Repairs May Cost More The You Think

By
Real Estate Agent with RE/MAX Results MN#20344949 WI#93113-94

How much does it cost you to get into a home? There are some good loan programs like USDA that in certain areas allows you to get a zero down loan. If you are able to negotiate the closing costs to be paid by the seller often you can get away with putting just the earnest money into the transaction. Earnest money is typically $1000. Even if you are getting an FHA loan the down payment is 3.5%, again for buyers staying in say the price range of $125,000 less they are looking at maybe $5000 to purchase with the seller paying closing costs.

Are the homes at $125,000 nice homes?  Working with buyers in Isanti, Sherburne, Anoka counties and the surrounding areas in Minnesota the homes for $125,000 are normally going to need work.  A townhome will probably be move in ready but when you talk about single family homes they will need work.

Buyers looking in the price range of $125,000 and under... If your looking in this price range you need to expect repairs like paint and carpet at the minimum.  If your to higher it out its going to cost your around $8000 on average to get the work down on say a 2000 sq ft home.  Not to mention do you need appliances?  Is there other deferred maintenance like windows?  Is the basement even finished?

Costs to buy these homes can add up quickly... Even with minimal down if you have a few items to do you are perhaps looking at $15,000 -$25,000 of repairs. Sure some homes are move in ready enough to do things over time, but just know there are costs to think about.

Move in Ready Homes... Thus many buyers choose to go up to the next level of home price. In the areas I work that might be $150,000 to $175,000. The house is clean, low maintance and move in ready without all the work. The same loan works. Cash to get in is real low.  Assuming you qualify for the higher amount.  You may be spending $200 more a month on a monthly payment if you pay $40,000 more for the home.  However, $200/m is a better option then THOUSANDS more upfront on homes that need immediate fix up.

My advice!  If you don't like to do work and can qualify for the higher amount. Or if you don't have a lot of cash on hand but qualify for the higher house price range then your likely going to be happier just looking at those homes.  Look at a couple homes that need work and then compare with the move in ready homes.

If its a low price home. Its going to need work.  The low price homes draw people in but find a trusted Realtor that can easily discern what makes sense for you to look at based on your needs, wants and goals.

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Chuck Carstensen is a Realtor with RE/MAX Results in Elk River and Cambridge, MN.  Helping buyers, sellers and investors in great Minnesota counties like Sherburne, Isanti, Wright, Anoka, Chisago, Hennipen and Mille Lacs. He is a Certified Distressed Property Expert (CDPE).

Contact Chuck by emailing him at chuck.carstensen@results.net or by phone at 612-290-3809. 

 

Comments (1)

Charlie Ragonesi
AllMountainRealty.com - Big Canoe, GA
Homes - Big Canoe, Jasper, North Georgia Pros

This is good advise Chuck. I tell people you don't know what is inside the walls. Rapairs can really mount up in time and cost. Liked the post and the analysis

Jul 17, 2013 04:23 AM