Author: jconwell

     It has been a while since I have had something to blog about… but finally some progress on our rental property.

     The whole permit process took longer than expected, and the addition of new storm drains on the street really added to the problem.  It was difficult for workmen to get to the property, deliveries were at a standstill, and to deliver the dumpster for the demolition work was an engineering feat in itself.

     All that aside, the demotlition work is all but finished, and the framing of the kitchen is complete.  Unfortunately, when we went to have new windows added to the porch, the whole structure was sitting on just a few cinderblocks.  We decided that we needed to correct that situation and not just try to make it cosmetically pretty. 

     That being said, it is important for Buyers to remember that even though a property looks great, they should still spend the extra money to have a home inspection prior to buying.  Also, if the home has been recently renovated, make sure you ask your agent to get the permits.  If the Seller has done everything above-board, they will have no problem producing the necessary paperwork.

     Hopefully, things are in full swing now and we’ll be in full swing by 4th of July.

Our permits are in, now we wait to get our approvals.  In the meantime, we have found out that the City of Cape May has adopted several ordinances to establish a Housing and Fair Share Plan, a Developer Fee and a Spending Plan.  All these things are to gain full compliance with the State of New Jersey Council on Affordable Housing (COAH Fee). 

Basically, this is going to cost us 1.5% to put an addition on our house.  This fee could turn out to be pretty expensive to anyone considering buying a “tear-down”.  It is my understanding (from reading the ordinance) that the tax assessor makes the determination based on Equalized Assessed Value (EAV) based on plans and requests for permits.  The money must be paid prior to receiving a Certificate of Occupancy.

If you are like me, you are probably wondering what the hell is Equalized Assessed Value.  It is something I should know, because the fee is going to be determined on this amount.  The definition in the ordinance says it is the assessed value of a property divided by the current average ration of assessed to true value for the municipality in which the property is situated.  Yeah, I still don’t understand it, but I will  before I have to write the check.

What I do know is this, if you are planning to purchase in New Jersey, and are planning to add on to the existing structure or tear down the home that is there and build new, you will have to pay this fee.  The fee if you tear down and start again can be 2.5%.  So, if you bought a house on an existing lot and tear the house down and build a new home that cost you $200,000.00 to build, it will cost you an additional fee of at least $5,000.00 in Cape May.

The other thing I am trying to find out is if my plumber gave me a quote of $20,000.00, does that mean I have to pay 1.5% of that quote?  The quote was to fix the house and the addition, not just the addition.  Shouldn’t I be able to separate the two?  Does that mean every time you do work on your home in Cape May and take out a permit, they can enforce this rule?  Won’t that lead to people trying to avoid taking out permits?

I have a lot of questions and not all of the answers.  The people at the construction office have been very helpful, but I still don’t understand the basis of the tax.  But I will.

   I guess it should be easy for me to find a contractors.  I’m in real estate, so I have had contact with many contractors through home inspections and repairs.  (Good and bad)  I’ve lived here for over 25 years.  Since my home is near I can meet them at the property to get some quotes.  So how do you pick?

   First and foremost, you should rely on someone who has had work done.  They will know if the contractor completed the job in the time promised, in a workman-like way, and was flexible with work order changes.  Sometimes, the cheapest contractor is not the best.  There is a reason why you get what you pay for.

   With the new property, we are planning to add a new kitchen, master bedroom and master bath.  We will almost double the size of the house.  So we started with someone we trust, Paul Burgin of Paul Burgin Builders is our general contractor.  We met Paul at the property and did a walk through and discussed the changes that we thought we would like to make tot he house.  Paul then took a copy of our survey and drew on graph paper a basic plan of what we discussed.  With the basic plan and square footage planned out, we made copies of the survey and layout and have handed them out to several electricians, plumbers, and a heating and cooling company.  Once the quotes come back in, and we decide which professionals to use, they will need to contact Paul to fill out all the permit applications.

   When planning to have major work done, you must go to City Hall and get permits.  When doing a project the size of ours, the entire permit package must be completed.  So the plumber, electrician, heating and cooling permits must all be handed in at the same time with the general contractors information.  Our plans do not require architectural drawings, so we are saving our selves some additional expense there.  Also, when planning our addition, we did not exceed the local zoning requirements for the area.  (These may be found on the City of Cape May website under zoning laws, or the people at City Hall are more than willing to help.)  Since we are abiding by the zoning requirements of the R-1 district, we will not need a variance to build.  Permits do not happen overnight.  The construction official needs time to review the application, and inspect the property.

   In the meantime, we have begun the hopefully magic transformation from ugly duckling to beautiful swan.   Our time frame is tight, because we are looking to get summer rentals booked for June, July and August.

  With the help of the police – Big thanks to Cape May Police Department – the Seller has removed all their personal belongings and we are ready to begin the rehab. 

   Our goals are fairly simple.  We would like to enlarge the property from three bedrooms to four bedrooms and add at least another bathroom and maybe a bath and a half.  This works needs to be completed by April or May so that we can have it on the rental market before June.

   Tonight, the decision makers will be meeting to discuss the financing of the work.  We have met with a builder who has quoted us a price of $100.00 a square foot.  Our plan is to knock that down to $80.00 a square foot if we do a lot of the finishing work ourselves.  That price is probably realistic, since we will be moving the kitchen to the addition, adding bathrooms, central air, insulation, and all new siding.

   Finally, here is the before picture.  I hope by June you will not recognize the after picture.

   Sometimes in business, an old adage is  an old adage for a reason.  The one today is “It doesn’t pay to be nice.”  The Seller still does not have all her belongings out of our home, although we went to settlement on December 17, 2009.  Understand this, when you sell a house, you don’t own it anymore.  You don’t get the money and then get to keep your stuff there for a few more days while you make arrangements to pack up and move.  The Buyers made the arrangements to get your money there on time.  The contract calls for the house to be empty and broom swept, yet still my Seller begs for more time.  We did accept $400.00 dollars from the Seller with a signed agreement that everything would be out by December 24, 2009.  That date has come and gone.  The Seller was planning to leave some things in the shed, thinking that we would dispose of them.  This is why real estate agents put money in escrow when some issues are not resolved at the settlement table.  Buyers and Sellers are more motivated to meet deadlines when money is involved in the outcome.

   The investment house is “officially” ours.  I say officially because the contract is out of the attorney review period (3 business days in New Jersey).  Since we are purchasing the house in “as is” condition, we will not be having a home inspection, although I did have our contractor look at the house prior to the end of the attorney review period so that we could get out of the contract should something been terrifically wrong.

   I have sent the contract to the title company.  The first thing they will do is a search to make sure that there is clear title to the property.  That means no one that owned the house in the past, or a relative, has a claim of ownership against the house.  They will also run a search against the Buyers and Sellers to make sure that there are no liens against them that would need to be paid with the proceeds from the purchase.  New Jersey has become very strict about back alimony and child support.  I think it’s a good thing. 

   The title company will also pro-rate the taxes to the day of settlement and in this case the water and sewer bill.  Because we are paying for the house with cash, we will not be required to show proof of insurance.  Insurance is usually required by your mortgage company because they want to know if something happens to the house, that you will be able to re-build and keep up with your mortgage payments.  We will get insurance even though it is not required because my husband will kill me if we don’t have it.  We will not be required to have flood insurance.  That is also a requirement of your mortgage company, not the title company.

   By paying cash, we will significantly lower some of our immediate out of pocket costs.  There is no mortgage application fee, appraisal fee, credit check fee, flood zone check fee, flood insurance required or hazard insurance.  (Although we are planning to get insurance on the house.)  Also, the mortgage company usually requires a Buyer to pay 1 full year of hazard insurance and then they escrow three additional months of payments.  They will also escrow three months worth of taxes.  It does add up to the cost of buying a house.

  We will have to pay, title insurance, to record the deed, pro-rated taxes, water and sewer.  Also there is usually a charge for holding the settlement and the cost of the settlement officer to notarize all documents.

   As I said, it is almost ours…..