Monday 30 October 2017

Should You Buy A Fixer-Upper? How To Assess The Real Cost

House hunting is a nearly inevitable part of life, especially when growing a family. The average American moves about 12 times in their life, and different types of homes often correlate with different stages of life. If you are looking to abandon the apartment life but still pinch pennies, a fixer-upper might be an attractive option. 

But is it a viable option for your family?

This guide will help you assess a potential fixer-upper and decide if the initial price is worth the work. 

Why Buy A Fixer-Upper?

First-time homeowners, or those with a specific home vision, might love the price and challenge that a fixer-upper offers. These homes are almost always available for a lower price than a pristine house, offering you the opportunity to save on the upfront cost. Once the home is yours, you can break out your tools and get to work on renovations. 

But while 40% of homeowners across five of the nation's biggest centers plan to renovate this year, not every remodeling project is created equal. This is the debate with fixer-uppers. 

"The ideal fixer-uppers are those that require mostly cosmetic improvements — paint touchups, drywall repairs, floor refinishing — which generally cost much less than what they return in market value," according to This Old House. "New lighting fixtures, doors, window shutters, and siding, as well as updated kitchens and bathrooms, are also lucrative improvements."

Anything beyond that, such as major structural changes and additions, might be outside of a frugal homeowner's budget. That's why it's essential to assess the true cost of the home.

How To Calculate The Home's True Cost

It's important to remember that the cost of a fixer-upper stretches through the years of renovations ahead. When assessing the true cost of the home, consider the following factors. 

  • Price out renovations.: This may seem tedious, but it can be costly if you skip this step. Make a list of the renovations you want to make, at least within the first five years. Then do research on the cost of labor, if you will be hiring a contractor, as well as materials.

  • Know your DIY limits.: You might buy a rundown home with the intention of diving into DIY projects, but are you being too ambitious? Know which projects you can realistically complete yourself and know which are best left to a professional.

  • Request an inspection.: This is an essential step. A certified home inspector can catch leaky pipes, a faulty roof, basement mold, broken foundation, or other hidden problems that will be costly down the line.

  • Consider the local market.: If you are fixing the house with the intention to eventually sell it, be realistic about the housing market. Work with a realtor to determine how much the home will sell for if restored. You might actually end up losing more money than it's worth.

  • Be skeptical.: When touring the home and speaking with a real estate agent, ask questions every step of the way. A realtor is showing you the home with intention of making a sale, not to tell you the whole truth.
Throughout your home hunting process, remember that you are not locked into a home until you sign for it. You have options as a potential buyer.

"Most home inspection contingencies let you go back to the sellers and ask them to do the repairs, or give you cash at closing to pay for the repairs," according to houselogic. "The seller can also opt to simply back out of the deal, as can you, if the inspection turns up something you don’t want to deal with."

And if it's too much to deal with, it is probably not the right home for you. Stick with your search and be selective. You deserve to live in a home that makes your family comfortable. 

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