One of the interesting things about having been a Realtor since 1996 is seeing the changes over the real estate market! And in today’s real estate market in Richmond, Virginia, we are still in a very tight seller’s market! Interest rates are higher than where they were at this time last year, and prices are still high because there are still very few homes on the market for buyers to look at!
So why would we begin to see houses go on the market being sold “as is”? I know that a lot of them may be foreclosures but not all of them are! Which means potential opportunities for buyers if you are willing to bring your imagination to the table to see what a house can be! Below are some questions to ask yourself!
What Type Of Loan Will I Be Getting?
If the house you are looking at needs some updating but there is nothing really structurally wrong with the house, it is possible for the house to qualify for conventional, VA or FHA loans. But if there is a significant amount of work needed on the house, you may need to go with a renovation loan. The appraisal requirements will be different on a renovation loan and there may be some additional fees and a higher interest rate which will add to the cost. Also, keep in mind that not all lenders do renovation financing, so it is important to know up front how much renovation and updating you are willing to do so your Buyer Agent can make sure you see the houses that will work best for your financing.
Can You Do Any Of The Work Yourself?
If you are planning on getting a renovation loan, the lender may have some strict guidelines in place as to what you can and cannot do yourself on the renovation! So you need to make sure you know what you can do, what you can’t do and what you want to contract out – and if all of that complies with the lender’s requirements!
Are You Planning To Live In The House While Renovating It?
If you are planning to live in the house while you are renovating and/or updating the house, you need to make sure you and your family are good with living in a construction zone for a period of time. If you are not comfortable with that, there may be an extra cost to consider in that you will be paying both a mortgage and a rent! Make sure that you discuss this with your Buyer Agent so that they can keep this in mind when showing you homes!
Do You Have A Backup Plan For Supply Chain Issues?
Hopefully you won’t have issues – but, there are still supply chain issues that you may have to deal with! If you are replacing siding, or windows, or a roof, or even appliances – these items may be delayed and the delays may end up costing you more than you originally planned! Make sure you have some wiggle room in your budget!
Is Fixing Up The House Worth It?
The answer to that question really does depend on what is wrong with the house as well as the location! So the first thing you will want to look at is what similar homes in the neighborhood or area are selling for right now! For instance, if you find a home that is priced at say $250,000 in a neighborhood where homes are selling for around $300,000 or higher, then it is possible that this could be a good buy for you!
What Will The Repairs and Updates Cost?
After looking at the neighborhood and deciding that the house is priced well under the market value of similar homes in better condition, then you will want to figure out how much those renovations will cost! This is not a time to forego the home inspection as there may be issues with the house that you can’t readily see when you are visiting it! Included in the home inspection process should be getting a good contractor to come out and look at the house as well so that you can get true estimates on what any repairs, renovations and updates are going to cost you!
How Should You Structure Your Offer?
Once you know how much comparable homes in the neighborhood are worth and you know how much you will need to spend to make the house yours, that will help you to structure your offer to the seller! So, if the house is priced at $250,000 and you know it will take $50,000 to do the work, you probably shouldn’t offer more than $300,000! But if you are able to get the house for less, that is even better!
It Sounds Like There Are A Lot of Reasons Not To Buy A Fixer Upper – So Why Should I?
Yes, you are right – there are a lot of things to consider seriously when you are considering a home that needs renovation/updating/major repairs! But there are lots of reasons why a fixer upper can be such a great deal!
It Can Be Less Expensive Than Buying A Turnkey Home!
Yes, a turnkey home would allow you to move into it right away! But in our current market, the price of that home may be much higher than you want or can afford to pay!
You Can Build Instant Equity In The Home!
Buying the house at a lower price point and doing some smart renovations and updates can instantly increase the value of your home! And if you are able to increase it enough, those smart updates may allow you to ask your lender to order a new appraisal! If the house now appraises over what you originally paid for the home, you may be able to get rid of paying mortgage insurance and the interest rates may have even dropped!
You Can Make The Home The Way You Want It!
When you buy a turnkey home, you are buying a home that has all of the seller’s personal choices – the color of the walls throughout, the flooring choices, the granite and cabinet choices, etc! If you like all of their choices, that is great. But many people want to personalize their home to their taste! Buying a home that needs renovation/updating will allow you to make this home your home! Depending on what you want to do, you may even be able to do things like alter the floor plan or even enlarge the home!
You May Have Less Competition For The Home!
With such a tight real estate market in Richmond, many first time home buyers are being completely shut out of the market! They are having trouble competing with other buyers for the same house who are paying cash or waiving all their contingencies, etc. But there are a lot of buyers who will shy away from looking at fixer upper homes! This may just open the door for someone who is willing to look beyond the dated kitchens and baths and how the house does not look good to see the potential the house may have! This may allow you to get an even better deal on the house that you would not have been able to get had you tried to buy a turnkey home!
While buying a fixer upper and going through the renovation process can feel overwhelming, it can also be rewarding, especially when you are finished and you have the perfect first home in the perfect neighborhood for you! If you do decide to go this route, make sure you consider both the pros and the cons of buying a fixer upper!
Have a question? Want to talk about buying your first home? Want to explore your options? Feel free to contact me – I have helped hundreds of first time home buyers purchase their homes in Richmond Virginia! Just contact me and I would be happy to help – no pressure, no obligation!