Before deciding that your next home must be a fixer-upper, you should do some homework into what to expect when purchasing these types of homes. Many prospective homebuyers tend to have a romanticized version of the entire process, and are quite shocked when confronted with the hard reality.
Fixer-Upper homes can often represent a good deal, but there are some points that a homebuyer should be aware of BEFORE making that offer.
MYTH # 1
I can make a “killing” in the real estate market by buying a run-down home, for tens of thousands of dollars less than the average home, fixing it up, and then immediately selling it for full price, or more.
FACT # 1
Most homeowners looking to sell their “fixer upper” home understand that they will have to list their home at a price that reflects the cost involved in restoring the home to its original condition. The asking price of a fixer upper is usually calculated so that the savings represented by the lower than average market price is roughly equal to the amount of money that a buyer could expect to spend on necessary renovations.
Updating the “look” of a home,or upgrading to higher-end finishes, is not included in these calculations, and you should be careful not to spend so much money on renovations that you are unable to recoup your investment.
MYTH # 2
If I’m buying a fixer-upper home, I don’t need to bother with the added cost and aggravation of a home inspection because I already know what I’m getting.
A home inspection should always be included in an Offer To Purchase and Sell agreement, and it is arguably even more important to include one when you are looking to buy a fixer upper. Structural defects are normally not visible to the untrained eye, yet will cost much more to repair than the obvious cosmetic fix-ups. Most licensed home inspectors will not only detail the defects that they uncover but can also give you a good idea of the costs involved in fixing them.
It’s better to pay a lot less and buy a “fixer upper” in an undesirable area, than to pay more for a comparable “fixer upper” in a better neighbourhood.
Most of us have heard the quote, “the three most important things to look for when buying a home are: location….location…and location!” While this is obviously meant to be
funny, and is a somewhat oversimplified rule of home buying, it does drive home the point
of how important it is to consider where you will buy your home. Purchasing a fixer
upper in a desirable neighbourhood will cost you more initially, but the payoffs —
personal peace-of-mind and higher return on your home investment when you sell — should not be overlooked.
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