Can Fixer-Uppers Work for First-Timers?
Buying a first home is a complex process. Fortunately, in today's market there are ways to find a home that you can comfortably afford.
One common way that buyers often find a good value is by buying a fixer-upper, which is basically an existing home that needs some work.Sometimes these dwellings could just use some tender loving care, like a putting on a fresh coat of paint and installing new flooring. Other times, though, they need more serious rehabilitation.
Depending on the condition of a home, a seller tends to price the property at a lower price compared to other homes in the local neighborhood, which can allow a potential buyer to save money on the price of the home right off the bat.
So the question is: Are fixer-uppers a good idea for someone who's new to homebuying and homeownership?
Besides paying a lower price for the home, there are some benefits to buying a fixer-upper.
Buyers who take on homes that need a lot of work have the opportunity and satisfaction of renovating the property to match their taste and style. And if they pick smart renovation projects with high resale value like bathroom and kitchen remodels, they could see financial benefits when it's time to sell the home.
But you'll want to avoid making the mistake of thinking about fixer-uppers as only needing cosmetic work – chances are, if the décor hasn't been maintained, other out-of-sight areas might not have been maintained either. And many times, that's where the budget-buster problems can lie.
That's where an expert can be a huge asset to you.
A home inspector can help educate you about the need for major repairs on a home, so it's critical to have a thorough home inspection completed before buying any home. But you should still do your own homework as well to understand repairs and associated costs in order to put a dollar figure to any problems that the inspector presents.
In this video, Paul Mignone, of Sound Shore Construction LLC, evaluates a potential fixer-upper. As a contractor, it is his business to know not only what repairs might be needed, but also what they really cost.
As always, an expert who's familiar with your local market will have the best idea of what renovations are most desirable in the market and are likely to return the most at resale so that you can prioritize your repairs accordingly.
And that in itself is a big item for a first-time buyer to consider-–do you have enough savings to pay for those home improvements and still have the funds left to cover any emergencies down the road?
Whereas repeat buyers may have equity to tap into from a recent home sale, as afirst-time buyer you will likely use a big chunk of your savings toward the down payment on your first home. Depending on the urgency and extent of repairs and renovations needed, you should think about how much you can afford to spend on repairs without putting the rest of your financial plans on hold. Being informed will better equip you to be a successful homeowner.
And did you know that if you make significant improvements to the property, the property taxes could increase the next time the property is assessed?
Money aside, remember that renovation projects can be stressful and often take longer to complete than homeowners anticipate.So make sure to gauge your comfort level with some of the emotional and environmental costs of remodeling, such as contractors being in the house for weeks or months on end, lots of messes and, if you're the do-it-yourself type, a lot of sweat equity.
So the key takeaways are that fixer-uppers can be a good choice for first-time buyers, but remodeling a home is not a project to be taken lightly. It's very important to crunch the numbers – it may turn out that you aren't saving as much money as you thought.But if you're handy and repairs are mostly cosmetic, this might be a good option for you.
If you aren't particularly handy, or if there are structural repairs needed, you may want to opt for a move-in ready home and save the fixer-upper for a future home purchase.
- Video: Home Inspections: It Pays to Know What You're Buying
- Home Inspections: What to Expect
- Video: Home Inspections for Sellers: Prepping for the Sale
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