Questions to Ask Before Buying a Fixer-Upper
A fixer-upper might have a lot more problems than you think. The last thing you want to do is purchase a home that ends up costing you more to fix than you calculated for. So before you spend a lot of your time and money on a fixer-upper, you need to know the questions to ask first.
Related: Tips for Buying a Foreclosure
Without asking the right questions, you could be buying a lemon—what was a moderately expensive project in your mind could quickly turn into a money pit! Here are five of the most critical questions you need to ask before putting up your earnest money deposit and purchasing a fixer-upper:
1. Is the Investment Worth It?
Deciding on whether to purchase a fixer-upper is a big deal. You need to make sure that it's an investment you're willing to commit to. If you have a contractor, they'll make you aware of the state of the home, and also give you a rough estimate of the total costs of fixing the house.
However, if you don't have a contractor, you need to ask the homeowner as many questions as you can. Ask them about the condition of the roof, foundation, plumbing, windows, etc.
Even when you have a trusted contractor, it's essential to have a professional home inspector look over the property. A home inspector is trained to find problems that a contractor might otherwise overlook, discovering what is often referred to as "inspection deal breakers."
By doing a thorough examination of the condition of the home, you can decide whether you want to purchase it or not.
2. Do You Have the Time to Invest?
This is a project that's going to take up a ton of your time. Whether you have any help or not, at the end of the day, it's going to be your home. That means you'll be in charge of that home day in and day out.
If anything goes wrong and there's an accident that occurs in the home, you'll be the only one responsible for dealing with that situation. So if you're serious about buying fixer-uppers, you need to learn how to manage your time. Additionally, if you're not looking to hire a contractor, you will need more time to spare.
3. Do You Have the Money to Invest?
You need to be 100-percent sure that you have the money, or be willing to obtain the necessary funds to purchase the home and have it fixed. Like most fixer-uppers, you can never perfectly calculate the final costs, so be ready to pay a little more if things don't go as planned. One of the most significant mistakes is not realizing there's a difference between a fixer-upper and a rehab home. When you don't understand this distinction, your budget can get shot very quickly.
If you're getting a loan, you need to make sure you know exactly what you're signing up for. A mortgage is a serious commitment of your trust and fiscal responsibility. If you have bad credit, a loan will probably be a bad idea for you. It's advisable to get your financial house in order before committing to more debt.
Whenever getting a loan, make sure you do your due diligence by getting all your mortgage questions answered by the lender. You should be totally comfortable before moving forward with such a significant financial decision.
4. Is the Home in a Great Area?
One of the biggest mistakes both investors and traditional homebuyers make all the time is discounting the importance of location. Agents constantly talk about how critical the location is in the grand scheme of things. It's vital for your home to be in an excellent area. The location of your home helps determine how much your home appreciates over time.
Even the type of road a house sits on affects the price. The difference in value from a home located on a busy street versus a quiet neighborhood can be night and day. Great schools and public transportation are just some of the things you need to look at when purchasing a fixer-upper home.
Make sure to get a feel for how appreciation has been over the last decade. Is it keeping up with other surrounding areas? Consult with your buyer's agent to get their opinion of how the appreciation will be before moving forward.
Whenever you think about purchasing a home, do more than focusing on the house. It'll be a good idea to drive around the neighborhood beforehand. Get a real feel for the surroundings.
5. What Are the Laws That Come With Dealing With a Fixer-Upper in Your State?
Many states have their own laws when it comes to the overall process of remodeling an older home. Your contractor will be aware of some laws that are permitted when it comes to your home, but they might not be mindful of every little thing.
There have been cases where people have gotten into trouble for doing something they weren't supposed to, and that can cost you a lot of money. One of the most common issues with real estate sales at the moment is contractors not getting required building permits. Skipping out on required permits can put you in a very precarious position when it comes time to sell your home.
Not knowing the laws can also possibly land you in a place where you are spending additional money, and, if you're really unlucky, removing the improvements from your property. You may be thinking that can't happen. Well, you're wrong—it can! Cities and towns can make you rip out non-permitted work.
If you're buying a foreclosure, you need to be extra careful. Not only will you be purchasing "as-is," but these kinds of properties routinely have issues where the previous owner skipped out on legal responsibilities.
If you're looking to start buying fixer-uppers, you have to able to spend a ton of time doing your research first. Additionally, as a beginner, you can make many mistakes, and it happens to a lot of people at some point. Don't let your fixer-upper become a rehab money pit! Ask yourself these five crucial questions before purchasing your first fixer-upper.