The Green Movement and its affect on building and remodeling

1.Homes in all price ranges will be smaller allowing their cost to respond more readily to the demand for sustainability and better energy efficient design.

2. The trend toward suburban sprawl will change. There will be more use of previously developed sites for both single and multi family homes requiring less use of “greenfield” sites and the attendant cost of new infrastructure. Grassroots organizations like Community First in Naperville will continue to work with redevelopers to find ways to blend  new homes with existing homes in established neighborhoods.

3. The trend toward incorporating historical styling and decoration in homes will be less important. Better floor plans, energy efficiency, durability, sustainability, and healthier air quality are considerations which will give rise to a new style of its own.

4. The trend toward waste of floor and ceiling space on the interior of homes will be eliminated. The use of impressive cathedral ceilings which ignore energy efficiency and human scale will give way to the use of nine and ten foot ceilings which still have a “grand ” quality. “Great Rooms,”which include a single large but less formal family dining area in close proximity to the kitchen, will replace the formal dining and living rooms.

5. As developers awaken to the call for the minimizing of waste in building materials, the use of sustainable building products, more practical floor plans, the reuse of existing building sites and infrastructure, and more concern for the health of the buyer, they will find a need to form teams to design and build their homes.

- Bob Lee

Obtaining a loan for a remodel or addition in todays market

A couple with two children and another on the way own a charming Cape Cod in an attractive  neighborhood in Naperville. He has a stable job with a good salary. Their home is comfortable, but they are out growing it and would like to add a master suite, a family room and update the kitchen. The obvious path to doing this is to hire an architect and a builder to give them plans and an estimate which they’ll give to a banker for a construction loan.

Before 2007 this would have been routine. But it’s 2011 and a sluggish economy and lethargic resale market have combined to change the rules. Newly passed banking laws and federal oversight have slowed the lending process. Appraisers are kept at arms length from the banks , credit rating minimums have climbed and applicant qualifications are scrutinized as never before.

In light of this new attitude in lending it is prudent to have some important questions answered before approaching the banks.    

What is the Value of the Home?

Since banks today will typically base a construction loan on 80% of the appraised value of the existing home plus the improvements, applicants should get an appraisal done by a company that banks will universally accept. Most Chicago homes have lost some of their value since the onset of the current recession which began in mid 2007. Homes which were bought at the peak of their value or were refinanced prior to that time will have less equity than homes purchased well before that time. The greater the equity the less the home owner will be required to contribute.

Is the Addition or Remodeled Segment Adding High Recoup Value?

Certain areas in remodeling have a higher value to the average consumer than others and thus appraise higher. Realtor magazine regularly publishes a table of the percentage of cost that can be recovered upon sale for the most often performed projects. A minor kitchen remodel sees an 80% return upon it’s investment. New Hardee plank siding returns 87% while a new sunroom only returns 51%. Thus carefully choosing the type of remodel or addition to be built has a direct impact on the amount the bank will loan compared to the construction cost.

What is the Home Owner’s Credit Rating and What is the Eligible income?

Most banks today look for a credit rating of 720 or more. They also now limit the recurring debt obligations to 45% of the new monthly mortgage payment.

Do the New Plans Make the Home Better?

Does the floor plan flow nicely and are the offerings reflective of current trends in the western suburbs? Is the exterior attractive?

Having an informed loan acquisition strategy is key to insuring a successful remodeling project.