Interested in Buying a Fixer Upper? 5 Simple Tips to Keep Your Sanity
As an industry distressed asset expert, I meet many buyers that want to buy a distressed property or a fixer upper. HGTV has romanticized the process and the chance to remodel an eyesore into a dream house. Many would be fixer upper buyers fold after doing the preliminary research regarding the cost and the timing of a major rehabilitation of a distressed home and refocus their search on move-in ready homes. On the flip side, I have seen many very successful renovations that have been well worth the extra blood, sweat, and tears from willing buyers. The best advice I can make for a buyer wanting to buy and then live in a fixer upper is to make a plan and stick to your plan.
- Target specific neighborhoods that you would like to live in. Check out the schools, the neighborhood amenities, and neighborhood resale potential when you are looking at buying a fixer upper. Even if you plan on living in this home forever, you do need to make sure that your rehabilitation investment does not turn your home into the best house by leaps and bounds in the neighborhood. Situations often change, and over renovating a home is never a good thing, in my opinion.
- Understand your renovation tolerance. If you do not have the stomach for significant cost overruns, expanding the scope of work, several months in temporary housing, and general frustration; you may want to consider looking for a home that is cosmetically challenged versus buying a fixer upper that is a major renovation project. Sometimes all you need is a good painter and flooring contractor to turn an average, blah home into a wow home. Be honest with yourself. Are you the type that is willing to work with an Architect, Designer, and Builder to knock down walls, move kitchens, and reconfigure an older compartmentally designed home into an open concept home? Or are you the type that wants to grab a paintbrush, some exciting colors, and call it a day?
- Don’t be afraid of Professional Help. Let’s face it, unless you are a contractor, renovating a home is not your primary job. While there are some things that a homeowner can tackle, most renovation items are best left to the professionals. During the home search process, it is imperative to hire a great agent, one that has distressed and renovation experience who can highlight cosmetic deficiencies versus major repair items. This expertise will save you, potentially, thousands of dollars in negotiation costs, heartache, and inspection fees. Bring in professional inspectors to best understand the necessary repair requirements in addition to the renovation requirements before you purchase your fixer upper. Get competitive contractor bids during the inspection process to best understand the anticipated cost of your fixer upper and add 20%. The 20% is for cost overruns and project alterations that are typically part of the process.
- Understand the financing options available and the best financing option for the home you chose to renovate. This is not a one size fits all category. For larger renovation projects, you may determine that a construction loan is the best fit. If you are looking at a moderate renovation, then you may find a low down payment renovation financing option a good fit. If you are choosing to pursue a structurally sound but ugly home, that will allow you to do the work yourself, you may find that traditional financing is a good fit. Perhaps, you may be willing to pay for your renovations after closing with available cash on hand, or line of credit. There are several great renovation financing options currently available. Some financing options are available with as little as 3.5% to 5% down payment. The low down payment options make a fixer upper affordable for all buyers, even first time buyers. There are also construction loan options available for larger projects. Construction to permanent loans allows the buyer to pay for the renovation process as they go in a series of draws and at a lower monthly outlay since their payments are typically interest only. Renovations are not limited with a construction loan except by the anticipated appraised value after renovation. You can build a home from the ground up with construction financing.
- Don’t be afraid to hire an Architect, and/or a Designer. Consulting with a professional for layout and color choices is a good thing; which, while an expense, can actually save you time and even money by avoiding costly mistakes and the need to repaint the entire house because you can’t stand the color you selected off of a paint color wheel. If you feel bold and confident with advice from Pinterest and Houzz, there are some good resources there for the super budget conscience.
While I love watching the HGTV shows, please don’t rely on the budget portrayed in these programs. I am amazed at the cost of renovations here locally in Northern Virginia in comparison to the renovation costs and home prices in Waco Texas. If you have questions regarding the fixer upper process here in Northern Virginia or would like to get a better understanding of your home buying and selling process, I would love to help! Give me a call (703) 477-6022 and we can find the best options for you!
If you're ready to start searching for your fixer upper, start your search, here.