Buying a house can cost a lot, but if you're up for it, you might find a "fixer-upper" for a good deal. However, fixing up a house takes effort and money, so be sure you're fully committed before buying.

If you're all set to explore fixer-upper homes, let's talk about the process and weigh the good and bad sides of this kind of purchase.

 

What is a Fixer-Upper?

If you've seen the HGTV show "Fixer Upper", you probably know what it's all about. These homes are typically older, lack modern upgrades or safety features, and require significant repairs to become fully livable.

Because of their condition, fixer-upper prices are usually lower, offering the potential for a great deal. But beware, the needed repairs can quickly add up, turning what seemed like a steal into a financial burden.

Buying a fixer-upper can be challenging. While having a home in your desired neighborhood may seem appealing and tailored to your tastes, these projects come with financial and practical challenges. However, if things go well, the rewards can outweigh these obstacles.

 

How to Find Fixer-Upper Houses for Sale

To quickly find fixer-upper homes, teaming up with a real estate agent is your best bet. These experts have the knowledge and connections to track your needs, including accessing homes yet to be publicly listed through the multiple listing service (MLS).

Another option is attending auctions to snag foreclosed homes for your fixer-upper project. Nevertheless, buying a foreclosure at an auction means taking the house as-is, with no room for negotiation or repairs.

 

Buying a Fixer-Upper in 6 Steps

Considering a fixer-upper? Here are some helpful tips to keep in mind if you plan to buy one.

1. Get a Home Inspection

A home inspection might seem costly, usually a couple of hundred dollars, but it's a must-do, particularly if you're eyeing a fixer-upper. An experienced home inspector carefully checks the property, highlighting all necessary repairs in a detailed report.

Skipping a home inspection might leave you unaware of crucial issues like plumbing problems, a faulty septic tank, or even foundation cracks. By getting an inspection, you dodge unwanted surprises and clearly understand what repairs or upgrades the house needs. This helps in planning your budget and prioritizing essential projects.

A home inspection is essential for any home purchase, but it's especially vital when considering a fixer-upper.

2. Estimate Renovation Costs

When buying a fixer-upper home, it is essential to ensure you have enough money to transform it into your dream space. Make a list of all the projects you plan to do and check how much materials and labor might cost (if you need a contractor).

Try researching online and getting quotes from contractors before renovating your home. While you might not get exact prices for everything, you'll get a rough idea to help you budget and decide if the investment is worth it.

3. Determine if a Permit Is Required

Certain renovations might need permits. The rules vary by where you live, but in many towns and cities, permits are typically required for things like:

• Changing the structure
• Installing windows
• Adding rooms
• Building sheds or garages
• Putting up fences
• Doing plumbing or electrical work

You can apply online or visit your local government office in person to get a permit. You might need to show detailed plans depending on your project's complexity.

4. Identify What You Can Renovate Yourself

DIY renovations can be a big money saver. Contractors can be expensive, so if you're handy or have friends or family who are, consider taking on some projects yourself. While electrical and plumbing might be best left to the pros, simple tasks like painting or adding a backsplash could be doable without hiring a contractor.

5. Explore Fixer-Upper Loan Options

Many lenders provide special loans for homes that need fixing up. Two options help cover both the home's cost and renovations: the Federal Housing Administration (FHA) 203(k) rehabilitation loan and the Fannie Mae HomeStyle Renovation Mortgage.

6. Make a Smart Offer

Try not to pay too much for a fixer-upper house. The goal of buying a home needing repairs is to get a good deal. Make an offer that balances a fair price with the repair costs.

Include conditions, known as contingencies, in your offer. These let you back out of buying if something unexpected pops up. Common ones are inspection and appraisal contingencies. You can change your mind if an inspection uncovers a major issue or the home appraises for less than your offer.

Negotiating the selling price is essential. If the house has many problems, you might have more bargaining power. Work with an agent to make a sensible offer and handle any counteroffers. Feel free to walk away if the seller won't negotiate.

 

Pros and Cons of Buying a Fixer-Upper

Consider these advantages and disadvantages when thinking about fixer-upper homes.

 

Pros

• Lower initial cost

Fixer-upper homes often have a lower price tag, which means a potentially lower down payment and overall expenses. However, you might need to spend more on renovations.

• Less competition

These homes typically have fewer buyers interested, giving you a better chance of snagging a property at a favorable price.

• Personalization opportunities

As a fixer-upper owner, you're in control. You can modify and shape your home according to your preferences, from remodeling the kitchen to adding a deck or expanding living spaces.

• Quality management

You get to decide on the materials, colors, and contractors, ensuring you can maintain quality during renovations.

 

Cons

• Costly renovations

Renovations might be pricier than expected, potentially resulting in breaking even or spending more on the fixer-upper.

• Budgeting challenges

It's tough to accurately estimate renovation costs, as unexpected expenses often crop up along the way.

• Unforeseen problems

Even with inspections, older homes might present unforeseen issues, adding to the renovation workload and expenses.

• Prolonged construction

If you live in the home while renovating, brace yourself for a prolonged period of residing amidst ongoing construction.

 

The Bottom Line

Finding the ideal fixer-upper is about discovering what suits you best. Every property is unique, so the decision relies on your budget, schedule, and lifestyle. Before buying a fixer-upper home, consider if you're prepared for such a significant project. Make sure you're ready before diving into this big step.