Buying a Fixer-Upper – 5 Facts to Consider

Fixer Upper House That Needs a Lot of WorkMost buyers are lured by the low asking prices and the opportunity to buy a property they can afford in a good neighborhood, school district or with a larger lot to expand. However, it’s often less costly to buy the more expensive house.

Here are some reasons why:

#1 Fundamental repairs to foundation, structure, plumbing, electrical, roof, etc.can be huge ticket items. These issues need to be addressed first. Meanwhile buyers are really dreaming about on the granite counters, designer paint colors and creating their spa bathroom retreat with all the luxury bells and whistles they see on HGTV.

#2 I work with excellent contractors who really know the costs of remodeling; however, even so they cannot predict all unforeseen ‘surprises.’ Unanticipated costs of 10%-25% are more the norm than the exception. For instance, Houselogic.com states a middle-of-the-road bathroom remodel runs from $100-$200 per sf. An average kitchen costs approx. $60,000. and HGTV estimates a gourmet kitchen over $80,000. Buyer frankly can run out of money.

#3 Yes, there is the FHA 203K loan. But, there are specific time lines, approvals, appraisal required to utilize this loan program. mortgage company guidelines restrict how much money a buyer qualifies to receive. Also, good contractors are busy in summer making it hard to coordinate the FHA required estimates and deadlines.

#4 Fixers tend to be older homes. And with older homes come potential health and safety risks such as lead based paint or asbestos. Remediation can be costly and your contractors must have the appropriate EPA certification.

#5 Sellers would often rather find a buyer using all cash that can close quickly with no contingencies rather than working with a 203K loan scenario.

After major renovations are complete buyers will have a custom home, exactly to their liking and tastes, but it won’t come cheap. And, I always caution clients about over improving. An option to consider might be a more ‘cosmetic’ fixer as old appliances, fixtures, faucets, wallpaper, shag carpet and linoleum are easier and cheaper to renovate!

Ready to go “bargain” hunting?