If you’re currently house hunting, you may have come across some homes that could use some work—also known as fixer-uppers. Although these homes may need a significant of work done, they could be much more affordable than similar, newer homes in the same area. But before deciding on a fixer-upper home, you’ll want to carefully consider some of the pros and cons first:
As mentioned above, fixer-upper homes tend to be cheaper than comparable homes in the same area that don’t need any work done. For most buyers, this advantage is enough to make them want to buy a fixer-upper, especially if they find the right property. Depending on the price of the home, this could mean purchasing a home in an area that would otherwise be unaffordable, or the opportunity to purchase a much bigger house than you thought you could buy.
A home that needs a complete overhaul is a lot of work, but it’s also the chance to turn it into the dream home you’ve always envisioned. If you buy a newer home, you might be stuck with designs or color palettes that are nice, but not exactly what you want. Because of the higher price you paid on that type of home, it usually doesn’t make sense to redo the design. But when you’re remodeling a fixer-upper, you can pick whatever design you want.
Avoid a loan
Many people will need to finance their home purchase and take out a mortgage, which will mean making payments for many years—usually 30. But if you’re opting for a fixer-upper home, you could be paying much, much less than you planned on. Depending on the price of the home and the amount of money you have saved up, you could potentially pay for the home in cash, and avoid a mortgage altogether.
Big, costly projects
Many homeowners who opt for fixer-uppers discover that the house needed a lot more work than they initially thought. For some homeowners, the projects seem to be never-ending and a lot more than they bargained for—and many end up with regrets. Not only can these projects be draining and frustrating, but they can be very expensive. Although any fixer-upper home will cost a new homeowner money, for some people, it can cost a lot more than they thought it would. By the time they put all that extra money into the home, it may have been worth it to avoid a fixer-upper and opt for a newer home.
Not only can home renovations be aggravating and expensive, but they can also be time-consuming. Many people don’t take this into consideration before investing in a fixer-upper, and realize they just don’t have the time needed to devote to the renovations.
“Buyers might want to avoid purchasing a fixer-upper if their lives are consumed with raising an active and busy family, taking care of aging parents, or if they’re constantly on the go,” said Joe Cuchiara, real estate broker and founder of Higher Ground Real Estate.
Difficulties with financing
If you will need to take out a mortgage for your home, you may have some issues if you’re trying to purchase a fixer-upper. As Cuchiara also points out, qualifying for special types of home loans when trying to buy a fixer-upper might be problematic.
“Most first-time homebuyers are strapped for cash—many using financing that allows a minimal down payment, such as an FHA loan. To make a home purchase, they must find a seller willing to pay their loan closing costs; this buyer is definitely not a candidate for a property needing significant work.”
Do you need money to buy a home? Peachtree Financial Solutions may be able to help if you’re receiving long-term payments from an annuity or structured settlement. Contact Peachtree Financial Solutions today to find out how you can sell future payments for a lump sum of cash.
Nothing above is meant to provide financial, tax, or legal advice. You should meet with appropriate professionals for such services.