Should We Buy a Fixer Upper?
When you're considering buying a home you're probably figuring on the price, location, and what type of home you want but the idea of a fixer-upper might be in there as well. Are you willing to put the time, energy, and money behind a fixer-upper? You might get a bargain on a home by going with a fixer-upper but is it worth all of the extra time and money? Here are some decisions to consider when contemplating a fixer-upper in Silicon Valley.
They are a work in progress.
Many first-time homebuyers think that they are going to save a lot of money by buying a fixer-upper. They may be limited on a budget so by finding a house that needs a little bit of work, they can work slowly, putting in money when they have it and build the house they really want. The issue a lot of people have is that they bite off more than they chew and end up not putting as much work or effort into the home as they originally thought.
The key to this is finding a home that just needs a little bit of cosmetic work, especially if this is your first home. New flooring, paint, and a few simple fixes here or there can really up the value of a home without making you feel like you've purchased a money pit. Major appliances, HVAC systems, roofing, and flooring issues can be almost too much to bear and should be tackled by a professional.
Move-in ready houses cost more.
There's a reason you love that beautifully staged home you've seen online but there's also a reason it's $100,000 more than the house down the street for the same size. If the home is staged beautifully and move-in ready, pull in a lot more profit should sellers can expect to receive a lot more when they sell the property then one that definitely has not been staged or needs cosmetic or even major repairs. It truly is a trade-off… Do you want to put the money and work into it or do you want to let someone else do that and reap the rewards but pay more initially?
Financing is easier without a major fixer-upper.
For first-time homebuyers, an FHA loan is usually the best option but the home needs to be approved for FHA and most major fixer-uppers will not qualify. When you purchase a fixer-upper that needs some serious renovations, you may need to finance the cost of the remodel as well as the purchase of the home. Many conventional mortgages won't approve a loan that's greater than the current value of the property but you can look into other options such as an FHA 203K loan, a Fannie Mae Homestyle renovation mortgage, or a VA renovation mortgage.
The location might be the deciding factor.
Are you considering a home in an up-and-coming neighborhood? Has the neighborhood turned around and now homes are starting to increase in value? This might be the opportune time to buy a fixer-upper. If you've noticed home prices and values have increased over the last couple of years and knew amenities and services are going into the neighborhood such as trendy coffee shops, restaurants, and other services, chances are the value of the fixer-upper will increase exponentially just because of the location. Put some sweat equity into it and you're likely to get a serious return on your investment.
While not everyone is cut out for a fixer-upper, you can start small by finding a home that needs some simple cosmetic repairs. The key is using a real estate agent that understands the micro-markets in each neighborhood, the up-and-coming neighborhoods that might be a great investment, and really how much work a home needs. Never neglect the home inspection as this is your roadmap for what the home really needs.
For more information on finding fixer-upper's in San Jose and surrounding communities don't hesitate to contact our office.