consumer Housing Trends.

To estimate potential profit, sellers who have claimed their home on Zillow can use Zillow’s Sale Proceeds Calculator. It factors in the home’s sale price, mortgage balance and agent commissions, along with other common seller fees.

Curious how your metro stacks up for sellers? Here’s a breakdown of the metros analyzed in the report:

Looking for more information about selling your home? Check out our Sellers Guide.





from Zillow Porchlight

6 Millennial Pink Homes Proving This Color Is Here to Stay

If you’ve never heard of millennial pink, don’t worry – you aren’t that out of the loop. Though the term was coined recently, it’s been popping up for years, and Pantone’s selection of Rose Quartz as one of its 2016 colors of the year was just a preview of the pink craze to come (yes, there’s a hashtag). Stars from Rihanna to Harry Styles have embraced light pink hues, though it’s more about the vibe than a distinct color, and its popularity goes beyond the 20-something crowd.

Millennial pink has put rosy-colored homes on the map as well. While painting a house pink is nothing new – several historic, stucco and adobe homes sport the hue – it’s certainly on trend.

Check out these six homes for some millennial pink inspiration, and see what all the fuss is about.

Key West, FL

914 Grinnell St, Key West, FL

Photo from Zillow listing.

Tropical color schemes are a trademark of Key West design and architecture, as embodied by this delightful revival-style duplex. Bright blue shutters pop against a pale pink exterior with white trim, while the interior bursts with cheerful, vibrant blues, yellows, greens, and – of course – more pink.

Find homes for sale in Key West.

Montpelier, VT

24-26 Loomis St, Montpelier, VT

Photo from Zillow listing.

A former mayor’s home, this restored Victorian is millennial pink inside and out. With a whimsical two-tone pink façade and a few light pink rooms in the interior, the bright paint choice is architecturally on point. “We often see a color similar on Victorian homes throughout Vermont,” explains listing agent David Parsons, “and I believe it has a historical precedence.” Because of an increase in the number of pigments available and a reduction in the cost of paint, brightly colored homes became de rigueur in Victorian New England.

Find homes for sale in Montpelier.

Charleston, SC

18 State St, Charleston, SC 29401

Photo from Zillow listing.

This historic home full of Southern charm proves that millennial pink is nothing new. Built around 1815, the current owners bought the pink house in 2004 and simply repainted it the same color since it worked so well. “There are many pink houses in Charleston, including one on Rainbow Row which is a block away,” explains Adam Edwards, who listed the home for sale last year. “Pink is a longtime popular color because it helps keep the interiors cooler in the hot summer months.” Black shutters and white trim give the house an elegant, refined look.

Find homes for sale in Charleston.

Seattle, WA

920 Federal Ave E, Seattle, WA

Photo from Zillow listing.

For a prime example of a bold millennial pink, check out this 4-bedroom, 3,080-square-foot gem close to all the action in Seattle. The exterior is painted a solid shade of warm, earthy pink called “New Pilgrim Red” and is complemented with off-white woodwork in “Navajo White.” “We had seen that on another Colonial Revival house years ago when we were just about to repaint,” former owners Clint and Elizabeth Miller recall. “It looked dramatic to us and suggested a New England sort of look.”

Find homes for sale in Seattle.

Albuquerque, NM

1323 Narcisco Ct NE, Albuquerque, NM

Photo from Zillow listing.

Stucco exteriors are common in the Southwest because they’re durable and – most importantly, for a desert climate – energy efficient. This pink-hued home shows that stucco doesn’t have to be drab. Here, the pink provides a dose of personality while maintaining a neutral, earthy vibe that meshes with the landscape.

Find homes for sale in Albuquerque.

New Orleans, LA

326 Warrington Dr, New Orleans, LA

Photo from Zillow listing.

New Orleans is no stranger to colorful homes. In fact, this cute, single-story house is subdued in comparison to many in the Big Easy. But that’s part of its appeal – and of the appeal of millennial pink in general. It manages to straddle the divide between playful and refined, youthful and classic.

Find homes for sale in New Orleans.

Originally published July 19, 2017.


from Zillow Porchlight

What Does a Builder’s Warranty Cover?

Even with new homes, things can go wrong. That is why many buyers of newly built homes are interested in warranties, which promise to repair or replace certain elements of the home.

Many home warranties are backed by the builder, while others are purchased by builders from independent companies that assume responsibility for specific claims. In other cases, homeowners purchase coverage from a third-party warranty company to supplement coverage provided by their builder. In fact, the Federal Housing Authority (FHA) and the Department of Veterans’ Affairs (VA) require builders to purchase a third-party warranty as a way to protect buyers of newly built homes with FHA or VA loans.

The key to any of these warranties is to understand what’s covered, what’s not covered, how to make a claim and the process for resolving disputes that might arise between you and the builder or warranty provider.

Most warranties for newly constructed homes offer limited coverage on workmanship and materials as they relate to components of the home, such as windows, siding, doors, roofs or plumbing, electrical and HVAC systems. Warranties typically provide coverage for one to two years, although the specific time period may vary by from component to component; coverage may last up to a decade on major structural elements. Warranties also routinely define how repairs will be made and by whom.

Warranties generally do not cover household appliances, tile or drywall cracks, irrigation systems or components covered under a manufacturer’s warranty. Most warranties also exclude expenses incurred as a result of a warranty repair construction, such as the need to store household belongings while a repair is being made.

Before you close on your new home purchase, you should ask your builder – or your third-party warranty provider – these questions:

  • What does this warranty cover?
  • What is not covered by this warranty?
  • What’s the process or timeliness if I have a claim?
  • Is it possible for me to dispute your decision to deny a claim?
  • What is the extent of your liability?
  • Can you refer me to other new home owners with whom you’ve worked so I can speak to them about warranty coverages?
  • Where are some of you previous projects so I can speak with owners there?

The information you gain may not be enough to send you running from your new home deal, but it should help you understand where you’ll stand if you ever need to file a claim. You should also check with your state’s Attorney General Office or contractor licensing board to make certain your builder is offering all warranties he’s required to provide.

To learn more about builders’ warranties, contact your state or local builders’ board. If you’re making your home purchase with an FHA or VA loan, those organizations can also provide you with additional information.


Originally published June 11, 2014.

from Zillow Porchlight

What Do Mortgage Lenders Review on Bank Statements?

Trained to spot financial mismanagement, mortgage lenders take careful time to review your finances before approving or denying you for a home loan. The role of the lender in approving a loan is to make sure you have enough money for a down payment and closing costs, and to assess whether you’re able to regularly make your monthly payments. Part of how they do that is by reviewing your bank statements. That’s why it’s important to make sure all your documents and records are sorted and straightforward.

Bank statement warning signs

Overdraft charges
Lenders typically include your last two months of bank statements in their evaluation of your finances. Having a long list of overdraft charges in your account isn’t the best indicator that you’ll be a good borrower. No matter the circumstances, having a history of overdrafts or insufficient funds noted on your statement shows the lender that you might struggle at managing your finances.

Large deposits
Another red flag to lenders is when a bank statement has irregular or lump-sum deposits. This can be seen as iffy because it could appear that those funds are coming from an illegal or unacceptable source. Unless you can provide an acceptable explanation for your large deposit, it’s likely the lender will disregard those funds and apply your remaining dollars to their assessment of whether you qualify for a loan.

Signs of the bank of mom and dad
One way to help ensure that your bank statement won’t raise any red flags with lenders is by having consistent, tracked payments. If, for instance, you have automatic monthly payments to an individual rather than to a bank, lenders could see that as a non-disclosed credit account. This would be the case if you were to take out a loan from your parents and make car payments to them rather than an actual bank, for example.

How to reduce bank statement scrutiny

Take extra care of your transactions for at least a few months before applying for a mortgage. Lenders want to know that the money in your account has been there for some time, not just recently deposited. One or two big deposits into your account right before applying could indicate to lenders that the money you claim to have isn’t actually yours or isn’t a “seasoned” asset, meaning the money hasn’t been in your account for at least two months.

At the end of the day, it’s best to start the process of organizing your bank activity and statements prior to applying for a loan. When you start looking for a home, it’s best to have your financial information sorted in case your dream home hits the market and you have to move fast.

If you keep your bank statements top of mind in the initial search phases, you may have an easier time applying for a loan and ultimately securing it. Remember: Underwriters review your accounts once more, just prior to closing. So, be sure to maintain healthy finances throughout the closing process too.

Photos courtesy of Shutterstock.


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