What every homebuyer should know about buying a fixer upper

Foreclosed

This week, I wanted to talk about Fixer Uppers.  I show a lot of distressed homes, and many that are not distressed, that need work.  Some may be just cosmetic and some may be structural.  What does it matter?  For investors that are buying homes to flip or to rent, it does not really matter much to them because it is all about paying cash and getting the best deal.  Most investors expect to do work and know what they are looking at – but what about the average first time homebuyer?  

If you are financing your home, repairs will be a big part in getting the home you want.  In most cases, distressed homes are “as is” with “no repairs”.  Depending on the extent of the work to be done, the home you choose may not be able to be financed by your lender.  In many cases, the home does not qualify for FHA or HUD standards and the “seller” will not fix anything, thereby preventing you from putting in an offer on some homes.  If you know that the home will require repairs for financing (your Realtor can tell you this information), you should have a contractor look at the home upfront and give you a quote and breakdown for work to be completed.  When writing up your offer, ask the seller to make those repairs so that you are able to obtain financing  If your offer is strong enough, the seller may consider making those repairs to sell the home.  Your other option is to consider a 203K Renovation loan that will allow you to finance repairs. In many cases, the seller may still refuse to do anything, but you never know until you ask.  This key is to do your homework and submit a strong offer based on current sales and renovation costs.

Here is another good article from Hands on Homebuyer about fixer uppers:

Is the fixer Upper worth Fixing?

Finding a foreclosed home to buy

Please be sure you have a good contractor you can call if you are looking at distressed properties.  You need to know what you are getting because there are no warranties and the bank holds no liability for homes that are damaged or have hidden defects.  It is “buyer beware” and you need to do all your due diligence before you make an offer.  You can get a great deal on a distressed property that may require minimal work – just be informed and do your homework.

Here is one of my archived articles on buying a foreclosed home:

A few things to consider before purchasing a distressed property