Buying a fixer-upper is a great way to build equity, but here are 6 things you should take into consideration before you decide if this is a good step for you:
1. Take a hard look at your skill level. Some fixer-uppers really just need to have the junk hauled off, deep cleaning and painting, and wallpaper stripped off and most people can do this type of work themselves. But certain types of work need an expert (plumbing and electrical) or someone with a medium to high skill level. While there is nothing wrong with learning as you go, if your work ends up being less than professional, you can hurt the value of the house, instead of helping it. So a realistic assessment of what you can do and what you would have to hire done is the most important first step. And ask yourself if you really have the time it will take to do the work and whether you are willing to live in a contruction zone while it gets done.
2. Determine how much it will cost to do the work. Estimate the supplies and tool rental expenses you will need for the things you will do yourself (and a good rule-of-thumb is to tack on an additional 20% for unexpected expenses that always have a way of cropping up). If you will have some or all of it done by experts, have him/her do a walk-through and give you an estimate of charges. And don't forget to factor in permit costs and the time and effort it will take to obtain them.
3. If the home needs major structural work, get a structural inspection. It is well worth the cost ($500-750) to have a structural engineer do an inspection if you think the home has structural defects. Then, once you really understand the extent of the problems, you can get written estimates of the cost to do the repairs. Serious structural problems can undermine all your best-laid plans, so don't skimp here. You need to know what is wrong and what the cost will be to bring the house up to snuff, so make any offer contingent on a structural inspection. And it just might save you from ending up with a serious problem that CAN'T be fixed.
4. How are you planning to pay for the repairs? If you have the cash saved up for this, great! But if you have to get a loan, you will want to get pre-approved for this before you get serious about a home. There are several types of loans available that allow you to borrow the additional money to get the work done on the house; these include FHA-203K loans, HomeStyle conventional loans, or Rural Development Loans. All of these loans have different requirements and eligibility standards, so call a good real estate agent and let them refer you to a lender experienced in doing these special types of loans to see what might be available for you. And be sure to make your offer contingent on being able to get the loan to purchase the house AND do the work, so you won't be forced into purchasing the home without the money you need to do the repairs.
5. Calculate a fair purchase price for the house. HouseLogic.com recommends this formula:
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The above information on buying fixer-upper homes for sale was provided by Barb Hutchinson. Barb can be reached by email at email@example.com or by phone at 208-707-4663. Barb has helped people move in and out of homes in The Treasure Valley in Southwest Idaho for the last 27 years.
Thinking of selling your home? I love to share my marketing expertise!
I sell homes and real estate in the following southwest Idaho towns: Payette, Fruitland, Parma, Emmett, New Plymouth, Weiser, Caldwell, and Nampa, ID
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