There’s no one way to be a homeowner. In the same way that the path to buying a home looks different based on the buyer’s needs and desires, making a house a home will look different for everyone.
Fixer-upper homes need repairs and updates, sometimes to improve the home’s appearance and modernize its finishes, other times to make a home functional and livable. These homes, which are usually sold at a lower price than a fully renovated property or a newly built house, can be a good opportunity for first-time homebuyers.
Before purchasing a fixer-upper, homebuyers must understand what a home renovation entails, yet it is an option available to all, said West Side-based real estate agent Shantel Franklin. In this guide, Austin Weekly News provides homebuyers with tips to consider before purchasing a home in need of a makeover, shared by real estate experts and loan officers.
Scope of the rehab
Know what type of work you can handle. A gut rehab is a much heavier lift than a cosmetic one.
Understand the type of work required to make the home safe and livable. If a homebuyer has an accepted offer, they will be able — or may be required — to complete a home inspection. Review the inspection report and evaluate any structural damage or potential safety hazards before moving along in the home-buying process.
The type of work that needs to be completed on the property determines its cost and the time it will take to do it. Make a plan and always plan for contingencies.
In a complete renovation or a renovation that requires extensive plumbing, electric or roofing fixes, to name a few, it is unlikely a homebuyer can live in the property while the work is completed. Plan for an alternative place of living and consider its cost.
Structural fixes and complete renovations cost more, require specialized contractors and take longer to be completed. While cosmetic fixes are more doable for a first-time homebuyer, consider the cost and time it will take to complete them.
Identify the types of city permits that may be required to complete your renovation project. Consider the time it will take to get a permit — and potential delays — in the renovation timeline.
Financing the project
Determine how much you can pay and how you will fund any renovations.
Determine how you will pay for renovations in addition to how you will pay for the property. Some mortgage loans may provide additional funding lines for repairs, but if they don’t, you may need to have additional cash to cover renovations.
Consider applying for loans designed for single-family homes that need renovations. The U.S. Department of Housing and Urban Development offers 203(k) standard and limited loans to purchase homes in need of major renovations and help fund minor repairs. Work with experienced loan officers to understand their benefits and requirements.
Check if there are any mortgage responsibilities or conditions you need to meet and how a renovation could impact them.
Advice from the professionals
Have a strong team that can guide you through the home-buying process.
Work with a professional realtor who can help identify properties that meet your criteria and the scope of renovations you can do.
Work with a strong lending team to understand the types of loans available to finance a renovation and their requirements.
Work with a financial advisor to determine how much money you can invest in a renovation without sacrificing your financial well-being.
Work with professional and reputable contractors when completing significant renovations, such as electric, plumbing, roofing and heating.
Working with contractors
Always work with licensed and bonded contractors.
Avoid being a victim of fraud, always work with licensed and bonded contractors. If a renovation is funded by the HUD, only work with HUD-approved contractors.
Review past work completed by contractors. Ask to see their portfolio of work, research their online presence or visit current projects they are completing, if possible.
Request quotes from different contractors and compare costs. Review the quotes to see that labor and materials are included, the timeline and payment structure.
If you are a victim of a home repair fraud or scam, you can file a complaint with the State Attorney General’s Office.
Importance of flexibility
It is very rare to be working on a renovation and for everything to go as scheduled.
Have funds available for additional repairs or work that was not initially planned. It is common to find unforeseen issues during a renovation.
Plan for delays in the renovation process and consider alternatives if you need to move in by a certain date.
Having the funds
Ensure you have money available for contingencies.
It is recommended to have additional cash reserves to cover any contingencies that may arise during renovations, even in smaller renovation projects.