Not everybody dreams of owning a McMansion in a planned community where every natural resource was razzed to set it up. Do you spend your weekends watching "This Old House" or "Flip This House"? Do you dream of finding the perfect diamond in the rough that can be polished into a showpiece? Or are you a first-time homebuyer on a severely limited budget? A fixer-upper could be the answer to your prayers.
Almost any previously owned home will have things that need to be taken care of before you can sign on the dotted line. So what differentiates that from a true fixer-upper? A fixer-upper generally requires more work -- be it redecoration, redesign or reconstruction -- and instead of the current owners of the property fixing what is damaged, you will be buying it "as is." Most, but not all, fixer-uppers are in livable condition. The upside to this is that a fixer-upper will be cheaper than a house that's ready to go.
For as much as the term is bandied about, finding a fixer-upper can be problematic. First, find out whether there is a real estate agent in your area who specializes in fixer-uppers. This person will have the inside track as to what's on the market and whether it's worth investing in.
If you don't have a real estate agent who specializes in fixer-uppers in your area, you can check foreclosure listings. Homes that are being foreclosed on typically need a bit more TLC than ones that are willingly on the market. You also can look through Housing and Urban Development listings at http://www.hud.gov. Another good Web resource is Realtor.com, an aggregator site that compiles listings from across the country. You can use "fixer-upper" as a search term on the site.
Being able to see the potential in a fixer-upper can be difficult. There may be a lot of cosmetic damage or ugly and outdated appliances and d?cor. Those are the easy fixes. Full home inspections are important in any homebuying situation, but they are absolutely necessary with a fixer-upper. An inspection could uncover something that turns what you thought would be a quick fix into a potential money pit. Things to be on the lookout for that would exponentially raise the price of any refurbishing you might do:
--An electrical system that needs to be updated. This is something to be especially wary of if you are looking at homes that are more than 50 years old. Electrical usage has changed vastly in recent years, and rewiring an old house is costly and time-consuming.
--Possible sabotage of the property. With more and more people being forcibly evicted from their homes, many are venting their frustrations on the properties. Though a lot of the damage done is cosmetic (graffiti, stealing hardware off doors and cabinets, holes in the walls, etc.), there are those who want to be sure the home is unlivable for the next occupant.
--Other potentially costly home repairs: low water pressure, horizontal cracks in the foundation, and water leaks. Any good home inspector will be able to identify high-cost problems.
Once you've found a fixer-upper you feel comfortable with, you will need a way to finance the repairs. Generally, you'll want to prioritize any repairs; not everything has to be done at once. Anything you can do yourself (pulling up carpet, removing wallpaper) will save you lots on labor. Do you feel comfortable laying tile or have the know-how to knock down a wall? Make sure you know what you're doing; paying someone to redo what you've messed up can be costly.
The Federal Housing Administration, which is a subdivision of the U.S. Department of Housing and Urban Development, offers a federally subsidized loan that can help buyers finance repairs. The loan, called a 203(k), rolls the cost of the home repairs into the cost of the house and allows the buyer to tap into the full money for the repairs for just the cost of the down payment.
As you should with any repairs, make sure that you use a licensed and insured contractor and that you have the correct permits. If the repairs will be especially noisy or messy, warn your neighbors. After all, it's not only the house you live in but also the community you become a part of that makes a house a home.