Many buyers start their home search with the idea that a fixer-upper will save them money, make them money and give them their dream home all in one. Unfortunately, many discover that buying a fixer-upper home isn’t for everyone. An older house with a lot of character may look great, but a professional inspector may find issues that make it a more expensive home than you think. In addition, you may discover that that fixer-upper brings repairs that are beyond your abilities. You need to be sure that you have the right mixture of skills and the finances to carry out the repairs.
Here are somethings to consider before you leap into buying that fixer-upper “dream home:"
Talk to Your Lender About the Costs
The idea of saving money as you buy and making money as you sell motivates lots of buyers considering a fixer-upper. There are the lipstick on the pig fixer-uppers and then there are the total gut and rehab projects. You can probably handle the expense of the lipstick on the pig home in your monthly budget - a new stove this month, three gallons of paint next month. If it involves major outlays like building or moving bathrooms or finishing off a basement and you have no construction skills, you need to talk to your lender about how you are going to pay for your dreams. Big projects are expensive and if you don't roll their costs into the initial financing, you are going to be paying for them with cash out of pocket. That can be very expensive and slow down the pace of your renovation. Do you really want to be living in a home with walls torn out and pipes exposed while you are saving money for the next project? Talk to your lender about the possibility of a renovation loan like a FHA 203K loan. Be mindful that in the midst of the COVID-19 pandemic FHA 203K loans are harder to get and will slow down the loan process. In short, make sure you know how you are going to pay for your dreams so they don't become a nightmare.
Plumbing, electricity, the roof and structural issues in the foundation are some things a home inspector should prioritize. They’ll advise you on what you need to replace immediately, what you can wait on or what you don’t need to fix at all. The inspection will help identify those issues which are going to cost you money up front. Even though you are planning on renovating that fixer-upper, you definitely do not want to skip the inspection. You might think that the property is a lipstick on a pig fixer-upper only to discover that it is a signficant renovation with structuaral faults that will cost big money.
Walk through the house with the inspector and check on the expected lifespan of the various home systems. If an air conditioner, furnace or other major item needs to be fixed, get a cost estimate before proceeding with the home purchase.
Buying a fixer-upper can mean more than repainting the walls or remodeling the kitchen. If it doesn’t have enough room, you may want to add on to the house. Or, you may just want to knock down a wall to expand the kitchen. Is that a load-bearing wall? Can it safely come down?
Check with your city’s building department to see if you can expand. Factor the cost of applications, permits, inspections and the time delay into your budget and your plans. If the home is in a historic district that could limit modifications.
Ask a Contractor
Before buying a fixer-upper home, hire an architect or contractor to look at the house with you so they can give you estimates on repairs or additions.
Many contractors will give you bids for free, so you should get a few opinions before deciding who to work with. Architects may charge an upfront fee.
Some cities offer tax credits for improving their property value. If the home is in a historic district, there might be tax benefits to restoring it to its original condition.
The local power company may offer rebates for installing solar panels, dual-pane windows or other energy-saving features. State and federal governments may also offer tax rebates for energy improvements.
The bottom line is don't let the low price of a fixer-upper house entice you too much. There could be problems under the surface that may put it well beyond your budget.
If you are looking for a dream home - whether a fixer upper or a renovated home - give the Lise Howe Group a call at 240-401-5577 or email us at email@example.com