5 Questions to Ask Before Buying a Fixer-Upper
Buying a fixer-upper is not for the faint of heart. A lot of first-time homebuyers, especially young people, think that they can buy a house and start to fix it up, but if it’s not even livable, you’ll need to find somewhere else to live while your home is being repaired. This may not be a task you’re willing to undergo. A fixer-upper to a real estate agent might be quite different than to a homebuyer. A few cosmetic repairs or updates is not technically a “fixer-upper”. A fixer-upper to a real estate agent means it needs a lot of major work, maybe to even be inhabitable. Here are five questions to ask if you’re considering buying a fixer-upper.
#1. What is the motivation behind buying?
Are you buying home to fix up to make into the home of your dreams or are you looking to turn it and flip it? Either way, it’s a lot of hard work. Unless you’re super handy or have a contractor on speed dial, this may not be the job for you. However, if you decide to buy one you can expect to pay between 20% and 25% less than a comparable home that’s move-in ready.
#2. Do I have a place to live during renovations?
Most major fixer-uppers, like I mentioned before, are not inhabitable, which means you’ll need a place to live while your home is being repaired.
#3. What’s the budget?
Remember, you’ll need to have money for the mortgage, renovations, and rent if you’re staying somewhere else so pull together the budget ahead of time. Ask if you contractors or the home inspector what certain things may cost so that you can start to gather a budget.
Additional: 5 Red Flags to Look for When Buying a Home
#4. How are you going to pay for everything?
Some lenders may provide a home improvement loan or construction loan, also referred to as a 203K loan. This loan provides money as you go to be used for improvements and renovations all the while taking into account the final value once the job is completed. The FHA 203K loan or a Fannie Mae Homestyle loan both are great options but the FHA only requires 3.5% down payment while the Homestyle loan requires 5%. Most come with stipulations and you’ll need to submit a bid for the project with approved contractors with the loan paperwork.
#5. Are you ready to manage this project?
From applying for the loan, negotiating the deal, hiring contractors, and making sure the work is done correctly, it can be a little overwhelming. Make sure you’re prepared for the unexpected and be extremely flexible not only with your time and the projects but with your money as well.
Looking for a fixer-upper in our area? Start your online search here for all homes in the areas that I specialize in or simply contact my office for a customized list of all the properties that meet your search criteria and price.