Want to buy a fixer-upper?
Read this to save yourself a ton of cash—and headaches, too… Do you remember the Tom Hanks movie “The Money Pit”? This was a great movie, but it truly gives people a idea of what can happen when you buy a home that needs to much work. You can quickly be in over your head with the work & costs. It’s a common situation for many buyers today when they are looking for a deal on a home that’s been sitting neglected for a period of time. In fact, bank owned properties & short sales often fall into the same situation. These types of properties usually require lots work & cash like a fixer-upper.
Here are some tips to consider before considering a home that’s needs to much work….
1. The Ugly House Fixer-uppers generally fall into 2 categories: total wreck and ugly house. A ugly house is a house that needs painting, a yard that needs curb appeal & smells bad. These are the kinds of flaws that are merely cosmetic, and they’re easy to fix. Painting is the easiest task that you can do yourself. Don’t cut corners though- buy all the right equipment (use the tape!) and paint correctly, with the right number of coats. It’s extra work, but it pays off in the end. Even if you hire a painter, it won’t cost as much as redoing the bathroom.
2. The Total Wreck House Be careful because some blemishes may initially slide under your radar and potentially make a big impression on your wallet. These are the”total wreck” homes such as; problems with the foundation, structure, roofing, and air-conditioning systems can be expensive. In some houses that have been sitting vacant for a long period of time they can develop a bad mold problem. The damages and cost to fix these types of repairs can put a homeowner into foreclosure easily.
3. Don’t guess on the renovation costs Consult with a general contractor to evaluate the home before you buy—but before you even get there, do your homework. Ask your friends and co-workers if they’ve done repairs lately and possible refer you to a reputable contractor. In addition; professional Realtor should be able to give you recommendations to help you determine whether the repairs would fall within your budget. Also getting written estimates for renovation costs such as; roof, foundation, HVAC, and windows will help you to determine a viable offer price.
4. Price Matters Now on to the real upside of buying a fixer-upper could be major savings. If a home has been sitting on the market for over 30 days in South Florida without any price reductions it’s a oppountiy to make a lower offer. Even if you know that this house is in shambles, that doesn’t mean the sellers know that, or want to hear it. To avoid insulting them with a low offer price break down your expenses. This is usually provided after you’ve agreed on a price and is still subject to inspection. A good home inspection will provide a written estimate of repairs so this will help you to determine if the home is actually affordable within your budget.
5. Get the right kind of loan A home requiring major renovations can sometimes qualify for a special type of financing called a renovation loan. And there are different types: A 203(k) loan, recently rising in popularity because of the competing interest rates & it’s insured by the FH? But there are a few downside with these loans because they can be complicated. For starters; often you’ll need to find alternate housing during the renovations, which adds more expenses to the budget. Also, you are required to get a licensed general contractor that’s approved with the lender to do the renovations. In addition, The contractor will then manage the funds the bank approves to give for the repairs. Lastly, the banks rules & regulations are typically very strict for the repairs so finding a loan officer who is highly experienced in these loans is very important.
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