7 Tips for Buying a Fixer Upper

by Gary and Lisa Schoeffler on October 9, 2014

in Latest News

 

7 Tips for Buying a Fixer Upper

Buying a fixer-upper home sounds like a good return on your investment of time and money.  The reality TV shows make it look simple, affordable, and not overly time consuming. However, is it right for you?  Here 10 tips to consider before deciding if you have a diamond in the rough worth excavating:

1. Determine what you can do yourself

Doing a home improvement and remodeling job, where you don’t have experience, can lead to poor quality results. Skills such as stripping wallpaper are painting, are typically easy, but what about more difficult work such as plumbing or electrical?  In addition, you need to assess whether or not you have the time and desire to give up weeknights sanding and staining, or weekends to prime and paint. If not, you will be stressed out with the amount of time it takes while living in a work zone for potentially months.

2. Create a budget before you make an offer

Does the home have mostly cosmetic work or is it there structural work that also needs attention?  Asking a contractor to do a walk-through can help create a budget and time frame for the job.  If you plan to do the work yourself, price the necessary supplies. In addition, it is always a good idea to add at least 20% to the budget to cover unforeseen problems.

3. Hire a professional

Hiring a professional will be necessary for those tasks you don’t have the skills, or time, to complete.  Be sure to get a least 3 estimates and do reference checks.  Ask agents, friends, or neighbors for recommendations and what they thought of the work.

4. Thoroughly inspect potential structural work and obtain pricing

If your fixer-upper home needs major structural work, hire a structural engineer for $500 to $700 to inspect the home.  If the home has major structural issues such as cracks in the foundation or termites, you may want to pass.  These fixes can be time consuming and very expensive.  Be sure to obtain written estimates before committing to purchasing a home with major structural issues.

5.  Obtain financing

Be sure you have enough money for a down payment, closing costs, and repairs when calculating financing.

If you’re planning to fund the repairs with a home equity or home improvement loan, get pre-approved for both loans before you make an offer.  It may be worth checking with the Federal Housing Administrations Section 203 (k) program that is available to homeowners purchasing a home that needs rehabilitation. The program allows the buyer to wrap the purchase and rehabilitation costs into a single mortgage.

6. Calculating an offer

Obtain comps (homes that have sold in the area that are similar in size and condition) to get a fair market value of the property if it were in good condition. Subtract the remodel/rehabilitation costs to calculate a fair market offer.

For example: Your target fixer-upper house has a 1960s kitchen, shag carpet, plumbing and foundation work that needs completion.

Your comparison house, in the same subdivision, sold last month for $400,000. That house had a newer kitchen, no wallpaper, was recently re carpeted, and has had upgraded plumbing.

The cost to remodel the kitchen, replace the carpet, fix the plumbing and foundation is $50,000. Your bid for the house should be $350,000, for example.

Check with your real estate agent to see if it’s a good idea to share your cost estimates with the sellers, to prove your offer is fair.

7. Realistic Expectations

If you watch home renovation shows, don’t think that your experience will be like those dramatic and quick transformations. Remember, that’s not really reality TV, and you might end up a disaster episode. But if you plan ahead with your time, money, and resources, your hard work could really pay off.

 

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Post by Gary and Lisa Schoeffler

Gary and Lisa Schoeffler are Ventura Real Estate Professionals specializing in residential real estate. Their expertise in helping both buyers and sellers is widely recognized in Ventura County. How can they assist you today? Wondering what the market is like? Call them, they will be happy to talk with you about it. 805-320-4472

Gary and Lisa has written 371 articles.

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