Buying a property that needs updates can seem like a budget-conscious way to get your dream home. But not all fixer-uppers have equal potential. Follow these 6 things you need to know about buying a fixer upper to make sure the house you fall in love with doesn’t end up being a lemon!
1. Consult Professionals
Your search for professionals should start with your realtor! A real estate professional can find listings that have just hit the market or are just about to be put up for sale. He or she may also show you unique properties or homes you hadn’t considered that can fit you needs. Once you have decided on a property, a home inspection is always a must. With homes that need renovation, a structural engineer, plumber, flooring expert, electrician, or other professional may be needed to give an estimate for work you want (or need) to have done. Scheduling these estimates prior to closing on your home can alert you to any major problems – and how much they may cost.
2. Look Past the Cosmetics
Anyone considering a fixer-upper should be able to look past the paint colors! House experts call this seeing the “bones” of the house. Homes may be priced accordingly if they feature shag carpet, bright pink paint, and 80s-style kitchens. For many people, those things signal time and money. For others, the spacious rooms or original features are drowned out by outdated décor. Consider if the house has the number of rooms and space you are looking for. Two full bathrooms? Four good-sized bedrooms? An eat-in kitchen? Two car parking? Other things can be changed! Yes, even a bathroom renovation is relatively minor compared to a large addition.
3. Find the Right Neighborhood
If you are looking for a return on your investment, finding the right neighborhood can be tricky. Fixer-uppers can be hard to find in high-income areas, and are often snatched up quickly by investors when they come on the market. Very inexpensive areas might lack infrastructure, good schools or neighborhood amenities you want. You also need to consider the upgrades you want. If you turn a fixer-upper into the nicest house on the block, when you go to sell, some buyers won’t be willing to pay a premium when they can simply buy their own fixer. Similarly, if other houses in the neighborhood all feature marble countertops and you prefer butcher block, you may have issues with resale. Identifying up-and-coming neighborhoods with well-priced houses in need of TLC, but the potential for future profits can be difficult. A real estate agent has knowledge of market trends and local areas and can help steer you in the right direction.
4. Consider Your Budget
A $40,000 house in a neighborhood with $200,000 comparable properties may seem like a steal, but it might need massive structural renovations. It’s often easier (and cheaper) to qualify for a traditional mortgage than it is to get a construction loan. Homes that are inhabitable – think no kitchen or flooring – will not qualify for a mortgage. Think about how you will pay for your renovations. Depending on the condition of the home, you can pay for the renovations in cash (perhaps by offering a smaller down payment), but that might limit how much you can renovate at first. You can take out a 203K rehab loan. You can look into a home equity line of credit. However you pay for your upgrades, consider the total cost of the house plus the needed (and optional!) work when purchasing.
5. Look for Health Hazards
Older building materials might now be considered hazardous. (The more you know, right?) Lead can be found in paint, but might also be present in old plumbing systems, which means it can leach into some drinking water. If a home owner knows there is lead paint in the home, they must disclose this to the buyer. But many sellers don’t know, and bank-owned properties won’t have that information, either. A lead paint test might be a good move, especially if you have children. Asbestos is another material that can cause health problems, often years or decades down the road. Asbestos was often used in shingles, tiles, insulation/wrapping, and even popcorn ceilings. Be sure to get a professional opinion about these products in an older home and budget to remove and dispose of them correctly.
6. Don’t Neglect the Mechanics
A pretty granite countertop or re-tiled shower might make your home look and feel gorgeous, and impress the new neighbors, but what you can’t see is important, too. Knob and tube wiring or galvanized steel pipes can represent a significant amount of investment – and unfortunately, you won’t even be able to see it! But you’ll have perfectly-working electricity and plumbing for decades to come. For those who know about home ownership, upgraded mechanical systems are a big feature. At least you’ll have the satisfaction of knowing that you’ve done something good for the home – preserving it for the future!
A fixer-upper can absolutely get you more house for your money than you might be able to afford with a move-in-ready house. Buying a home that needs work can also mean getting features like older hardwood floors, wood details and established landscaping that you can’t find in new construction. With some careful evaluation and the right team on your side, you can be confident you’re making the best home buying choice for your needs!
If you are looking for the perfect fixer-upper in Center City Philadelphia or the surrounding neighborhoods, please contact me. And remember: friends don’t let friends buy or sell homes without Agent Lady!
About Agent Lady: Cherise Wynne is a leading real estate agent in Philadelphia, helping home buyers and sellers navigate the City of Brotherly Love, with a special focus on first time home buyers. To chat about getting started with your first time home buying experience, click here.