This Old House has been a constant presence on public television networks across the United States for decades, and cable shows like The Property Brothers, Hometime, and Flip or Flop are ratings winners. Could this help explain why so many millennials are considering buying a home that isn’t move-in ready? According to Arch MI’s Insights, nearly 70 percent of millennials are willing to purchase a fixer-upper. Whatever the reason for their interest, purchasing a property that is in need of a little TLC requires caution. If you’re thinking about taking the plunge, check out our tips for buying a fixer-upper before making a purchase.
Tips for Buying a Fixer-Upper
Why do people entertain the idea of buying a fixer-upper? Some delight in the unique charm and character that only an older home can offer. Others see a fixer-upper’s lower price tag as a way to buy a home that they wouldn’t be able to afford under normal circumstances. The idea of making a profit by flipping a home can also seem appealing to certain buyers. Finally, for many, the chance to personalize a home by renovating it to suit their own needs and tastes is irresistible.
Regardless of your reasons for buying a home in need of some work, it’s best to keep these three tips for buying a fixer-upper in mind as you shop:
1. Know What to Look For
No matter how low the price is, you should never assume that a fixer-upper is a fantastic bargain. Hidden problems with the structure or its mechanical systems could be lurking, waiting to transform your dream home into a waking nightmare. How do you determine if a fixer-upper is a great deal or a disaster in disguise? As The Balance explains, it helps to look at these three factors:
- Location: Location is something you should consider with any real estate purchase. A desirable location can raise a property’s value; a bad location can lower it. Ask yourself: Would you buy a move-in ready home at the location? If the answer is no, don’t purchase a fixer-upper there.
- Condition of the Home: Some problems can be addressed with fixes that are relatively easy and affordable. Others are more involved and expensive. Before buying a fixer-upper, consider its overall condition carefully. Make sure that you identify both obvious issues and hidden ones, and opt for a property with requirements that you, and your budget, can handle. Generally, cosmetic problems like ugly paint, obsolete fixtures, or damaged trim are fairly simple to deal with. On the other hand, structural issues with roofs or foundations, outdated electrical systems, moisture problems, and signs of termites or other pest activity will be far more demanding.
- Floor Plan: While making minor adjustments to a floor plan or adding an addition to expand your living space is generally doable, major changes to a home’s existing layout are likely to be expensive and impractical. To avoid headaches and keep renovation costs down, choose a fixer-upper with a workable floor plan.
2. Schedule Professional Inspections
You don’t need construction or engineering experience to recognize peeling paint, small rooms, or outmoded fixtures in a fixer-upper. Unfortunately, not every issue is obvious, and hidden problems can have a devastating effect on your renovation budget. As FortuneBuilders indicates, homebuyers should always bring in a qualified home inspector to evaluate the property and provide them with a detailed report. To get additional reassurance and a better idea of what any repairs might cost, you may also want to request additional inspections from specific professionals like general contractors, electricians, plumbers, roofers, or pest control specialists.
3. Make a Smart Offer
How do you figure out what kind of offer to make for a fixer-upper? The folks at This Old House suggest running the numbers. Make a list of the work required to transform the property. Then, calculate how much the renovations will really cost. Be sure that you estimate high and include labor, materials, and permitting. Next, study real estate values in the area to get an idea of what the property’s value will likely be after it’s renovated. Deduct the cost of the renovations from the improved value. Then, subtract at least another 10 percent as a contingency fund. The amount that you’re left with should be your best offer.
Financing the purchase of a fixer-upper can be somewhat complicated. After all, you need to secure enough funds not only for the purchase of the property but also for the renovations that it needs. At PrimeLending of Springfield, Missouri, we make the process easy with our renovation loans. To explore your financing options and discover the right loan program for your needs, contact us today.