Tips for Determining Whether You Want to Buy a House that “Needs a Little Work”
Advertising an older home as a “fixer-upper” is a common strategy, suggesting that it’s a great deal that just needs a little “TLC” to make it your dream home. Often, that’s true, but just as often, sellers can put a lot of lipstick on a piece of property, masking a lot of basic structural issues or problems that can end up turning a bargain into a money pit. What are some of the telltale signs that you want to stay away from a particular piece of property? Is there a rule of thumb for how much you want to pay for that “fixer-upper”?
The Good Signs—Things that Should Be Encouraging
Here are some of the basic indications that you’re likely making a good investment:
- People like to use the term “good bones,” but it generally means that there are no problems with the core structural elements of the house, such as the roof and the foundation. Is the roofline straight and without leaks or dips? Does the foundation have any cracks or is there evidence of leaking?
- Are things like cabinets, paint and flooring dated, but in good shape? You may still want to replace them, but you’ll be less likely to run into any significant unknown issues
- Will the layout work for you? Will you need to take out or add walls, windows, doors, etc.?
- Is there evidence of water, moisture or mildew?
Factors that Should Be a Concern
Any of the following issues will likely require significant time and money to remediate:
- Plumbing concerns—Are the pipes lead or cast iron? If so, they may all need to be replaced. Is there evidence of leaks, corrosion or broken fixtures, pipes or drain lines?
- Electrical concerns—When was the electrical last upgraded? If it’s really old—think knob and tube or aluminum wiring—you may need to have the whole house rewired.
- Water damage or mold—Determine the source before you commit yourself. This can be an extremely expensive and arduous process.
- Obviously cosmetic coverups—They are usually hiding something.
Avoiding the Money Pit
The best way to ensure that you don’t commit to a house that will liquidate your bank account is to do some financial homework. Get an appraisal of the after repair value of the property (ARV) and get estimates of the costs of all repairs. Don’t pay more than the ARV minus the cost of those repairs for the home. When you’re getting those estimates, it’s usually advisable to add about 20% to cover any hidden surprises.
Make that Fixer-Upper a Good Experience
When looking to buy a property that “needs work,” take the time to look for the telltale signs that it’ll either be a money pit or a real bargain. Make certain the entire project makes financial sense.
