buy a fixer upper or a move in readyWhether you enjoy physical work and are looking forward to rehabbing a home or you just want to save some dough, deciding on a move-in ready home or a fixer upper is a big decision in the home buying process.

Fixer Upper vs. Move-In Ready: Pros and Cons

It would be wonderful if you could buy a below-market house in a great neighborhood, put your own finishing touches on it, and then live in your dream home which is now worth twice what you paid for it. Unfortunately, that’s not always realistic. There are pros and cons to buying a Fixer Upper as well as the move-in ready home.

Fixer-Upper

For certain homebuyers, a fixer upper is a dream come true:

  • You pay less for a home which may mean a huge difference between owning and continuing to rent.
  • You may pay less in taxes as they are based on the home’s sales price, and you may qualify for tax credits on qualified rehabilitation costs.
  • You can fully customize your new digs and make every design decision.

And for some homebuyers, a fixer upper can be a nightmare:

  • More Work. Instead of just unpacking your belongings, you’ll now have a whole list of projects.
  • More Time. When you’ve got renovations to do, you are looking at a much longer time clock.
  • More Costs. Surprises happen, and even the best estimate of renovation costs may fall short if something unexpected occurs. Putting more money into the home may wipe out any savings from the lower price tag.

Move-In Ready

A move-in ready property has many pros to consider:

  • Move in immediately. Once the papers are signed and the keys are handed over, you are ready to live in your new home.
  • Getting a mortgage may be easier if you aren’t asking for financing for home improvements.
  • There’s less stress involved (and moving is stressful enough!).

There are also some cons to keep in mind:

  • More expensive. A move-in ready house will cost more than a fixer upper.
  • You don’t get to customize it to your tastes and needs.
  • You may still have surprises down the road.

Can I Afford to Buy a Fixer Upper?

While the reduced price tag may seem like you are saving money on a home, you may end up paying more in the long run.

Are issues structural or cosmetic?

This will make a huge difference in price. If there is something wrong with the home, you’ll have to fix it before it can be lived in. This means money must be spent up front.

If you are just looking to change countertops or flooring so that the house is more modern and more you, this can be done over a period of time.

What is the seller asking for the house?

If the necessary renovation costs plus the sticker price of the home equal less than the home will be worth, pass it up.

Are you a do-it-yourselfer or a break-it-yourselfer?

 

  • Have you ever completed a project like this or do you have a long history of projects gone awry?
  • Do you have the necessary skills and the available time to do everything that needs to be done and to do it safely?

Keep in mind that while some projects only cost money if you do them wrong; some projects (like electrical) can actually put your family at risk if you’re not qualified.

Assessing a Fixer Upper Before Purchase

Before you make the leap, follow these steps to determine if this fixer upper is worth it:

  • Figure out what needs to be done. This includes structural and cosmetic work.
  • Decide how much of it you can do yourself.
  • Get estimates from professionals for the projects you can’t do yourself.
  • Research what permits you need and how much they will cost.
  • Look into what financing is available.
  • Figure out how much you’d like to pay.
  • Add inspection contingencies to your offer to cover any larger issues that may come up during inspection.

Making an Offer on a Fixer Upper

Chances are that the seller is aware the house needs work and has factored that into the price. Depending on the individual situation, this may or may not be negotiable.

Deciding how much to offer on a Fixer Upper comes down to a simple equation. First, figure out how much the home would cost if it didn’t need any repairs. You (and your agent) can look at comparable homes in the neighborhood to arrive at a price.

Next, figure out how much it will cost to renovate the property. This will likely entail bringing in experts to thoroughly assess the condition of the house. Once you’ve determined what needs to be done, create an estimate taking into account:

  • Materials
  • Labor (even if you are doing it yourself, your time is valuable)
  • Permits
  • Living expenses if you will move into the home yet not be able to use parts of it (like the kitchen or laundry room)
  • Unexpected (surprise) expenses that you will uncover as you go about the renovation

Finally, subtract this total from the home price. As an example, if comparable houses in the neighborhood are going for $350,000 and potential renovations will cost $50,000, and you should offer $300,000.

The decision to buy a home should never be taken lightly. If you are seriously considering purchasing a Fixer Upper, please do your research, talk to professionals, and honestly assess your abilities to carry out this project. If these renovations aren’t doable, spend a little bit more up front and buy a move-in ready home so that you can save money and your sanity in the long run.