Looking for a bargain home? If you know your way around a toolbox, you may want to consider a fixer-upper. But be sure to assess the property carefully before you buy. Here are some tips to keep in mind:
Arrange a home inspection
First and foremost, make your offer conditional upon a home inspection by a professional appraiser. For around $200 to $400, you’ll learn about any less-than-obvious flaws. A home inspector can also advise you on the difference between reasonable low-cost repairs and expensive emergencies-in-waiting. This will enable you to assess whether or not to walk away from the deal or to ask for a discount on the asking price so you can afford to cover the necessary expense. Forewarned is forearmed.
Get pre-approved for a mortgage
In many cases, homeowners want to sell their fixer-upper because they are financially strapped and eager to make a quick sale. So make sure you’re pre-approved for a mortgage loan. The ability to act quickly puts you at the front of the line among potential buyers.
Learn the jargon
You can usually spot a bargain home by the wording used in its listing. Look for ads that say it’s a "fixer-upper," "fixer," "needs TLC," "handyman special" or "diamond in the rough."
Remember the importance of location, location, location
Look for a rundown home on a street where the other houses are considerably higher in value. All the elbow grease in the world won’t recoup your investment if you’ve purchased your fixer-upper in a neighborhood that is going downhill.
It’s important to compare the asking price of a home with the prices of comparable homes in the same neighborhood. An ideal fixer-upper is one you can purchase at 20 to 30 percent less than its potential fixed-up value.
Ignore superficial details
Don’t be turned off by dirty carpets, neon-colored walls, ugly paintings and a messy or old-fashioned kitchen. You can correct cosmetic details like these relatively inexpensively with carpet cleaner, cans of paint, new artwork, elbow grease and a do-it-yourself kitchen upgrade. Just make sure the problems aren’t an indicator of serious neglect.
Assess the need for serious repairs
It’s one thing to buy a home without fancy bells and whistles and quite another to buy one that’s going to need an infusion of cash before you can even move in. You can replace an old furnace or out-of-date appliance in good time. But beware of a furnace that doesn’t work or leaks carbon monoxide and appliances that won’t turn on. These will need to be replaced immediately.
Note any damaged walls or ceilings
Check for bulging walls or ceilings, cracked ceiling plaster or a spongy surface. If the damage is minimal, you may be able to cover it up with a coat of paint. But major repairs may involve replacing the drywall -- a messy, though not overly expensive, process.
Look for evidence of leaks or flooding
Stains around skylights or on ceilings may mean a leaky roof. Flaking paint around window frames and peeling paint in bathrooms can be a sign of moisture problems. And a musty smell in the basement may be an indication of a leaky foundation. These are all potentially expensive repairs.
Check the wiring
Your new home may not even be eligible for home insurance if it has old-fashioned knob and tube wiring. Look for ceramic “knobs” that support cloth-covered wires between joists or studs. This type of wiring can be a fire hazard and will need to be replaced, at a cost of around several thousand dollars. Also, check whether the electrical panel has fuses or up-to-date circuit breakers. Fuses may not be able to handle all modern appliances.
Test the plumbing
Run all the taps and flush all the toilets. Beware if the water runs brown -- it may be a sign of rust buildup. Plumbing repairs can be very expensive.
Watch out for signs of infestation
Beware of piles of sawdust near wood. It could be evidence of carpenter ants. Also, mud tubes and mud protruding from cracks between boards and beams may be a sign of termites. And dull brown cracked or crumbling timber, or small brown spores on the ground, could be evidence of dry rot, a fungus that can cause deterioration, particularly in wood that is in contact with wet brickwork or masonry.
Beware of major structural problems
You should probably walk away from the deal if you find continuous cracking in the bricks or foundation. Other signs of potentially major structural damage include brick veneer, window frames, floor tiles or parquet that are separating or lifting, doors or windows that won’t shut properly, floors that are crooked and walls that are leaning.
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