If you consider yourself to be handy and able to do it yourself, then a fixer-upper home may be the right purchase for you. Even if you are not, you may be interested in a fixer-upper because you think it is a good deal. There are some things to consider when purchasing a fixer-upper home.
Sticking to a budget can be a challenge. However, creating a budget for a remodeling project you’ve never done before is an even bigger challenge. Building a realistic budget requires a detailed plan and ahead of time research.
To determine the approximate idea of what your renovation budget should be, consider the value of your home. Avoid spending more than 10% to 15% of your home’s value in a single room (however, that is easy to do with a kitchen remodel). If you spend more, the value of the remodeling will not add to the value of your home.
Before you put down your earnest money deposit on the home you want to be sure to do your research and get bids from reputable contractors for the work. Make a list of all the items that need to be remodeled. You also need to budget for the unknown and hidden costs. Once you open up a wall, you may find that the home needs additional work and will cost you additional funds. Try to budget an additional 5% to 10% of what you anticipate for the unknown.
Consider the location of your fixer-upper and where it is situated in the neighborhood. Does it back to a busy road or freeway.? Are there city sports courts across the street that have bright lights to keep the courts lit up at night?
The location of a home can impact the resale value. If you are buying the cheapest house in a neighborhood that is not desirable, you may not a good return on investment. Be sure to pick the best neighborhood within your budget.
If you are doing a major remodel on a fixer-upper, you will want to work with a licensed contractor who is reputable and familiar with the codes. Additionally, it is helpful if the contractor is familiar with the building department in your city or county. Every city does things differently, and you want to be prepared.
It is important to obtain permits and does the remodel properly. If not the city can red-tag the project which basically stops it and require permits to complete the project. The city can require that it take out some of the renovations in order for the property to be properly inspected.
Having permits in place is imperative and it is for the health and safety of the occupant. Additionally, when it is time to sell the house, you will need to disclose if you have done any work on the house without permits. That can open up a can of worms! Generally speaking, you can obtain the permit history on a property from a city website to determine what has been completed on the home.
You will need to determine how much fixing and repairs the home is going to need. If the majority of the work on the home is cosmetic, then much of that can be done by the homeowner. Cosmetic work would include items such as removing peeling wallpaper and paint. Removing wallpaper is not that difficult. However, you might find layers and layers of wallpaper which has covered up a big drywall hole! A drywall patch is also not that difficult to repair, however you might need to bring in a contractor to make that repair. Because in addition to repairing the hole, you will need to re-texture the wall so it matches the other textures on the walls.
More expensive repairs are going to include a kitchen or bathroom remodel. Adding new cabinets and appliances can be pricey. You will want to get estimates before you close escrow to determine if this fits within your plan.
The home inspection is based on the observations made on the date of the inspection, and not a predictor of future conditions. The home inspection will not reveal every issue that exists or ever could exist, but only those material defects observed on the date of the inspection. The home inspection will likely trigger other inspections including a soils inspection, roof inspection, mold inspection and more. With a fixer-upper, you may want to bring in a contractor to do additional inspections.
After you have had the inspections, you need to establish a budget of how much each part of the renovation is going to cost. Then you can determine if you are getting a good deal or not.
Buying a fixer-upper is not for everyone. Some buyers may not want to proceed with it at all. Buyers can be concerned that if there are obvious signs of deferred maintenance, then the major systems of the home were also neglected. Major systems such as HVAC, plumbing and electrical can be costly repairs and may make a buyer walk right on out the door. It is important to do your due diligence and ensure you know what you are getting when you are buying a home!
Eric Jeanette has written an excellent article about the FHA 203k mortgage which is the loan used to buy and finance the repair needed for a fixer-upper. He discusses the benefits of the loan and the requirements as well.
You’re a first-time buyer, and you watch HGTV. It looks easy enough to swing a sledgehammer through a wall and splash what walls remain with some paint. So, you just have to find the right property, one that needs some TLC, and you’ll be good to go. Geoff Southworth has written an excellent post should your first home be a fixer-upper?
Maria Mastronolardo has written an excellent post about Falling in Love with a Money Pit Home. In the article, she discusses how older homes may have charm and character, however, they may have deferred maintenance. She discusses the importance of inspections before purchasing a home.
Fred Franks has written a detailed article about Tips for Purchasing a Fixer-Upper. In the article, he discusses the decision to invest in a home that needs renovation and remodeling is something that has to be well planned.
The above real estate article “What to Consider When Buying a Fixer-Upper” was written by Sharon Paxson of Newport Beach Real Estate. Having experience representing buyers, sellers, and landlords with their real estate transactions since 2005, we welcome the opportunity to share our expertise and guide you through the home buying or selling process.
We work in the following coastal Orange County CA areas including Corona del Mar, Huntington Beach, Newport Beach, Newport Coast, and more! If you are considering selling your home, we welcome the opportunity to work with you and list your home with a top Newport Beach CA Realtor.