By Brittany Fisher
We’ve all seen those rags-to-riches renovation shows that make investing in a damaged home look very appealing. It’s definitely doable if you know what you’re getting into and how to go about it—or it can turn into a nightmare. Here’s what to do if you decide on a house, only to find out it’s more of a fixer-upper than you were originally planning on.
Fixer-uppers come in a wide range of shapes and sizes. As Redfin explains, the predominant quality in a good fixer-upper is location. After that, keep in mind that sometimes properties only need cosmetic updates, but other times, the home could quickly become a money pit. Whether the buyer disclosed issues, the house is being sold as-is, or you just have a gut feeling something is awry, knowing how much damage is lurking just beneath the surface will help you know how you should proceed. The Motley Fool explains that many repairs are quite costly, such as foundation issues and HVAC replacements.
Hiring a home inspector is always a wise choice when purchasing a house, even if you know you’re buying the property as-is, and even if you know and trust the seller. This way, you can avoid any costly surprises down the road.
As NerdWallet explains, a professional inspection will include a detailed walk-through reviewing the house’s structure, looking for evidence of pests, leaks, hazardous substances, and other sources of trouble. You can expect the cost and time it takes to vary depending on the size of the home, and as a result of the inspection, you will receive a report detailing what was found.
How you use the home inspection report depends on your situation. If you are purchasing a home that was not listed as-is and the inspection is completed in the normal course of closing, the results become a bargaining chip in your offer. Depending on the nature and extent of the trouble, you can request the seller make repairs, offer to do them yourself, or back out of the deal altogether. Sometimes your bank will make the choice for you, as only certain types of loans are normally used for fixer-uppers.
If you are looking at a house that’s listed as-is, you should have the inspection completed before making a formal offer. This ultimately gives you the chance to change your mind if the inspector finds damage beyond your expectations.
On occasion, buyers make an offer and the house is damaged between the time of the offer and closing. This is usually due to things like extreme weather events. This situation can be tricky because there comes a question of who must pay for the damage. The insurance companies and mortgage companies will likely have a say in things, and home buyers and sellers often benefit from the insight of a real estate attorney if negotiations become complex.
Sometimes whether or not to invest in the property is a no-brainer. For instance, if you love the location, there are only small amounts of damage or cosmetic concerns, you might score the deal of a lifetime. On the other hand, a property that will require extensive repairs might take more thought. If you’re pretty handy and can work on the place while you live there, pricing out the supplies can help you make your decision.
If you can’t live in the house while repairs are made, then you need to consider whether you can afford two mortgages, rent an apartment, or live with a friend while work is completed. If you need to hire professionals to tackle the work done on top of that, you have even more complexities to contemplate and more numbers to crunch.
Will your fixer-upper be a dream come true or just a pipe dream? Do some thorough research into the house itself—and into your finances—before you proceed. It could be time to realize your own rags-to-riches story, or it might be time to walk away.