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fixer-upper-house

 

Need a heavily discounted property?  Try a fixer-upper!  But know what you’re getting into ahead of time…

 

Housing is expensive these days, whether you’re renting or trying to buy.  But our generation is much for handy and DIY-enthusiastic, so many hopeful homeowners are looking at “fixer-uppers” as a way to save some dough on the initial home purchase.  A home that has not been updated in many years, or one that is not habitable in it’s current state will be heavily discounted compared to newly renovated and move-in ready homes.  But beware of the risks and know what to look for when considering a fixer.

 

Some Flaws Can Be Fixed

There is a huge difference between an ugly house and a tear-down, though it might not be readily apparent unless you know the signs to look for.  Broken tiles, chipping paint, peeling wallpaper, holes in the drywall, dirt, grime, and general disarray are all easy fixes.  It can be hard to look past an ugly house that has not been well-maintained, but if it has “good bones,” you might be looking at a diamond in the rough.

painting

Painting is the cheapest and easiest thing you can do all on your own that will make a huge difference to your living space.  Don’t skimp on the preparation and materials!  Make sure to clean the areas to be painted first, and even sand them down if necessary.  Use a primer or paint with primer, mask off the edges and roll on at least two coats of color.

Carpenter installing wooden floor - home improvement

If you are a little bit more handy and have some experience with home renovations, you may be able to tackle some larger DIY projects such as floor replacement, cabinet installation, or bathroom remodel.  Putting as much of your own elbow grease into your home improvements could shave thousands of dollars off your budget.

diy

 

Some Flaws Are Costly

There are some problems that can be insurmountable.  Issues affecting the foundation, structural integrity of the home, the roof, siding, sewage/septic, heating/air conditioning, and concrete repairs can be imperative and very expensive.  Foundation and structural issues will almost certainly need to be addressed by a structural engineer.  Plans and calculations will need to be approved by the city or your local municipality, which adds both time and expense to your project.  These issues may not necessarily be deal-breakers if they were identified ahead of time and have been worked into your budget, but a major surprise like this could completely derail your project. 

fixer-for-sale

Some issues may not be able to be resolved entirely.  In some cases, it is impossible to completely eradicate mold, for example, in a perpetually damp basement.  Erosion or compaction problems with the soil underneath the foundation may be untreatable.  Even zoning restrictions may hinder your ability to transform the home as you would like.

typesofsettlement

The most important thing to remember when investigating a home is to get a thorough home inspection, and follow-up with any specialized inspections as needed.  You need to have a clear picture of all the defects of the home to make a proper evaluation.

 

Estimate Repair Costs and Formulate a Budget

After you’ve had the home thoroughly inspected and have identified the defects that you will need to address, the next step is to determine how much it will cost to make the necessary repairs.  Start out by asking friends and family if they have had any work done recently on their home and the estimated cost of their improvements.  This will give you a general idea of the price range for certain services.  Next, get a few quotes from a few different contractors and compare rates.  Draw up a reference sheet with all the necessary repairs and their estimated costs, including contractor estimates, to determine a viable offer price.

 

Ask For A Discount.  Gently.

Now that you are armed with information, you can make your highest and best offer to the seller and ask for any credits or discount as necessary.  Most likely the seller knows the condition of the home, but a low-ball offer or aggressively demanding repairs or a discount isn’t the best way to get a seller to work with you.

To avoid insulting the seller, start out by expressing what you love about the home but that you (and you contractor/engineer/etc) have noticed some issues that will take time and money to fix.  Here’s where your reference sheet and contractor bids can be helpful as well.  Subtract the necessary repairs from the asking price.

And you don’t have to stop there.  If the defects in the home keep you from living (or living comfortably) in the home until they are repaired, it is also customary to tack on an extra fee for what Realtors call the “hassle factor,” which can be estimated by the amount of time and money you would spend living somewhere else until the renovations are complete.

The bottom line, the more you break down your expenses, the more sense your offer will make to the sellers.  Homes that need a lot of work can be a worthwhile project, saving you anywhere from 20%-40% of the original asking price.

 

Get The Right Kind of Loan

If your fixer requires major renovations, you may qualify for a special type of financing called a “renovation loan.”  One of the most popular renovation loans is offered by the Federal Housing Administration (FHA).  The FHA 203(k) renovation loan offers great interest rates since it is backed by the government.  The downside is there is a limit to how much you can borrow – anywhere from $217,000-$729,750, depending on the median home value in your area.  Be upfront with your lender about the condition of the home and your renovation plans and ask to review any loan programs that will help with renovation costs.

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This article has 14 comments

  1. Blue Betta

    This is good to know. I think a lot of people jump into buying a “fixer” house and then get in trouble because of issues with the foundation or a rotted frame and they find out that it would cost more to fix up the house than it would to buy a new one. Some things, like this post mentioned, like painting or redoing floors, are an easy fix. I think it’s important to have a contractor look over a place to make sure there aren’t any hidden issues that inexperienced home buyers might miss. I like the idea that the author has of having an estimate ready when you ask for a discount on a home. Saying something is one thing, but there is some real weight in having the actual numbers to back it up.

    • hoyin_3@hotmail.com

      I agree with you on that. I guess people always think that it’s going to be super easy to fix up the house because there are so many of these television shows featuring these projects.

      • Atropa Belladona

        …Not to mention considering the skills some DIYs require. Some things are easier in theory rather than in practice. Then there’s the issue of time, you can’t buy a fixer house if you don’t have the time to devote in the renovations (e.g. you work full time and have kids to take care of), in which case the renovation will become an eventual uncalculated cost, because eventually they have to be done by a professional.

    • saygorem@gmail.com

      Yes its true . I agree with you, fixer upper houses are hard to renovate as others think they are easy and convenient. But you have to consider a fixer house if the foundation is very stable and strong. Don’t forget to ask for discount as this is a fixer upper house. The owner may consider it, make a bargain because you have to fix many parts of the house.

  2. vhicks332@yahoo.com

    This is really something that I have always kept in the back of my mind as a possibility one day, so this is a nice little read to have. There is a lot that goes into it, and I know that I did not think of a lot of the things here, and I am sure there is more too.

  3. yankee.jason@yandex.com

    I like to use the same strategy with websites. Sometimes I like to pick up an older domain, or an older domain which contains written material.. In that case, at least some of the base work is already done. It only needs to be fixed up.

  4. jahanzebali1982@gmail.com

    You are such a creative and intelligent person. You gave an easy solution for the buyers of fixer. Whenever someone bought a fixer house. It takes a lot of time renovate it but it is not impossible. This is a nice project providing solution for a lot of projects. Thank You.

  5. Destiny

    Excellent tips here! When we were ready to buy our home, we got all excited about buying a fixer-upper and had big plans. As it turned out, the ones that were available in the area at the time would have ended up costing considerably more to have the needed work done, so we finally bought a house that was already in good condition.

    That said, though, we’re once again talking about the possibility, but for investment purposes this time. The plan (at least so far) is to have a budget for a property that includes the necessary repairs for safety, etc. and see what’s available within that budget. Any non-vital cosmetic work can be done over time even while someone is renting it.

    Very helpful article. I don’t worry so much about the flaws that can be fixed, but I know that we need to be aware that some things just wouldn’t make it a wise purchase if they turn out to be a big money trap… I learned a lot from reading this. 🙂

  6. JonPanama

    It seems that a lot of people are getting into the fixer up market due to the flood of foreclosed homes. The problem is that bidders may not take into consideration that utilities may not be allowed to be reinstated, the structural integrity may be at its limit, back taxes and high evaluation, and dangerous neighborhoods. Although you can strike a deal, there may be a good reason why the house is let go for so cheap.

  7. saygorem@gmail.com

    Its nice to buy a house that has good foundation even if the outside looks bad or old. I learned in your topic that before we buy a house, we should consult a structural engineer to assess if it is for renovation or it has a stable foundation. Make sure what we spend in fixing the house is worth the money.

  8. SirenOnFire

    This is actually a very nice idea when you’re thinking about renovating a house. Not only will you save a big amount of money, you can also have fun and enjoy while doing it, at the same time making sure that what you want done, is what’s really going to happen. I know quite a few people who opt to do this, and I have too when I wanted some changes done to my room. Then again, there really are some house problems that would indeed need a professional opinion or hands.

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