If you are looking for a house to buy with a limited budget, fixer-upper houses are a good way to go. In fact, according to a CNBC report, 68% of millennials want to buy a fixer-upper home instead of the usual brand-new deal. But it’s not just the popularity of fixer-uppers TV shows that made these houses come back alive.
Purchasing a house that needs work is actually a long-established method of owning a home. Whether a house needs a few simple cosmetic touch-ups or a full renovation, the market is still very much in demand.
To attract interest at first, the cost for a fixer-upper could be set fairly low. If it’s appropriate and you’re lucky, you can even offer a lower price upon purchase. But that could only happen if the house is in really bad shape.
And that’s where the trouble comes in when buying a fixer-upper house. You need to consider a lot of costs because of the repairs that have to go into it. Unlike buying a move-in-ready house, setting a price for a fixer-upper isn’t easy. Every single one of them is different from the next, so there’s no way you can make comparisons.
When buying a fixer-upper, you need to consider the cost of the final offer, renovation and repair costs, and of course, your budget. Hopefully, this article can help you get a fitting cost assessment for a fixer-upper you’ve been eyeing for quite some time now. And in the end, maybe you can finally decide to proceed with the purchase or not. Good luck!
The First Visit
First, find out how old the house is. Older houses can have a lot of problems. Plumbing, structure, electrical wiring, and heating problems can all cost you. In other words, you will spend more to renovate and repair an older house compared to one that’s just a few years old.
Second, ask the owner if the house is for foreclosure. Some owners sell their houses before foreclosure. You can help them by making up for the back payments they missed and then take it out of the home’s final cost.
The First Assessment
Look around the house and check which parts of the house you can easily repair and remodel yourself. Then check around if there are outdated appliances that need to be upgraded. Appliances are not cheap. They are considered investments, especially for first-time homeowners.
Make sure to write down the cost of the materials and everything you’ll need.
The House Inspection
After your own inspection, it’s now time to get a professional house inspector to check out the house. They can help you spot mold, structural flaws, frayed wiring, and other factors that you’re not aware of when buying a house.
Often, the cost of hiring a house inspector can be covered by the seller. If not, you can pay for it, and if all goes well, you can deduct the cost from the final price of the house.
Now you can bring in your contractor to the house. According to Home Advisor, the average cost of renovating a house sits between $18,000 to $76,000. A lengthy walkthrough can help your contractor come up with an estimate of the renovation costs for the house that’s hopefully lower than what the Home Advisor advised.
Then, find out how much a building permit will cost you. Your contractor can get this for you. You will need it before you can make any repairs or conduct a renovation.
Next, talk to your real estate agent and find out how the cost of renovation can affect the price of the house. Your real estate agent can also provide you with the fair market value of the house.
Next, figure out a way to finance your home purchase and renovations. Some loans can provide funds for both of these. Get pre-approved first before you proceed with the next and final step.
Now you can put everything together. Use the fair market value provided by your real estate agent. Take out the construction cost given to you by your contractor and anything else that can be taken out of it. From this, you can get a true cost estimate of your fixer-upper. You can use this as a base price for your final offer.
Know What You’re Getting Into
Buying a fixer-upper can only be a good deal if you find a house that’s less of its market value and then be able to sell it after improving its condition. If the costs of repairing and renovating it are draining your money, however, it will not be worth it. Before you buy your fixer-upper, consider these tips.