Answer These 5 Questions Before Buying a Fixer-Upper

Buying a fixer-upper house can be a grand romantic gesture. In the best case, you get a home with history and character. But some buyers find that history and character turn into old age and problems. Before you sign the closing documents, make sure you've fully investigated the fixer-upper and the money and time it will take to transform it into your dream house.

 

Here's a checklist of questions to ask yourself – and others – before you commit to the purchase:

 

When was the home built?

Some fixer-uppers aren't that old – they're just in need of extensive repairs or renovations. But others are older homes that might even have been fairly well-maintained. Still, the exact age of the house matters, particularly when it comes to home insurance.

 

Yes, home insurance can be one of those things you might not think about when you're house hunting. But your lender is going to require you to get it before you close on your mortgage, and there are some factors to keep top of mind.

 

If the home was built before 1945, you might need historic home insurance. If it was built before 1900, you'll almost certainly need it. Here's the thing: Historic home coverage can cost about 20% more than standard coverage. This varies by provider, so check with several insurance companies before making a decision.

 

Is there structural damage?

 

You'll need to get a home inspection early in the process to determine the state of the house. While the inspection typically is conducted when you sign a contract to purchase, there are too many potential problems with a fixer-upper that an inexperienced eye might miss and that could influence your decision. You'll want to move the inspection up.

 

Here are a few issues an inspector might find:

 

•        A cracked ceiling
•        Shifts or cracks in the foundation
•       Mold
•       Rotting around windows or doors
•       The presence of lead paint or asbestos
•       Termites

 

Repairing any of these scenarios could take major investments of time and money – you'll need to get an estimate from a contractor to know what you're getting into and whether it fits your budget.

 

Are you in a historic district?

If the fixer-upper is older, you'll need to check whether it's in a designated historic district. That could determine the materials you can use when you're doing repairs and even the type of repairs you can do. Even if you're not in a historic district, you should check the zoning regulations and the building code for the property to make sure there are no surprises there if you need to make renovations or repairs.

 

Has the roof been replaced?

This is a big one, for many reasons. Replacing the roof – experts suggest it be done every 20 years – will cost you thousands of dollars on top of the purchase price.

 

Conversely, if the roof has been replaced in the past 12 years, it could get you a discount on home insurance, for example. Why? Roof damage is a factor in almost all wind- and water-related insurance losses, and the average payout in those claims is more than $7,700, according to the Insurance Information Institute. The newer the roof, the more likely it is to survive storms intact.

 

How about the plumbing and electrical system?

This is something else you'll find out during the inspection. Plumbing doesn't last forever, particularly for systems that aren't maintained well. And bad plumbing comes with a risk of water damage from leaky or broken pipes, and that could lead to mold. These would be costly repairs. While updating the plumbing also could be costly, there could be insurance benefits. The average claim for water damage is nearly $7,500.

 

Older electrical systems – in particular those that use fuse boxes instead of circuit breakers – can raise the chance of fire. A new system, while costly, could prevent you from a devastating loss. The average insurance claim from a fire is more than $37,000.

 

There's much to like about the notion of buying a fixer-upper. You often can buy more house for your dollar, and there sometimes is great charm in living in an older structure. But understand that the purchase price is just part of the deal. Make sure you don't forget the renovation costs and the higher insurance premiums you'll pay at least until the work is done.

 

 

Does that mean you shouldn't chase your dream? Of course not. But you should be confident before you buy that you can handle what it will take to make the dream reality.

 

 

HomeInsurance.com is an online resource for homeowners and drivers across the country. Offering comparative automobile and home insurance quotes, consumers rely on HomeInsurance.com for the most competitive rates from top-rated insurance carriers. The HomeInsurance.com blog, provides fresh tips and advice on a range of financial topics to help homeowners and homebuyers make educated decisions about their insurance purchases.