On Tuesday, I discussed buying new construction homes, and the things to consider in relation to them. Today, I would like to look at the other end of the spectrum; “fixer uppers.” Fixer uppers are those houses that have great potential to be the home of your dreams, but need some love to get there. The amount of work needed varies greatly between fixer uppers and can be anything from fixing some cosmetic issues and putting up some sheetrock to completely gutting the house. And if this is something you are considering, there are a few things to think about before you jump in.

First, you need to know your own do-it-yourself abilities. We all have moments where we think we can redo the roof on our house or handle a full kitchen remodel if we watch some YouTube videos, but you need to be cognizant of what you can actually do. Most people cannot retile a floor, move a bathroom, or even hang cabinets without some experience in having done it. So if you have no experience and no experienced home remodelers willing to help, be sure you get quotes for what the work will cost if you need to bring in a professional.

Second, and with the first point in mind, consider where on the fixer upper scale you want to be. If you can get the right deal and have the cash available, you can create a virtually new home that is completely customized to your needs if you gut it. But if your cash is low and you want to do the work yourself to save money, be sure you really consider what you can do, how much things will cost, and have a reserve in case additional problems arise when you open the walls or pull out the old, rotted, floors.

Third, consider what the end result will be, and what you will pay out of pocket to get there. Be sure to inflate the costs to account for the unexpected problems that can come up with home repairs (wood rot in the rafters, cracked foundations, additions that were not built to code, etc.). Then, look at homes you can get for that price. If you aren’t getting much more to do all the work than you can to buy a house in that price range, be sure it is worth it to take the chance on doing all the work. It might be worth your while to save your time and cash and buy a house that is move-in ready (or at least close to it).

Fourth, once you have the house and the quotes for the work, and you are sure it is what you want to do, sleep on it. I have known far too many clients who jumped at the opportunity to buy a fixer upper and have it made into their dream home, only to call me within a year looking to finance a new home because they bit off more than they could chew. If you have no reservations, no concerns, and are 100% sure you are making the right move, you haven’t considered everything. Even seasoned homebuilders have some worry when buying a fixer upper, because you don’t really know what needs to be done until you start tearing everything apart. But if you do it and succeed, there is nothing more rewarding.

Fifth, and finally, you need to think about financing options. You can finance the repairs yourself with cash reserves, should you have the money available. But if you are tight on cash or would like to keep your reserves, it might be a good time to brush up on FHA 203k loans, Fannie Mae Homepath renovation loans, and Homestyle renovation loans. Each of these loans has different requirements to qualify, but each also offers cash at closing to help you fix up that house.

If you are in the market for a new home and would like to know how much house you can afford, or need a preapproval to put in an offer on a house, please contact me. If you have anything to add about fixer uppers, please leave a comment.