Do Not Buy a Fixer Upper Until You Read This

Do Not Buy a Fixer Upper Until You Read This

When it comes to finding a bargain in real estate it typically is a fixer upper that requires additional work but is for sale at a very low price. It’s little wonder that such homes are desired by those who do not mind taking the time to repair them. However, do not buy a fixer upper unless you know about all the things that can go wrong first.

Have the Home Inspected

Even a fixer upper will need to be inspected by a professional and licensed home inspector in order to catch all of the flaws that need to be addressed. All too often, people get an overview of the home by the seller and do not take the extra step of getting a home inspector to see if there is anything else that needs to be addressed. For example, a wall that needs repairing might also be hiding termite damage that may be destroying the entire structure of the home.  The home inspection is also great to have to help create the scope of work.

Choose a Home that Only Needs Cosmetic Fixes

Keep in mind that there are two types of fixer upper homes, those that can be quickly repaired and those that will cost far more to repair than you may imagine. If you are a first time investor or a homeowner looking for a good deal, the type of fixer upper you want is the ugly house that needs cosmetic changes such as a new coat of paint, refinishing the floors, new cabinets, and new tile in the bathroom.  You do not want to buy a gut rehab where you have to replace all the electrical and plumbing systems or buying a house with structural issues.

Figure Out the Cost Beforehand

Do not buy a fixer upper until you have figured out how much all the repairs will cost. You will want to create a scope of work which details all the work that you need done.  Once you have a complete scope of work with all your finishes chosen, you should get bids from at least three licensed contractors for all the work to be completed based on the scope. This way you can figure out whether the repairs will fall into your budget before you purchase.

Get the Best Price Possible

Considering that most fixer upper homes are at deep discounts, you can find some real bargains especially if the home has been on the market for a while. You can set up a search for homes that have been listed for 6 months or more which means the sellers are probably pretty motivated.  An easy way to ask for discounts is to report what the home inspector of structural engineer has reported about the home and asking for a discount that reflects that estimated cost. It is good to get retail bids for negotiating, for example, I once got a quote from Pella to replace all the windows on a house and the quote was over $100,000!  The same window job from my window contractor was only $19,000 but I used the quote for over $100,000 in my negotiations.

Get the Best Loan for Your Needs

The renovation loan is generally the best kind to get when you are doing extensive work on a property unless you have saved up your own money to do the job. The 203k loan is a program rising in popularity and backed by the Federal Housing Administration (FHA). While you are limited on what you can borrow, they are available for those will less than the best credit and offer lower interest rates to boot. You can also talk to local banks who do construction loans or hard money lenders as well.  See a list of hard money lenders here.

Do not buy a fixer upper until you know how much the repairs will cost, until you verify that you are getting a deal, and have all the funds necessary to fix it up completely.