Let's review the Pros and Cons for you as a First-time Buyer looking for a starter home.
Pros for Buying a Fixer-Upper
- An opportunity to save money by acquiring a property that requires some TLC.
- Your bargaining power is increased if offers have not been made by the seller.
- The freedom to create the home of your dreams (… a blank slate …) comes with the opportunity to renovate an outdated fixer-upper.
- You are avoiding the costs of updates that have been customized by the seller to suit their personal style or what they thought or they think buyers would want.
- The initial investment in a fixer-upper can be significantly reduced if you take care of the updates yourself.
- By taking on the challenge of fixing up a fixer-upper, you will gain personal satisfaction, self-assurance, and confidence in your abilities even if you weren’t already a DIY enthusiast.
Cons for Buying a Fixer-Upper
- Seller may not be willing to offer additional concessions if a house is selling under the market value price.
- Buying a fixer-upper "as is" and on a "take it or leave it" basis increases the likelihood that sellers will not reduce their price for repairs.
- In comparison to other homebuyers, more upfront costs (… yes, also budget for the unexpected…) are incurred when purchasing a fixer-upper property. If you need to generate more cash for renovations, you might look for an alternative source of financing like a renovation loan.
** Is the home eligible for FHA’s 203(k) Loan Program or Fannie Mae’s HomeStyle Renovation Loan? - If the house requires extensive repair work, it may be difficult to obtain an appraisal value for the sale price. Be ready to reevaluate the deal: accept a lesser offer, move on, or raise your own funds as a last resort. If you make an offer, be sure it includes inspection and appraisal contingencies.
- Buying a piece of property that you can turn into your dream home is a trade-off when buying a fixer-upper home at a lower purchase price.
Key Questions to Ask Yourself When Thinking of Buying a Fixer-Upper
- Are you okay with living in a construction zone, if applicable?
- Will you be living somewhere else while planning on making improvements to flip the property and make a profit?
- After the renovation process is complete, will you be using the home for income property purposes and renting it out? In that case, does the location appeal to potential renters?
- Are you able to take on the task of updating a property that needs repair on your own time?
- If you're aiming to finish the project before putting the property up for sale or rent, can you guarantee it will happen on time? (i.e. You already have a renter waiting to move in. You’d like to secure a continuous renter for the snowbird season.)
- Despite the ability of beginner DIY-ers to carry out many home improvements, certain tasks should be left to professionals. Be cautious - don't take on more than your abilities can handle!
- By doing many upgrades yourself, you can keep costs low and save money while still receiving regular updates on your property. But, you want to ensure that your budget can accommodate the contractor's services for the bigger jobs past your expertise - best to get some initial quotes early on before settling on the fixer-upper home. They can help price out labor costs and materials.
Final Tips before you Purchase a Fixer-Upper
Don’t Delay on those Permits:
Procrastinating on obtaining permits for a fixer-upper project can result in delays. Applying for them and waiting for inspections can prolong your renovation process.
Necessary Permits are usually for:
- Structural work
- Window installation
- Room additions
- Sheds and garages
- Fences
- Plumbing and electrical work
When to Walk Away from Making an Offer on a Fixer-Upper
- Is there a solid foundation?
- Any leaks that lead to mold?
- How old is that roof?
- Don’t skip on those pests - termites!
- Get several inspectors’ opinions
- Have the electrical updates to the older home been installed and up to code?
- What’s that smell? Rotten eggs or too much Lysol may mean a plumbing issue.
- Everyone in our Tri-State area needs an HVAC in working order. Get it checked.
- Do you envision knocking down walls? If so, proceed with caution when it comes to asbestos!
Is the High Risk, High Reward Fixer-Upper Right for You?
Wishing you success on your house-hunting adventures!
Let's connect if you're ready to find a fixer-upper to make into your dream home.
Buying or Selling. Let Us Guide You Home.
