Due to the mortgage crisis that our country faced over the last several years, there are continually more and more foreclosure properties that are being put up for sale everywhere you turn. Oakland County Michigani and buying a fixer-upper can be very tempting for homebuyers as people can sometimes get properties for 30% or even less on the dollar.
However, if you are considering a foreclosure property or a fixer-upper for your next purchase, then there are some common pitfalls that you will need to avoid along the way to protect yourself and your future asset. Let’s review some areas to be aware of before making any serious offers.
Thinkgs to Consider
Buying a fixer-upper home can be both a rewarding experience and a significant challenge. If you’re considering this path, it’s essential to thoroughly assess the situation, so you make an informed decision. Here are some things to consider:
- Budget Carefully: You’ll need to not only consider the cost of the home but also the expenses of the repairs. It’s essential to budget for unexpected costs because renovations often uncover additional problems.
- Inspection is Crucial: Before purchasing, get the home inspected by a professional to understand the extent of the repairs. This will give you an idea of the time and money it’ll take to make the house livable.
- Location: Even if the house needs a lot of work, a good location can make the investment worthwhile. Remember, you can change the house but not the location.
- Skill Level: Assess your DIY skills. If you’re planning to do most of the repairs yourself, be sure you’re up for the task. If not, factor in the costs of hiring professionals.
- Time Commitment: Renovating a home can take a significant amount of time. Consider if you have the patience and flexibility to see the project through to the end.
- Financing: Traditional mortgages might not cover homes that are considered “uninhabitable.” You may need to look into specialized loans like the FHA 203(k) loan that allows you to borrow money for both the home purchase and the renovations.
- Resale Value: Think about the potential resale value of the home. Will your renovations increase the property’s value enough to make a profit if you decide to sell? Or is your primary goal to create a space tailored for your personal use?
- Insurance: Some insurance companies might not cover a fixer-upper until certain repairs are made. Make sure to research and get the necessary coverage.
- Living Arrangements: If the house is not livable during renovations, you’ll need to think about where you’ll stay and for how long.
- Emotional Preparedness: Renovations can be stressful. Be prepared for setbacks and challenges along the way.
- Permits: Depending on the extent of your renovations, you may need to get permits from your local city or county. These can take time and money, so it’s essential to factor this into your plans.
- Long-term Plans: Are you planning to stay in the home long-term, or is this an investment? Your goals can determine how much time and money you’re willing to put into the property.
Take Away
If you decide to move forward with buying a fixer-upper, it’s vital to have a clear plan, a solid budget, and perhaps most importantly, a good sense of humor. Renovations can be full of unexpected surprises, but the end result can be incredibly rewarding, whether it’s a dream home tailored to your tastes or a profitable resale.