Have you thought about everything you want in a new house and compiled it into a wish list? If you have, you might be wondering if there is any house in the world that can provide you with all of those amenities at a price that is within your budget. Most likely not, however in circumstances such as this one, it’s time to rethink the way you do your shopping.
Start looking at ugly homes.
Surprised? Homes that need work, or “fixers” as they are called in the real estate industry, are the ideal choice for the picky homebuyer, and here’s why:
- They are less expensive than homes in move-in condition.
- There is typically less competition in the fixer market.
- You can customize the home to fit your home-buying wish list.
- You may be able to buy in a more expensive neighborhood, which will help boost the home’s value when it’s repaired.
- Financing options are quite attractive.
“In some markets, buying a fixer can really be a game changer, bringing the typical single-family home into reach for a median-income household,” says Realtor.com’s Cicely Wedgeworth.
Shopping for a fixer
Shopping for a fixer-upper house for sale may be challenging at first. Remember, these homes are typically not very attractive so you’ll need to learn how to look at them in a different light.
Forget trying to picture yourself living in your dream home now – picture instead what the home will be like when you’ve transformed it.
The most important aspect of fixer-upper shopping is to find a floor plan that most closely fits your needs without having to knock down too many walls.
While removing a non-load-bearing wall may cost between $2,000 and $3,000, ripping out a load-bearing wall costs $1,200 to $3,000 for a single-story home.
If the home you purchase has more than one story that price jumps to between $3,200 and $10,000, according to the folks at HomeAdvisor.com.
As you can see, the floor plan is key when looking at fixers.
Two professionals you simply must have on your side when shopping in the fixer market include a real estate agent to help you negotiate and a contractor, for obvious reasons.
Financing the fixer-upper
Once you decide on a home unless you’ll be paying cash for it and for the rehab work you’ll need to get financing. Unlike in years past, today there are several attractive options.
Our favorite programs are the FHA 203(k) loan, the Freddie Mac Home Possible® mortgage, and Fannie Mae’s HomeStyle® Renovation Mortgage. Although these programs have different qualification guidelines they all basically offer the same thing: They permit borrowers to wrap the rehab work into the financing for the home.
One loan covers both. With the FHA program, you won’t need to start making mortgage payments until you actually move into the home.
This is a significant money and time saver. First, having just one loan means you’ll save on closing costs. With all three programs, the loan amount is typically based on the value of the property when the work is completed.
The process is complicated, we must warn you, but with the right contractor and real estate agent, buying a fixer-upper property may just be the best investment you’ve ever made.
Purchasing a fixer-upper will need significant financial investment. It would be beneficial if you anticipated the disturbance to your everyday life, as well as the commitment and hard effort required to accomplish it. As a result, it is critical to enter the project with your eyes wide open and confirm that you are capable of handling the project.
You should choose a house that will be easy to renovate and avoid those that would demand work that is beyond your skill level or budget. Unless you are a skilled worker, some work must be performed by an expert to safeguard both safety and the structural integrity of the property.