Housing prices can be unbelievably high in a seller’s market. This makes purchasing a fixer-upper even more attractive. Fixer-uppers require vast renovations and repairs but are usually much more affordable than other homes. In fact, because of how good a deal you’re able to get on fixer-uppers, many individuals see these as a great alternative to move-in-ready homes.
While buying a fixer-upper comes with challenges such as financing repairs, it’s also advantageous because the house comes at a reasonable price and has less buyer competition. Of course, buying a fixer-upper is a more complex process since you have to take care of renovations and repairs before you can move in. First-time homeowners may not fully understand what goes into making such a purchase. This article by Robert DeFalco Realty delves into what you need to know before buying a fixer-upper. Armed with this information, you can ensure that buying such a property is right for you and your unique needs.
What Are Fixer Uppers, and Why Do People Invest in Them?
A fixer-upper is usually an older home that isn’t livable and requires renovations and repairs in order to be considered so. The repairs needed can vary from cosmetic fixes like new tiling or flooring to structural issues like cracks in the foundation or other serious issues like plumbing or electrical work problems. The following are some of the many reasons people choose to purchase fixer-upper houses rather than turnkey homes:
- They’re much more affordable
- Depending on the cost required for upgrades and repairs, they can make good investments
- Buyers have complete control over renovations and can customize the home to their needs
- There’s less buyer competition and fewer bids to compete with
What You Must Know Before Buying a Fixer Upper House
Before investing money into a fixer-upper, there are a few precautions you must take and a few things you must account for. Consider the following before making your final decision.
Home Inspection Details and Scope of Repairs
A home inspection is critical before buying any house. However, it’s even more important when buying a fixer-upper. Bringing engineers and contractors during a visit can help you better understand what repairs are required. If any flaws need extensive repairs or can cause problems later, you should know sooner rather than later.
In doing this, it’s essential to look at the different aspects of the home, and you should opt for more than a simple home inspection. Some of the other inspections you may want to consider include a pest inspection, a roof certification, a sewer line inspection, and a thermal imaging inspection to check for issues such as moisture damage, air leakage, electrical component issues, and insufficient insulation.
The different components of the home you should consider thoroughly during home inspections include the following:
- Air conditioning and heating systems (HVAC)
- The roof
- Steps, decks, and the driveway
- Plumbing and sewer systems
- Electrical systems
- Foundation and structural soundness
- Environmental issues
- Kitchen and bathroom
Paying special attention to these different components will allow you to understand the full scope of the repairs required and how to budget for these repairs. Making cosmetic changes is simple, but if the home’s foundation, membrane, or structure requires extensive repairs, the fixer-upper may not be worth the investment. The only time fixer-uppers with structural issues can be deemed a good investment is when you’re getting the property at an excellent price and have accounted for the repairs accordingly.
Cost of Repairs and Renovations
When it comes to fixer-uppers, renovations and repairs can be quite extensive. You must price the cost of the repairs and renovations you’re going to make before purchasing the home to determine if the price you’re paying is a good one. Remember – the cost of the fixer-upper itself is only the starting point, and you must account for inspection costs, closing costs, construction costs, etc., to come up with a final number.
In addition to pricing the supplies and the cost of labor, it’s essential to add an extra 10-20% for incidentals as any number of problems may arise and require additional expenses. Take permit costs into account as well. Depending on the property and the work you must do, you may require a permit. Many first-time buyers simply begin work without a permit to save on costs, but this backfires because it causes problems when they try to resell the house. Getting permits can be time-consuming and may involve a lot of additional work. However, getting them yourself or having your contractor arrange them is important.
Depending on how much money you’ve saved, you may not have enough money for the down payment and the repairs. Instead of going through your savings entirely, think of financing options in detail. Many people who buy fixer-uppers get home improvement loans to cover these costs. The different loans available for fixer-upper homes include construction-to-permanent loans, mortgage, and home equity loans, and different construction and mortgage loans.
It’s important to know your financing options well so you can include remodeling costs into your overall loan. Some of the different financing options and programs you can take advantage of include the following:
- Fannie Mae HomeStyle Renovation Mortgages
- VA Rehab and Renovation Loans
- FHA 203(K) Loans
- Freddie Mac CHOICERenovation® Mortgages
Robert DeFalco Realty Can Help You Find the Ideal Fixer Upper House
Buying a fixer-upper can be tempting because of the low upfront cost. However, in addition to being affordable, these properties are also time-consuming and require a lot of work and financial commitment. Buyers must consider both advantages and disadvantages of fixer-upper houses before making a significant investment. However, if you’ve taken all this into account and have decided a fixer-upper is the right choice for you, ensure you have the right people guiding you through the process. The buyer’s agents at Robert DeFalco Realty can ensure you get the best price possible for your purchase. This can set you up for success as you navigate renovating your new home. Call us at 718-987-9700 or contact us here to get in touch with our experienced real estate agents. You can also visit us at our various New York offices, and we can get the process started.