Whether the housing market is in the doldrums or red-hot, the price of a typical new home may still out of reach for many first-time buyers. Even seasoned professional ‘home flippers’ have to be savvy about how they do business in order to generate an acceptable return on their investment. One way both types of home buyers are trying get the most home for their money is to look for a fixer-upper home; a home that needs work to bring it up to standards that would allow it to be sold for the current market value of similar homes in the same area.
For people looking to buy a home to occupy, the ideal fixer-upper is a house that is selling for below market value, but that only requires minor cosmetic repairs in order to bring it back in line with other homes in the neighbourhood. Reasons that a home might be in this position is the previous owner experienced financial distress and has to sell the home as fast as possible, or the home may have sat vacant for a long time with little buyer interest.
Fixer-upper homes are sometimes advertised as a handyman specials. These homes are good for people who have some skill in construction, electrical, and plumbing services. Repair work may be more extensive than merely cosmetic and may include repairing leaks in the pipes, re-wiring the electrical sockets, and laying new carpet or hardwood floors.
Unless you are qualified to estimate the cost of repairs it is always a good idea to call in a qualified home inspector to get a complete list of deficiencies that must be corrected. Once you know what issues must be addressed, you must get an estimate from qualified repair people to determine how much the repairs will cost. When considering the repair cost of a fixer-upper, don’t forget to include the value of your own ‘sweat equity.’ If the amount of the required repairs plus the initial cost of the home exceeds the fair market value, the home should not be considered a fixer-upper.
Fixer-uppers may be older homes in need of updating and renovation. While these homes may be purchased for considerably less money than newer homes, consideration should be given to the possibility of lead paint and asbestos insulation that was common before the 1970’s. The cost of remediation of these toxic items should be added to the total renovation cost.
Foreclosed properties and HUD homes are frequently advertised as fixer-uppers. The nature of these properties is that they are on the market because of the financial distress of their previous occupants and as such the state of repair of these properties has frequently been neglected. Always carefully inspect any home, but particularly foreclosed properties, prior to purchasing to prevent any unexpected surprises.