The Realities of a Fixer-Upper

Many home buyers consider getting a fixer-upper. It’s hard not to get excited by the lower price tag, and when a house needs updating, you can custom-tailor its renovations to create your dream home. Don’t get me wrong, there are some great benefits to buying a TLC property, but there is a lot of room for disaster. Below are a few pieces of advice.

1) Learn as much as you can about the property before placing a bid- Here are the big questions: Is the house vacant or occupied? If vacant, how long has it been vacant? Is the seller disclosing any information in advance about the property’s condition?

Houses need people living in them. The longer a property is vacant, the likelihood of major problems grows. I’ve seen a leaf-filled gutter cause major mold issues, and a family of squirrels wreak havoc on an attic. If the seller is not the owner (foreclosure or estate sales are common with fixer-uppers), you will probably get very little information from them about the home’s history or condition. If this is the case, don’t scrimp on home inspections, which are vitally important to learning about the home’s condition.

2) Price will make or break your happiness with a fixer-upper- Your purchase price must leave ample room in your budget for needed repairs. Don’t buy a mansion at the top of your price range that needs a new roof and a host of other repairs. If you can’t afford to make the immediate repairs, you will be miserable after settlement! Your dream of a ultra-modern kitchen will be bitterly pushed aside as you struggle to treat termites, fix drainage issues, and knock down ruined walls. Bid low, and expect to have your offer rejected if your purchase price is well below asking, but don’t over-bid with the hopes that the house will turn out to only need fresh paint!

3) Home inspections are vital- I almost always recommend buyers get home inspections, but I  demand it when they are buying a fixer-upper. A house with visible problems probably has invisible problems, waiting to be uncovered. Inspectors test the house’s systems, evaluate the roof, attic, basement, crawl spaces, pretty much anywhere they can get into is inspected. However, they are limited by what is accessible at the time of inspection. For example, if it has been a dry month, they may not be able to detect a water issue in the basement, or if it is winter, they won’t be able to test a central air system. Inspectors can miss things, but chances are good that they will uncover at least a few surprises when going through a fixer-upper.

4) Get estimates- If it becomes clear that a major repair is needed, call a local contractor to give you an estimate on the work. Unless you are planning to do the work yourself, it is helpful to understand what the real costs are going to be. Estimates should be done within the inspection contingency period of your contract to buy; that way you can use the estimates to either accept the property, negotiate for a lower price, or leave the deal completely.

5) Renovation Loans- if you're handy and plan on doing the work yourself, a renovation loan isn’t for you. Both FHA and conventional loans offer renovation loans, the kind that lend borrowers the purchase price AND the money to make repairs/renovations to the property. However, these loans require that the work be done by licensed contractors. Additionally, renovation loans involve extra steps and usually take longer to process. On the plus side, reno loans place deadlines on the work, usually allowing 6 months to get everything done, which helps give the buyer a timeline for getting the house ready.

If you have any questions about buying or selling fixer uppers, or real estate in general, don’t hesitate to contact me. I help folks buy and sell homes all around the Delaware Valley, and I’m happy to help!

(adapted from my blog at realestatedelcopa.com)

Michelle Cross Smith, Realtor® Century 21 Alliance

3012 Township Line Rd. Drexel Hill, PA 19026 

Office: 610-449-6006 Direct: 610-506-1505 Email: Michelle@Century21.com