Tips for Buying a Fixer Upper
Buying a Fixer-UpperTrying to decide whether buying a fixer-upper house is a good idea? Follow these seven steps, and you’ll know how much you can afford, how much to offer, and whether buying a fixer-upper house is right for you.
Decide what you can do yourself
TV remodeling shows make home improvement work look like a snap. In the real world, attempting a difficult remodeling job you don’t know how to do will take longer than you think and can lead to less-than-professional results that don’t increase the value of your fixer-upper house.
Do you really have the skills to do it? Some tasks, like stripping wallpaper and painting, are relatively easy. Others, like electrical work, can be dangerous when done by amateurs.
Do you really have the time and desire to do it? Can you take time off work to renovate your fixer-upper house? If not, will you be stressed out by living in a work zone for months while you complete projects on the weekends?
Price the cost of repairs and remodeling before you make an offer
Do you really have the time and desire to do it? Can you take time off work to renovate your fixer-upper house? If not, will you be stressed out by living in a work zone for months while you complete projects on the weekends?
Price the cost of repairs and remodeling before you make an offer
Get your contractor into the house to do a walk-through, so he or she can give you a written cost estimate on the tasks to be done.
If you’re doing the work yourself, price the supplies.
Either way, tack on 10% to 20% to cover unforeseen problems often present in a fixer-upper project.
Check permit costs
If you’re doing the work yourself, price the supplies.
Either way, tack on 10% to 20% to cover unforeseen problems often present in a fixer-upper project.
Check permit costs
Ask local officials if the work you’re going to do requires a permit and how much it costs. Doing work without a permit may save money, but it’ll cause problems when you resell your home.
Decide if you want to get the permits yourself or have the contractor arrange for them. Getting permits can be time-consuming and frustrating. Inspectors may force you to do additional work, or change the way you want to do a project, before they give you the permit.
Factor the time and aggravation of permits into your plans.
Double check pricing on structural work
Decide if you want to get the permits yourself or have the contractor arrange for them. Getting permits can be time-consuming and frustrating. Inspectors may force you to do additional work, or change the way you want to do a project, before they give you the permit.
Factor the time and aggravation of permits into your plans.
Double check pricing on structural work
If your fixer-upper home needs major structural work, hire a structural engineer for $500 to $700 to inspect the home before you put in an offer so you can be confident you’ve uncovered and conservatively budgeted for the full extent of the problems.
Get written estimates for repairs before you commit to buying a home with structural issues.
Don’t purchase a home that needs major structural work unless the following conditions apply:
You’re getting it at a steep discount
You’re sure you’ve uncovered the extent of the problem
You know the problem can be fixed
You have a binding written estimate for the repairs
Check the cost of financing
You’re sure you’ve uncovered the extent of the problem
You know the problem can be fixed
You have a binding written estimate for the repairs
Check the cost of financing
Be sure you have enough money for a downpayment, closing costs, and repairs without draining your savings.
If you’re planning to fund the repairs with a home equity or home improvement loan, do the following:
Get yourself pre-approved for both loans before you make an offer.
Make the deal contingent on getting both the purchase money loan and the renovation money loan, so you’re not forced to close the sale when you have no loan to fix the house.
Consider the Federal Housing Administration’s Section 203(k) program, which is designed to help home owners who are purchasing or refinancing a home that needs rehabilitation. The program wraps the purchase/refinance and rehabilitation costs into a single mortgage. To qualify for the loan, the total value of the property must fall within the FHA mortgage limit for your area, as with other FHA loans. A streamlined 203(k) program provides an additional amount for rehabilitation, up to $35,000, on top of an existing mortgage. It’s a simpler process than obtaining the standard 203(k).
Make the deal contingent on getting both the purchase money loan and the renovation money loan, so you’re not forced to close the sale when you have no loan to fix the house.
Consider the Federal Housing Administration’s Section 203(k) program, which is designed to help home owners who are purchasing or refinancing a home that needs rehabilitation. The program wraps the purchase/refinance and rehabilitation costs into a single mortgage. To qualify for the loan, the total value of the property must fall within the FHA mortgage limit for your area, as with other FHA loans. A streamlined 203(k) program provides an additional amount for rehabilitation, up to $35,000, on top of an existing mortgage. It’s a simpler process than obtaining the standard 203(k).
Ask your REALTOR® if it’s a good idea to share your cost estimates with the sellers, to prove your offer is a fair one.
Don’t rely on your friends or your contractor to eyeball your fixer-upper house. Hire professionals to do these common inspections below:
Home inspection. This is key in a fixer-upper assessment. The home inspector will uncover hidden issues in need of replacement or repair. You may know you want to replace those 1970s kitchen cabinets, but the home inspector has a meter that will detect the water leak behind them.
Radon, mold, lead-based paint
Septic and well
Pest
Most home-inspection contingencies let you go back to the sellers and ask them to do the repairs, or give you cash at closing to pay for the repairs. The seller can also opt to simply back out of the deal, as can you, if the inspection turns up something you don’t want to tackle when buying a fixer-upper home.
Radon, mold, lead-based paint
Septic and well
Pest
Most home-inspection contingencies let you go back to the sellers and ask them to do the repairs, or give you cash at closing to pay for the repairs. The seller can also opt to simply back out of the deal, as can you, if the inspection turns up something you don’t want to tackle when buying a fixer-upper home.
If any of these situations happens, this isn’t the right fixer-upper house for you. Go back to the top of this list and start again.
Contact your local RE/MAX Realty Center Agent Stacey Guzanick 262.490.3696 / Guzanick@gmail.com if you have questions about buying a house or selling one. I can guide you toward your next home.
Looking to purchase a home, visit www.HomesWithStacey.com.
See You at Closing!
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