So…you’ve decided to move.
But wait—not so fast.
Making the decision to move is just the first step in your journey to buying your next home.
Can’t I just browse the home listings and pick one?
Well, technically you could, but choosing a house without considering all your options could leave you feeling like you made a monumental mistake a few months or years down the road. For example, should you buy a move-in ready home or a fixer-upper? Should you buy a previously owned home or a new construction home? Believe me, there’s plenty to think about. But today, we are going to go over the pros and cons of buying a fixer-upper home.
Are you ready?
Let’s get to it.
What to Consider Before You Begin
I recommend preparing yourself mentally before you begin searching for your next home. This will help ease the mental burden of the fear of the unknown and help prevent stress from creeping in due to inevitable expenses that are bound to occur. If you learn about what’s ahead, it will greatly reduce the surprises and turn them into minor hurdles—because you will already be mentally prepared and have some idea about how to handle all the potential “what if” scenarios if and when they happen. Then also have a look at Surrey Lofts if you would like a loft conversion as we recently used them and they were fantastic.
Here are a few things to think about ahead of time.
- Realize that buying a home, especially a fixer-upper, is going to require a lot of patience.
- Take some time to find the best location for your lifestyle, then vet that location thoroughly.
- Think about how your life could change within the next 3-, 5-, and even 10-years from now, then look for a home that will meet all your needs now and going forward.
- Consider your budget and know exactly how much you can spend on the house and for the repairs/replacements. You should also include enough extra money for any unexpected repairs. And remember…there are almost always unexpected repairs.
- Consider all the pros and cons of buying a fixer-upper.
The Pros and Cons of Buying a Fixer-Upper
Weighing the pros and cons of buying a fixer-upper will help you with how and if you should proceed. It will also help you make an educated decision about whether or not buying a fixer-upper is right for you.
Deeply Discounted Purchase Prices
Yes, this one is obvious, but it’s the biggest reason most people buy or consider buying a fixer-upper. For some people, buying a fixer-upper is the only way they can afford to buy a home, especially with the cost of homes continually rising. The sale of fixer-upper homes is always priced accordingly because the seller usually knows their house needs work.
Buying a home that needs work oftentimes means you can fix it up (customize it) to meet your wants, needs, likes, and dislikes. Buying a fixer-upper means you will have more of a chance of turning that house into your dream home versus buying one that someone else has already fixed up according to their vision.
Lower Property Taxes
Property taxes are based on the price you pay for the home. That means when you buy a fixer-upper at a lower price versus a new home, your property taxes will be lower.
Renovations Add Value
Any renovations you do to a fixer-upper home will add value. That means, in most cases, you will have instant equity once the renovations are finished. Just make sure you don’t over-improve that home beyond what other homes in that neighborhood are valued.
Save Money by Performing the Repairs/Replacements Yourself
When you perform the repairs and replacements yourself, you will save loads of money versus paying a contractor to do them for you. There might still be some things you have to contract out; however, performing as many repairs and replacements as you can yourself will save you money in the long run.
When buying a fixer-upper, you have total control over everything that goes into that home, including the quality of materials, and which contractor does the work. This versus buying a move-in ready home that the investor/flipper, etc. bought and used the cheapest possible materials, cut corners, covered up potential issues, and might have even used cheap labor that may or may not have known exactly how to do things the right way. This alone could potentially be a safety issue and one that could end up costing you at some point.
Living in a Better Neighborhood Than You Could Otherwise Afford
Buying a fixer-upper in a neighborhood that would have normally been out of your price range helps you skip a step. Buying a fixer-upper in that neighborhood means you can live in the neighborhood you want to live now versus having to wait until you can afford it.
Another benefit of buying a fixer-upper is that if the house you are thinking about buying has been on the market for a while, this will give you more negotiating power with the seller.
More Work Than You Realize
Most people go into a fixer-upper realizing they will have to do some work. However, once you get started, in most cases, there will be other issues arise that you might not have bargained for. But don’t worry, you will get through them, it might just take more money and take longer than you expected. Keep the faith, though, because it will be so worth it when you’re done.
Settling in Takes Longer
Unlike a move-in ready home where all you have to do is unpack and settle in, a fixer-upper takes time. Buying a fixer-upper means it will probably be a while until you are able to get your life back to normal because you will be living in a home that is in a constant state of repair.
Competing with Investors
Oftentimes, when trying to buy a fixer-upper, there will also be investors and flippers trying to buy that same house as well. Investors and flippers frequently offer the seller a quick sale cash offer, which is generally preferred by a seller even if that investor offers less money for that home than you did.
You Could End up Busting Your Budget
Always expect the unexpected when buying a fixer-upper. Once you actually get started on the repairs/remodeling, there are almost always unexpected repairs and/or replacements that arise. And some of those repairs/replacements could be well beyond what you originally budgeted for your fixer-upper. So you should always budget for possible incidentals.
The Fixer-Upper Might Not Appraise
Unless you are paying cash for that fixer-upper, the mortgage company will require an appraisal of that home’s value before they will grant you a mortgage. And if that home doesn’t appraise for what you contracted for, you will have to pay the difference, get the seller to lower the price, or back out of the deal altogether.
The Unexpected Could Happen
If you experience a life-changing event such as losing your job, a health issue, etc., while you are in the middle of working on your fixer-upper, you might have to live in an unfinished house if the renovation money has to go towards more pressing expenses.
You Need Money to Perform Some Repairs/Replacements
When buying a fixer-upper, you will either need cash on hand or a home renovation loan to make the repairs/replacements. If you don’t have access to cash and can’t get or can’t afford a renovation loan, you won’t have what you need to complete that house. That means you will end up living in a house that makes you miserable for an unknown number of years to come. It also means if you try to sell that home because you can’t afford to make the repairs it needs, you might have to sell it at a loss.
Things to Consider Once You’ve Decided on a Fixer-Upper
Once you’ve made the decision to buy a fixer-upper, there are a variety of issues to consider before you proceed.
We touched on location a moment ago. However, before you buy a fixer-upper, consider the location of that home. Is it in an up and coming neighborhood or is it in a declining neighborhood? Check the crime stats, and how far it is from the places you frequent daily, including how far it is from your job, etc.
Visualize the Home’s Potential
Many people are too quick to pass up a home that is not in pristine condition. For example, many homes only need a few minor cosmetic fixes such as paint and carpet. However, these are the things that make a home look not so appealing to buyers, which causes many of them to pass. So if you can envision what the house would look like if those things had been completed, you could save yourself loads of money in the long run.
The Home’s Layout
You might see a home for sale that has lots of square footage. However, if that square footage isn’t useable square footage, then all that space really doesn’t do you any good. For example, you’ve found a large home with lots of rooms and bedrooms, but if those rooms are so small that you can’t logically fit your furniture, then all that space is pretty much worthless.
Therefore, it’s important to not only look at the square footage of a home but to also measure that space to make sure your things will fit. Otherwise, you are in for an unpleasant surprise when you move in. Additionally, if you buy a fixer-upper that has a bad layout, it doesn’t matter how much you fix it up, it might still be hard to sell later.
Evaluating the Home’s Condition
When evaluating a home’s condition, consider the minor renovations, as well as the major renovations. Get some contractors to give you bids so you know exactly what those items will cost to fix and/or replace. Then make a list of all the needed repairs, the cost of those repairs, and which repairs you will be performing yourself and which ones will be contracted out. This will help you prepare your initial budget for your new fixer-upper.
Minor repairs would include:
- Interior and exterior paint and sheetrock repairs.
- Laying tile or installing a new carpet.
- Installing new ceiling fans, light fixtures, and doors.
- Changing plugs and light switches.
- Installing new or refacing cabinets and countertops.
- Adding a new deck or patio.
- Fixing broken windows and replacing or repairing screens.
- Adding crown molding or replacing baseboards.
- Replacing kitchen or bathroom sinks and/or faucets.
- Replacing water lines under sinks and toilets.
Major repairs and/or remodeling would include:
- Replacing the roof and/or HVAC system.
- Fixing a foundation.
- Installing new windows throughout.
- Remodeling the kitchen or bathrooms.
- Building a garage, sunroom, or other addition.
- Major plumbing and electrical items such as replacing all water lines, sewer lines, or electrical wiring, click here for more details on how you can do it.
- Pouring a new driveway or sidewalk.
- Repairing a sinkhole.
If you don’t have cash on hand to perform the repairs and replacements for your fixer-upper, then you will have to finance them. The Federal Housing Administration has what’s called a 203k loan. The 203k program allows you to buy a house and finance the cost of the repairs/replacements. This is a great option for buying a fixer-upper and having the money you need to renovate it. Just make sure you have enough money in your budget to pay the extra cost of the 203k loan.
Are you looking to buy a fixer-upper? Perhaps you would rather buy a move-in ready home, or you just want a little more information so you can decide on which route is best for you? Whatever the reason, we can help! Contact Lakeland Real Estate Group today.
Lakeland Real Estate Group associates are experts in Lakeland, Florida, and surrounding real estate markets and can help you find the best fixer-upper according to your wants, needs, and budget. Let us show you just how easy buying a fixer-upper can be. We look forward to meeting you!
Don’t forget to download our Free Buyer’s Guide now.
Let’s Do This!
Additional Resources for Buying a Fixer-Upper
Without asking the right questions, you could be buying a lemon, writes Bill Gassett. Ask yourself these five crucial questions before purchasing your first fixer-upper.
Is it worth buying a fixer-upper? Many folks envision buying a fixer-upper will save money…..better think twice says Kevin Vitali.
Some home improvements require advanced skills, knowing when to save money with DIY or hire a professional are explained by Debbie Drummond.
About the author: The above real estate article “The Pros and Cons of Buying a Fixer-Upper” was written by Petra Norris of Lakeland Real Estate Group, Inc. With over 20 years of combined experience of selling or buying, we would love to share our knowledge and expertise. Petra can be reached via email at firstname.lastname@example.org or by phone at 863-712-4207