One of the nice aspects about buying a fixer upper is that the purchase is not contingent on the temperature of the real estate market -- whether hot, cold or neutral -- any time is a good time to buy a fixer. Especially if you buy the fixer for less than everything else around it. The advantages are obvious:
- Lower sales price
- Less competition (not everybody wants a fixer upper)
- Potential for resale profit
- Gain repair knowledge, which will help you to properly maintain the home
- Personal satisfaction when the projects are completed
Remember, if you make a purchase offer at the right price, you make money the day you close. Because the time to think about selling is the day that you buy, even if you have no immediate plans to sell. It will help you to avoid many home selling mistakes on the back end if you avoid home buying mistakes on the front end.
The Ideal Fixer Upper Home
The perfect fixer upper is the home that everybody wants when fixed up but few can see past its imperfections to buy. The peeling paint, sagging ceiling or worn carpet are correctable features that turn off many home buyers. They can't see past the disarray. Most first-time home buyers want to buy a home in pristine condition, one that is turnkey and ready to occupy.
What to Look For in a Fixer Upper Home
You've heard it a million times but it's true -- location drives saleability. Don't buy a fixer upper that is located on a busy street, next to a school or across the street from a power plant. Look at fixers in desirable neighborhoods. That doesn't mean you can't make money on a ghetto fixer, but given the choice, wouldn't you prefer a sought-after neighborhood?
Examine the surrounding homes and pay attention to how the homes are maintained. Are the lawns manicured? Do you notice deferred maintenance on the neighboring exteriors? Does the neighborhood appear conforming with mostly owner-occupied housing?
The best type of fixer upper to buy is one that will appeal to the largest pool of buyers, which is a 3 bedroom with more than one bath. That's not to say a two bedroom isn't profitable, especially in a neighborhood of primarily two bedrooms, but three are better. If three bedrooms are better, four are better yet as some buyers who need a four bedroom will not consider a three bedroom, but a three-bedroom buyer will purchase a four bedroom.
If the home is chopped up with a bad layout, realize that it can be expensive or impractical to move walls. The layout should flow. Bedrooms at opposite ends of the home will turnoff buyers with young children, as will a two-story with the master upstairs and the other bedrooms downstairs. Kitchens with more than one entrance are desirable. Some buyers do not like dining rooms serving as the central focal point of the home, from which every other room is accessed.
What's a major rehab to one home buyer is a walk in the park for another. Consider your expertise and whether you want to tackle a home that requires a major renovation to make it habitable. Minor cosmetic improvements are typically less costly and easier on your budget.
Fixer-Upper Repair Estimates
Easy fixes are:
- Patching walls, stripping wallpaper and painting.
- Refinishing floors, laying tile or carpet.
- Installing ceiling fans and new light fixtures.
- Replacing baseboards or adding trim.
- Fixing broken windows.
- Replacing bathroom subfloors due to leaky toilet seals.
- Installing new or refacing / painting kitchen cabinets.
- Replacing doors.
- Changing out receptacles, light switches.
- Painting the exterior.
- Adding a deck.
More expensive fixes are:
- Replacing HVAC systems or adding central air.
- Shoring up foundations.
- Reroofing, when it involves a tear-off.
- Replacing all plumbing, sewer lines and electrical.
- Pouring concrete for driveways, sidewalks, steps.
- Installing replacement windows throughout.
- Complete kitchen / bath remodels.
- Building garages / additions.
Inspections for Fixer Upper Homes
If your state permits inspections before purchase -- if your contract lets you cancel the purchase contract for any viable reason -- always, always, get a home inspection by a credentialed home inspector before committing to complete the sale.
But there are many types of home inspections that you may want to consider before buying a fixer upper, and some of those inspections could involve asking the seller to foot the inspection bills:
- Roof Certifications.
Obtaining a roof certification at the seller's expense is good business practice, if you can persuade the seller to pay for it.
- Home Warranty.
Not all sellers will pay for a home warranty, but many view it as insurance against those late-night phone calls when things break after closing.
- Pest inspections.
Not every state has a pest problem, but if your area deals with damage from beetles, termites or ants, ask for a pest inspection, and make your purchase offer contingent on your approval of the inspection including seller-paid repairs.
- Sewer line inspections.
As properties age, so do their sewer lines. In some parts of the country, Orangeburg pipe, which is basically tar paper, has been popular for use in the last part of the 20th Century.
- Home inspection.
Not all home inspectors are licensed and few states regulate them. Look for experience, background to qualify the inspector and read the contract for recourse.
- Engineering Reports
Natural hazard or geological disclosures. An engineer can determine if that home on a hill is likely to slide. Pay attention to landfills nearby, contamination reports and other detrimental resale hazards.
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.