Admit it. Just like us, you are addicted to those HGTV fixer-upper shows. Who doesn’t love the adorable Chip & Joanna Gaines or the charming Property Brothers? Shows like these have certainly romanticized the idea of buying a fixer upper and turning it into your dream home. And they make it look oh-so-easy. But before you run out and buy your “diamond in the rough,” ask yourself these important questions.
WHEN IS IT RIGHT?
Buying a fixer upper is great if you are trying to buy into a certain neighborhood but getting priced out.
Going for the a fixer upper in your dream neighborhood is the perfect way to get into an area you may not be able to afford otherwise.
Another time to take the fixer plunge is when you are not finding your ideal home in the existing inventory.
The ideal fixer upper requires mostly cosmetic improvements such as paint, removing carpet and installing hardwoods or refinishing hardwoods, replacing lighting fixtures and doors. Here is a handy list of the easy fixes and the ones that will end up costing you big time.
WHAT TO LOOK FOR WHEN BUYING A FIXER UPPER
When touring possible fixer uppers, look for these things:
- Good Bones – How is the overall layout? Do you like the style of the home? Is the construction good quality?
- Roof Condition – How old is it? Will it need to be replaced soon?
- Structurally Sound – Are there any foundation issues? Do you see any water damage?
- Windows – Will they need to be replaced?
- Electrical – Is the electrical panel upgraded or will you need to do this?
- Major Systems – How about the heating and cooling systems? Will you need to replace these as well or install air conditioning or gas heat?
- Red Flags – Do you see mold, rotting wood, or poor DIY fixes? Does the house have a peculiar smell?
- Restrictions – if you are house hunting in a historic district, there may be restrictions on the work you have in mind. Check with the local jurisdiction and historic district before proceeding.
DO YOUR HOMEWORK
Be sure to get all of the appropriate inspections before sealing the deal on your fixer upper. Not only a general home inspection but also asbestos, termite, chimney, sewer, pool inspections. You want to know exactly what you’re dealing with when taking the plunge.
WHAT IS THE BUDGET?
Next, get a sound estimate from a trusted Realtor of both the home’s current fair market value, as well as its potential worth. Now determine how much it will take to get the house to that point. It’s always wise to build in a contingency fund of at least 10% to deal with unforeseen issues. If the home is older, plan on 15-20%.
If you are looking at a house that requires a kitchen and/or bathroom renovation before you move in, you should ask yourself if you truly have the enough money to do these renovations right. These particular projects can be expensive but do can pay off when you go to sell.
Keep in mind, you don’t want to over-improve. Look at the homes in the neighborhood to determine what you need to do to bring the home you are considering up to par.
Once you know the approximate renovation amount, assess whether you have these funds or would need to do some sort of loan.
CAN I DEAL WITH THE HEADACHES?
Home improvement projects almost always take longer than expected. Can you live in a construction zone? If not, can you afford two house payments?
Are you handy? Doing much of the work yourself will save you considerable money. And while you may think it may not save time, you will spend a great deal of time researching, securing and supervising contractors (who can sometimes cause additional headaches).
How do you handle surprises? Inevitably, problems arise when walls are opened, floors are removed etc. Projects tend to snowball into bigger and more expensive ones. If you don’t handle this sort of stress well, the fixer upper route may not be for you.
THE BOTTOM LINE
Buying a fixer upper can be a fabulous opportunity to create your dream home, build equity, and/or be able to live in your desired neighborhood. But it’s not for everyone. Ensure you have the time, money and energy to handle the work and the hiccups and expense it will bring.
If we can help you crunch the numbers or talk through the process of buying a fixer upper or if you have your eye on potential project, please reach out. We are always happy to help!
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