Buying a home that needs considerable work at a lower price point could get you the home of your dreams in the location you’ve always wanted. When is a fixer-upper worth buying, and when should you move on?
First, a cost analysis should be done based on a thorough assessment of the condition of the house and the estimate of time and money that it will cost to renovate. Subtract the renovation cost from the home’s potential future market value after renovations plus another five to ten percent for any unforeseen circumstances. The final calculation will give you the amount that you can comfortably offer on the house.
The contract written for the fixer-upper should include an inspection clause to ensure you are making a wise investment. This clause will give you a way to back out of the deal for any found significant issues. Many experts advise against buying a fixer-upper that has considerable structural problems. That’s because major repairs – foundation upgrades, extensive roof and wall work, and plumbing and electrical overhauls – are usually ‘invisible’ and do little to raise the value of the home enough to offset the cost to renovate.
Finding a serious problem or two isn’t necessarily a deal-breaker. Your real estate agent can use these inspection findings to get the seller to pay for repairs or negotiate the sale of the price down to cover the cost.
READY TO RENOVATE
So, you’ve finally purchased the fixer-upper, and you’re ready to turn it into the home of your dreams. When making your improvement plans, be sure not to over-improve for the neighborhood. For maximum resale value, be sure not to raise the value of your house more than 10 to 15 percent over the median sale price of the other homes in your area.
It is most cost-effective to have the homeowners chip into the renovation work, but when this is not possible, finding the right general contractor that specializes in extensive renovations is critical. Your Mike Thomas Associates Real Estate Agent can help connect you with exactly the right team to make your dream home a reality.
If you are looking to purchase fixer-upper and want to ensure that you’re making a wise investment, we’re here to help! Give us a call today.