Should I buy a fixer-upper?
Buying a fixer-upper is all about getting more house for less money. A fixer-upper will generally need updates and renovation to be as valuable as comparable neighboring properties that have been improved and modernized. If you're willing to invest some sweat equity and live in a home while it's undergoing renovation, buying a fixer-upper house could be a great way to afford a bigger house. It can also make a highly desirable location much more affordable.
Steps to buying a fixer upper
If you're thinking about buying a fixer-upper, you'll need to take some extra steps to ensure you're getting a house you can afford to fix up. Some repairs, like structural ones, can require hiring experts, which can be costly. Buying a fixer-upper can take some time, but following these steps can help speed the process along.
1. Search the housing market
Finding a fixer-upper can be tough because lots of people are looking for deals. Search for a house that has good bones (i.e., major structural systems are intact) and a reasonable asking price, so you have money left to fix it up. Some realtors specialize in fixer-uppers and can be helpful when navigating your local housing market.
2. Call specialists
You should have any house you buy inspected, but it's even more important with fixer-uppers. You'll want to know exactly what sort of work you'll have to tackle. Structural issues can be costly and probably beyond most home renovators' skill level.
3. Run the numbers
Once you have an idea of needed repairs, calculate the total cost to buy the house, closing costs, repairs and more. Look for lenders who offer renovation mortgages, which roll renovation costs into the total financed.
4. Make an offer on the home
Next, you need to submit a formal offer if the numbers check out. Every seller wants top dollar for their home, so you'll probably need to do a little negotiating. But be sure to have a maximum price set beforehand and not exceed it. Learn more about making an offer on a house.
5. Close on the home
After you complete due diligence and get approved for financing, it's time to take possession of the property and start planning your repairs.
6. Move in
As you move into your new house, be mindful of the types of work you'll be doing and the key areas to be affected first. Try not to immediately fill the house with stuff, as it will make it harder to complete work.
Buying a fixer-upper as a first home
Buying a fixer-upper can be a great way to buy a better house than you could otherwise afford. But for first-time home buyers, fixer-uppers can prove overwhelming. If you're determined to purchase a fixer-upper, enlist the help of experts to help you understand the breadth of work needed on the new home. Find a realtor or other housing expert in your market who can help you navigate the process. Many real estate agents specialize in finding fixer-uppers and have a network of inspectors, contractors, electricians, and the like.
The home inspection will be a key step in the process of buying a house that needs work. Even if you agree to purchase a home "as-is," an inspector will be able to list all the issues with the house. Generally, a house that needs plumbing, electrical, or other structural work will be much more expensive to repair and renovate. Learn more about the importance of home inspections.
Tips for buying a fixer-upper
- Set a firm limit on what you're willing to pay, and don't go above it.
- Read inspectors' reports carefully, paying particular attention to structural issues.
- Have outside savings available to cover repair and renovation costs.
- Only look at houses with good curb appeal and reliable resale values.