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Buying a Fixer-Upper

By Derren Peters

Fixer uppers are homes that require a bit - sometimes more - of maintenance. The level of work needed will vary from home to home. For a handy homeowner looking for a discount price, or an investor seeking a property with potential, a fixer upper could fit the bill. But, as with any product that is "well used," there are many potential pitfalls involved.

Because of their price, fixer uppers will catch the eye of buyers looking for an inexpensive property. Put the price tag aside, and consider your family and financial situation first. A home requiring a major overhaul probably isn't the right fit for first time homebuyers. Alternatively, an investor may see such a home as a great opportunity.

Most fixer uppers are priced with the costs of repairs in mind. The listing price is only one part of the "true cost." The true cost is what you'll end up paying after adding in any repair bills. The repairs may lean more on the aesthetic side, such as painting, carpeting, and countertops, or more significant and expensive upgrades, such as roof replacement, issues with the heating, electrical rewiring, or plumbing system upgrades.

Fixer uppers are best for buyers and investors willing to put extra time and money into the property. Ask yourself these questions: Is this purely an investment, or are you planning on living in the home? Do you need to move in soon? Are you exceptionally handy around the home? Do you have a background in a trade - roofing, HVAC, carpentry - that will help you? Do you have experience with fixing the issues outlined in the inspection report? If not, calculate the costs of hiring outside help. Can you comfortably afford that, on top of the price of the home? It may be possible to get financing that not only pays for the cost of the home, but also includes money for renovations. Ask your agent and mortgage lender about those options.

At best, a fixer upper purchased at the right price might save you a bit of cash, and the sweat equity will improve the value of the home. At worst, you'll sink money into a property that needs a boatload of work, and end up paying far more than you would have for a home in great condition. Always put together a best estimate of repair costs, and be prepared to pay more than that number.

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