Should you buy that fixer?
"Fixer-Upper." That term strikes fear in the hearts of many-a homebuyer because it's such a relative term. We don't have any strict criteria defining exactly what "fixer-upper" means. It could mean a historic home that requires some minor repairs and updates ... and it also could mean a ramshackle place with sagging floors, a leaky ceiling and a serious draft problem.
And yet, fixer-uppers represent an excellent way for many homebuyers to move up into larger accommodations -- provided they're willing to assume the cost and the effort it takes to perform the various repairs these homes require. So by no means should you dismiss fixer-uppers during your home search. But this is a clearly a situation during which you should take your time and thoroughly investigate all of the repairs a home will need -- and most important, how much they'll cost -- before you sign on the dotted line. A home that seems like a great bargain now can turn into a real money pit if you don't do your homework before the sale.
To get started in your search for a fixer-upper, check out both the Internet and your local newspaper in the real estate classifieds section. If you're new to the home-search process, you'll soon be educated on the frequent discrepancy between sounds-too-good-to-be-true home listings and reality. Even if you pull up to a home that appears on the outside to live up to its promises in print, have your Realtor take you inside for a closer look. Many of these fixer-uppers look quaint, even immaculate on the outside. The inside, however, is sometimes a much different story. This exercise isn't wasted time; it's part of your education. You'll soon learn to distinguish between homes that are worth your time to investigate and homes that probably aren't worth a look.
Even if you determine that the home is in need of a significant number of repairs, the prospect of a "great deal" can tempt you to turn a blind eye on the home's problems. Fixer-uppers can be intoxicating. The steal of the century is something to which we all aspire. The seller of the fixer-upper may dangle proverbial carrots in front of you, such as a mortgage assumption, in an effort to discourage an appraisal. This is clearly an occasion during which you can't let your emotions reign supreme. Don't make a same-day decision. Go home, sleep on it, and allow yourself time to consider what you might be getting yourself into. Think about the prospect of getting yourself into a home for which you paid too much, and for which you still have to invest thousands of dollars in repairwork. You'll be amazed at how much different that home appears to you in the morning.
It's also well worth your time to find out if the asking price of that fixer-upper is comparable with the prices of other homes on the block. Are there other fixer-uppers on the street? Have any nearby homes been refurbished by their owners before a sale, and if so, for how much were they sold? What you can you expect to get for that home if you refurbish it, then turn around and sell it?
If you have your heart set on a fixer-upper, make sure you get yourself pre-approved for a mortgage in which money is allocated for home renovation, such as the FHA 203(k). When you're meeting with your lender, keep the lines of communication open about exactly how much work will be required to fix up your prospective home. Being specific about what needs repair and whether or not you plan to hire a professional to do the work is in your best interests, enabling you to obtain a loan that accommodates your needs. And, of course, being pre-approved helps your chances if you're up against competing bidders.
In the event that your dream fixer-upper passes muster, find yourself a reputable home inspector, and have a thorough inspection conducted before you commit to a purchase. There's always a possibility that your inspector could locate a significant problem of which you weren't aware (for example, lead). If that's the case, you don't have to give up on your dream, necessarily. But you will have to stand firm and hold out until it has been agreed and put in writing that any such problems will be covered with adequate estimates for repair.
The dream of purchasing a fixer-upper, donning a tool belt and overalls and transforming a home to its original glory is firmly rooted in the American dream of homeownership. But that dream can lose its luster quickly when costs mount and reality sets in. Taking your time, aligning yourself with a reputable lender, Realtor and home inspector, and even taking an eduational course or two can help you make the right decision. There are, indeed, promising fixer-uppers to be found if you educate yourself on what constitutes a good find ... and leave the rose-colored glasses and your emotions at home when you begin your search.
Written by Courtney Ronan
Copyright © 2005 Realty Times. All Rights Reserved.