Buying To Renovate: What You Need To Know

Written By: Jaymi Naciri
Thursday, October 06, 2016

If youre looking for a house thats not exactly turnkey, youre not alone. Call it the HGTV effect. Is anyone else OBSESSED with House Hunters Renovation?

"So youre thinking of buying a fixer-upper? Maybe youre a do-it-yourselfer, or you just love this home so much that you dont mind lavishing extra TLC on it in the years to come," said U.S. News. "Or perhaps youre enthralled with home renovation television programs where every home has a camera-ready happy ending."

Yes, buying a house in need of renovation definitely has its advantages, starting with the ability to make updates that match your >

Not every home in need of renovation is a diamond in the rough

Some homes might just be too far gone to bring back to life. Or at least too expensive to be a good deal. There is a reason "movie plot lines have been based on the darker idea that rehabilitating a home can result in disaster," said U.S. News. "Sometimes fixer-uppers turn out to be dismal downers."

It could be that the house hasnt been maintained properly and has serious issues that are going to increase the timeline and drive up the renovation costs. Maybe it needs work thats well beyond your scope - and budget.


Decoist

"If the house needs significant structural improvements, many real estate experts recommend avoiding it altogether," said This Old House. "Thats because major repairs - plumbing and electrical system overhauls, foundation upgrades, and extensive roof and wall work - are usually invisible and hardly ever raise the value of the house enough to offset the cost of the renovation."

Inspection, inspection, inspection

Some homes in need of renovation are purchased as foreclosures or at auction, but the problem therein is that you might have to buy "as is." That means you dont get to inspect the home before purchase or request any repairs from the seller when you uncover problems.

It goes without saying that this is an idea that is often frowned uponespecially for those who are inexperienced in home renovation. Buy a home "as is" and you may end up with a great big money pit. Making sure your home is inspected before you purchase can help you see the full picture and decide whether its a good buyor a goodbye.

Think about bringing in an architect and an engineer, too

If youre planning on knocking down walls and arent we all, you might want to consider hiring an engineer and/or an architect early on. Structural walls or surprises inside the walls like plumbing or HVAC may make the open floorplan youre dreaming of unachievable - or at least really expensive. It pays to do your due diligence before you purchase, even if it costs a little more upfront.

House Beautiful

Whos doing the renovating?

Planning on taking on some or all of the renovation yourself? Are you a first-timer, an old pro, or somewhere in between? If the grand total of your experience is patching a few nail holes in your college dorm room, you might want to think about hiring a professional.

Some things, like tiling or installing hardwoods, and some types of demolition, can be taught in a clinic at your local home improvement store, or even on a video on YouTube. Other skills like roofing, plumbing, and electrical work are usually best left to the pros. Keep in mind that, depending on what you plan to do to the house, you may also need permits before any work can begin.

Theres a loan for that

Financing is an important factor when buying any home. A traditional mortgage wont pay for your repairs and updates, and most people arent super excited about shelling out a bunch of cash for renovations on top of their down payment and closing costs.

"If youre buying a home that needs a little TLC, a typical fixed-rate mortgage isnt going to help you pay for repairs," said Interest.com. "Your lender isnt going to approve a 300,000 loan to buy a home thats only worth 250,000. And, while homeowners sometimes use home equity loans to remodel, you cant get a home equity loan when you have no equity. This can be a big obstacle for buyers who dont have extra cash to make needed renovations or repairs before moving in."

Thankfully, there is another alternative. Several loans build cash for renovations right into the terms. "Four government-backed loan programs are designed for purchase-remodelers," said Bankrate:

  • FHA 203k
  • Streamlined FHA 203k
  • Fannie Mae Home>
  • Fannie Mae HomePath mortgage

"Each program bases the loan amount on the value of the home after renovations are complete," they said. Youll want to talk to a lender and get preapproved prior to finding a home to streamline the purchase process.





Copyright© 2017 Realty Times®. All Rights Reserved
Instagram
Youtube
Find out what your home is worth
Updated: Sunday, July 23, 2017

Curb Appeal Problems And Easy ...
Just how important is curb appeal? Real estate industry legend Barb...

Cant Sleep? Why Your House Mig...
Not being able to get sufficient sleep isnt just annoying. Beyond m...

Copyright ©2017Realty Times®. All Rights Reserved

Real Estate Resource Center
Louise Touchette Client Login
New Listing Email Alerts