For many people who have been sitting on the fence waiting and wondering if the housing market is rebounding, the signs are showing an improved chance to get into real estate while prices and loan rates are still low.
However, many of the homes on the market need some work and some need a lot of care. How do you know what to look for in a fixer-upper? If you're a first-time home buyer, purchasing a fixer-upper can be a good option because the price will be lower. But fixer-upper homes come with flaws and some can be huge.
Why a fixer-upper? In some areas, the housing market is very low on inventory, especially new and/or homes in top shape. Foreclosures and short sales, though, can offer better prices if you can deal with the home's maintenance needs.
Many first-time home buyers don't take into consideration the extra expenses needed to maintain a home. They carefully calculate the mortgage, downpayment, homeowners' association dues, property taxes, and other hard costs but they neglect to factor in the everyday repairs and maintenance for the property. Things like a new water heater, stove, microwave, central heating/air conditioning systems, washer/dryer and dishwasher repairs and even plumbing and roof repairs. These items might be new or relatively new when you move in but, in the not-too-distant future, they'll need repairing or replacing. When they do, the added costs can put a strain on homeowners' monthly budget.
With this in mind, buying a fixer-upper for your first home can be a great way to get into the real estate market at a good price. However, it's essential that you completely understand the home's necessary repairs before you buy. Things to consider include how much you'll save by buying a fixer-upper versus what you'll need to spend to make it livable, how old the home is, who will do the repairs, and how much patience you have for this project.
Real estate is also always about location for obvious reasons. You can have a fabulous home in a horrible location and then later nobody wants it. Or you can have an okay or fixer-upper home in an ideal location, and suddenly it's worth millions - easier to fix up a home than it is to change the entire surrounding location. So, when shopping for a fixer-upper, be very careful to survey the neighborhood and make sure it's in a location that is worth spending your time and money to fix it up.
You need to carefully study the cost and savings by buying a fixer-upper. People buy these types of home to save money but if you end up under-estimating the home's cost to renovate it, you'll be either short on cash or very upset. Get a home inspection to ensure you understand the basic repairs and maintenance needs. If there are problems with the home, make sure you consult with experts to give you an idea about how much the repairs will likely cost. Also, be sure to consider the age of the home. If a home is very old, it can certainly have some charm t but it also can have a lot of nightmare issues that aren't always easy to spot. This can be things like plumbing or electric wiring issues, lack of insulation, structural or foundation problems... the list goes on. You don't have to steer clear of an older home but do your homework before you buy.
Part of doing your homework is finding an expert team to help with the repairs. If you're a handyman, that's fine, but there will likely be times when you'll need to turn to other experts for help and advice. Start gathering these resource contacts now before you buy so that you can have them available to look at the fixer-upper homes you're considering buying.
Finally, be short on expecting super fast progress and long on patience. Remodeling and even just making minor repairs can take longer than you think. Don't get impatient. Remember you chose a fixer-upper to save money. Taking the time to properly care for it will ensure that you have a comfortable home.