Buying Distressed Property

Real Estate Agent with Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Huntsville AL

Buying Distressed Property

I would like to preface this post with an invite from all Mortgage professionals to add to, correct or clarify anything in this post. 

So you think you want to buy a distressed or fixer-upper property?  I've bought several over the years, my first was a 100 year old Victorian complete with gas lights, an old octopus type furnace (at least that's what we called it) wrapped with asbestos and everything was sinking to the center of the house...about six inches out of level (not the home below).  That house was a real eye opener and I learned a lot about remodeling and keeping to a budget...about a year or so later I managed to sell that home at a profit and my real estate career had begun.  It was a different time then regarding financing of investment property and safety measures required to remodel a home...which were pretty much non-existent...I'm specifically referring to the dismantling of that asbestos wrapped furnace.

Buying Distressed Property

Distressed or fixer-uppers can be found in most any community.  A fixer-upper has simply gone without regular maintenance and therefore suffers a lower market value than other homes in the area that have been maintained.  While investors or owner occupants will buy in any community, it's generally accepted that you should buy the least attractive or desirable home in the best possible neighborhood.  A good real estate agent or Realtor can help to determine what an expected market value for your purchase would be once work was complete.  So you would need to determine what purchase price plus estimated costs to repair would be a feasible endeavor.  

If you are not paying cash for your fixer-upper and require a mortgage, depending on the degree of the homes distress you may or may not be able to get financed.  However, it may be possible to take advantage of  the Streamlined 203(k) where you may be eligible to borrow in addition to the purchase price of the home up to $35,000 for needed or required repairs with a minimal 3%-5% down payment.  The "Streamline" is meant for uncomplicated rehab work such as HVAC, flooring, plumbing, electrical, septic systems, lead-base paint stabilization or removal, etc., it's not intended for work requiring architect plans, consultations, engineers.

So it is possible to get into a home combining additional money needed for repairs with the primary loan/mortgage.  Chances are that it wouldn't work for the home above, but at the very least if you are considering buying a distressed or fixer-upper property, call a Realtor and they will work with you and point you in the right direction and that direction will probably be towards a lender or mortgage person who's current with all the available loan products as well as new rules and regulations affecting the loan process.


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Nick T Pappas

If you need a knowledgeable real estate professional in Madison Alabama or Huntsville Alabama area, why don't you let me Google that for you! I also know outstanding agents in all states and Canada should you need help relocating to a new area.

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Christine Koch
eXp Realty - San Antonio, TX
Realtor - eXp Realty San Antonio TX

Nick nice picture!  Investing in fixer uppers is still a very lucrative business but the buyer really needs to have a good knowledge of contracting and costs.

Jul 17, 2011 09:10 AM #1
Daniel H. Fisher (704) 617-3544 - Charlotte, NC
MCRP - Charlotte Real Estate, NC or SC

determining what purchase price plus estimated costs to repair would be a feasible endeavor is the first step towards making a real estate investment

Jul 17, 2011 09:55 AM #2
Maria Morton
Chartwell Kansas City Realty - Kansas City, MO
Kansas City Real Estate 816-560-3758

lol - Nick, that is a GREAT photo depicting a Fixer-Upper!

Jul 17, 2011 10:57 AM #3
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Nick, I will just add one thing FHA 203K Streamline Loans are for properties that are going to be owner occupied properties.  FHA does not do investment properties.

And by the way you are right the house in the picture would not qualify for a 203K Streamline loan, it would even have a hard time qualifying for a Full 203K.

Jul 17, 2011 03:00 PM #4
Ed Silva
RE/MAX Professionals, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

Nick, that home might be listed in some MLS systems as 'requiring a little TLC'. The 203K options are an excellent way for a home buyer to get into a house and have some fix up capital as well

Jul 18, 2011 02:26 AM #5
Karen Kruschka
RE/MAX Executives - Woodbridge, VA
- "My Experience Isn't Expensive - It's PRICELESS"

Nick    I will never sell one unless the buyer has a contractor of his or her choice evaluate the property or unless the buyer is a contractor

Jul 18, 2011 03:11 AM #6
Nick T Pappas
Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Hun... - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource

Christi-get the home at the right price and know what you'll have to put into it.

Daniel-of course knowing what the market value after repairs is also important.

Marie-interested???  I'm sure I can get you a great deal on it!

George-of course you are absolutely right and maybe I should edit that out...I didn't mean to give that impression. of those truth in advertising issues!!

Karen-yes, this is not for the uninformed or inexperienced.

Jul 18, 2011 05:42 AM #7
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Nick T Pappas

Madison & Huntsville Alabama Real Estate Resource
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