After finally saving up enough money to use as a down payment, I decided that it was time to hit the market. I met with a lender, got pre-approved for a loan, and then started visiting different properties. However, I quickly realized that I didn't know as much about real estate as I would have hoped. I wanted to find a great neighborhood and know what to ask the professionals, but I could tell that I needed a little help. To point me in the right direction, I started working with a great real estate agent who was familiar with the area. This blog is all about educating the general public on real estate matters.
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Buying a property that requires redecoration, reconstruction, or redesign can be a profitable venture since you are likely to buy it inexpensively. However, there are a few potential complications you should know about these "fixer upper" homes. Here are three examples of such complications:
Ever-Rising Renovation Costs
Depilated houses can have many problems beyond the discernible ones. For example, a house may have a subtle foundation problem that hasn't manifested itself via the usual symptoms people use to detect such issues. Hidden problems can easily increase your renovation costs beyond your initial budget.
To avoid such issues, don't just give your prospective house a cursory inspection before purchase. Rather, have it inspected by a professional inspector first. That way, if you decide to go ahead with the purchase, you will know exactly what you are walking into.
Understand the Insurance Costs
Home insurers use many factors to issue a quote, but they all boil down to the amount of money they would use to indemnify your loss and how likely you are to experience the covered risks. Unfortunately, renovated houses don't fair so well in both areas.
For example, as discussed above, such a house can have hidden problems that may not be easily discovered. Such hidden issues may later cause full-blown problems, and insurers know this. At the same time, if you have a good budget and decide to go all out in the renovation, you can spruce up your house with the latest materials and installations. Both of these things means your insurer is likely to spend a lot of money to cover your losses, which means insuring the house won't be cheap.
Therefore, don't just consider the renovation costs and the purchase price of the house when evaluating your budget. Evaluate the insurance side of things to ensure you will be able to insure the house if you end up buying it.
Restrictions on Renovations
Lastly, there is also a risk that you might buy your house, only to realize later that you can't turn it into your dream house as previously envisioned. Try reconstructing a house and you will realize that you aren't the only one who determines what the finished product looks like. Local authorities and neighborhood associations may have a say on it too. For example, the neighbors may dictate the type of roof you can have
It's not advisable to buy a fixer upper home without involving a real estate agent. Such a real estate professional has the experience to spot potential complications, which may help you avoid losing money on a bad property.
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