Fixer Upper Homes

What is a Fixer Upper Home?

When looking for a good deal on a home, it makes sense to explore all the different options available to you. This can include properties such as foreclosures, pre-foreclosures, short sales and fixer-upper homes.

The simple definition of a fixer upper home is that it is a property which requires some repairs and upgrades to be done in order to make it livable and enjoyable for the next buyer. What one person considers to be a fixer-upper may not be the same for another person. Many times, fixer-upper's require simple repair work such as patching holes in the wall, replacing flooring and jazzing up the landscaping.

5 Reasons Why Fixer Upper Homes are so Popular

• Lower sales price: Because most buyers are looking for a move-in ready homes, they often won't get a second glance at a fixer-upper property. For that reason, these properties are often priced well below other properties in the area simply because repairs have to be taken into consideration.
• Less competition: Not everyone wants to mess around with fixing up a house. Most typical home buyers want something that is move-in ready, so that means that your competition for these properties is a lot less.
• Potential for resale profit/flipping: Buyers of fixer-upper properties know there is a lot of profit potential in between the sales price and the final value price after repairs. If you get a home that is priced well below market value, and you have the resources to do the repairs, you may find yourself sitting in a great position as far as profit goes.
• Gain repair knowledge: Buying a fixer upper property helps you learn more about home repair. This will allow you to maintain your home properly over the long-term.
• Personal satisfaction: Some people buy a fixer-upper property simply because they like the satisfaction of seeing a house go from a dilapidated state into a showplace.

What To Look for in a Fixer Upper Home

There are four basic criteria that you want to consider when looking at fixer-upper property:

1. Location: As with any kind of real estate, location matters a lot. If you buy a property in a bad location, you're going to have to cut your price substantially in order to sell it. Always consider location before you make your purchase. Look for things like proximity to shopping, good schools, proximity to interstates, etc.
2. Configuration: There is something called functional obsolescence. This means that certain floorplans just don't work in today's modern society. When looking at properties, you must make sure that the current configuration would suit your end buyer. For instance, if the home you are considering has the laundry room in the kitchen, this will be a drawback for modern home buyers. You have to take configuration into consideration as far as your repair and renovation costs.
3. Layout: The layout is very important when looking at properties. Make sure that the floor plan of the home flows well and will be easy to sell to an end buyer. The home should also meet the standards of neighboring properties. For instance, don't buy a one-bedroom bungalow in the middle of three bedroom family homes unless you are prepared to do extensive upgrades.
4. Condition: Obviously condition matters a lot since you will be figuring your repair costs. Make sure that you do a thorough inspection of the property so that you know exactly what you're up against when it comes to repairing and upgrading the property.

Fixer Upper Repair Estimates

When estimating how much repairs will cost on the subject property, consider the easy and extensive fixes. For instance, here are some typical easy fixes that you may be able to do yourself:

• Replacing doors
• Installing ceiling fans and new light fixtures
• Changing out receptacles and light switches
• Patching walls
• Stripping wallpaper
• Painting
• Laying tile or new carpet
• Replacing baseboards
• Fixing broken windows
• Painting the exterior

Of course there are also some more extensive fixes that you will likely have to hire out to contractors. It is very important to have a good idea of the cost of these kinds of fixes before you purchase a property. That way you won't find yourself sinking tons of money into a home that isn't going to appraise high enough to warrant those extra costs. Here are some examples of more extensive fixes:

• Complete kitchen or bathroom remodeling
• Replacing the HVAC system
• Adding central air conditioning
• Replacing plumbing, sewer lines or electrical components
• Re-roofing the house
• Pouring concrete for the driveway
• Reinforcing the foundation
• Creating room additions or building a new garage

As you can see, some of these more extensive home repairs or upgrades can be pretty costly if not factored in at the very beginning. You certainly don't want these kinds of surprises to crop up and cost you all of your profit potential.

Fixer Upper Home Inspections

There are several different home inspection items that you want to consider having done when you buy a fixer-upper property. Again, it's important to know everything going in so that you can make an informed decision about whether or not you want to purchase the property. Here are some inspections that you might want to consider having done prior to sealing your purchase and sale agreement:

• Roof inspection and/or certification
• Pest inspection and/or termite bond
• Sewer line inspections
• Septic tank inspection and/or pumping
• Radon testing
• Full home inspection
• Engineering reports
• HVAC inspection and/or servicing

Are Fixer Upper Homes for You?

Fixer-upper homes are definitely not the right thing for everyone. How do you know if fixer uppers are right for you? Here are some questions to ask yourself:

• Am I handy with tools and home repairs? If the answer is no, that's okay, but you have to be willing to pay extra to have all of that hired out.
• Do I like the idea of going into homes that may be in disrepair?
• Do I mind working in potentially dirty and dusty situations?
• Am I financially prepared to take care of the repair issues?
• Am I financially prepared to pay the underlying mortgage payment while renovations are being done and the home has been listed for sale?
• Am I prepared to work with contractors and subcontractors?

Special Loans for Fixer Uppers

If you don't have the extra money lying around to do home repairs, never fear. There are special loans available for people who buy fixer-uppers. One such loan is called the HUD 203(k). This is an FHA insured loan they can be obtained through mortgage lenders all across the United States. It is only available for individuals who will be living in the property. In other words, this is not an investor loan.

The great thing about this loan is that it will cover the cost of acquiring the property plus the repair costs. This money will be put into an escrow account so that money can be drawn out as work is completed on the property.

Of course, investors also have access to different kinds of rehab loans usually through private or hard money lenders.