Considering a fixer-upper
When shopping for a home, most people dream of finding a house that's new, affordable and in a great location for their needs. However, when the buyer's idea of a perfect house can't be found on the market or isn't affordable, other options need to be considered. One option is to find a house that's in a desirable location but needs repairs. Buying a fixer-upper can be a way for homebuyers to own a home in a particular neighborhood that they otherwise couldn't afford. Because a fixer-upper isn't move-in ready the purchase price will be considerably lower than updated homes for sale in the same area. Buying a fixer-upper is also a way for first time homebuyers to get their first home sooner rather than waiting to save up the larger down payment for a home that's either new or recently updated.
Necessary repairs or renovations needed can vary within the fixer-upper category. For example, one potential buyer may be comfortable buying a house that only needs some minor aesthetic renovations like new paint and carpets while another buyer is willing to take responsibility for more extensive work like replacing outdated plumbing and windows. Whatever the condition of the house, before committing to buying a home that's in need of renovations, make sure the finished renovations will bring the house up to market value so selling the house will pay back some of the money spent on renovations later on. Elizabeth Weintraub writing for thespruce.com says, "The perfect fixer-upper is the home that everybody will want in the future, but nobody wants it right now."
Before making an offer on a fixer-upper the buyer should have the home inspected by a licensed home inspector. When walking through a house, there are some needed repairs that might be obvious to most people like water stains on ceilings, falling plaster or loose porch railings. However, a professional home inspector can detect less obvious structural problems that can significantly increase repair costs far beyond what the seller may be aware of. By law in Connecticut, sellers must submit a disclosure statement to the buyer that gives specific information on certain structural features including the roof and foundation and also on system specifics like septic, plumbing and electric. Glenda Taylor writing for bobvila.com advises, "Before making an offer, have the house carefully inspected and gather repair estimates." This will give the buyer the most informed estimate of how much it will cost to bring the property up to their standard of living as well as the extent of the work required and help the buyer decide whether to make an offer or to pass it over.
Another thing to consider when shopping for a fixer-upper is acquiring a mortgage. If the buyer is planning to borrow the funds to purchase the home, a mortgage will need to be secured. Before a mortgage is approved, the lending institution will send an appraiser to inspect the property to make sure the price doesn't exceed the property value. This protects both the lender and the buyer's investments. In addition, if the lender finds that the house is in need of too many large repairs or updates it may disqualify the property for a traditional loan.
If the lender disqualifies the property for a traditional loan the buyer can apply for a renovation mortgage. Beth Buczynski and Kate Wood writing for nerdwallet.com explains, "Renovation loans are mortgages that let you finance a house and improvements at the same time. With a renovation loan, you can pay off improvements over a longer period of time and at a lower interest rate than other types of financing." There are different types of renovation loans that are offered from different lenders. Renovation loan lenders may require estimates from licensed contractors, copies of permits and their own inspections before approving and releasing funds.
Finding a fixer-upper in a great neighborhood can be a dream come true for home shoppers who, otherwise, couldn't afford a house in that location. Learning exactly how much work is needed, the estimated cost of work and the how to acquire a mortgage are a few things that need to be determined before buying.