Are you a homebuyer considering a fixer-upper? Maybe you’re looking for your family’s dream home, or maybe you’re looking to renovate a house for resale. Either way, finding that “diamond in the rough” to polish into something spectacular can have its pitfalls.
Before you jump in, research and learn about the process of finding and fixing up a property. Talk to others who have renovated homes and decide what kind of time and resources you have, including financial alternatives.
The following are five crucial steps to finding a true diamond in the rough.
1. Get an experienced Realtor
Buyers can begin by searching through their local MLS, as well as sites like Zillow and Realtor.com, but from viewing to purchasing, savvy home buyers work with an experienced agent, said Realtor Liz Levey-Pruyn with RE/MAX Shoreline, who is licensed in New Hampshire and Maine, a RE/MAX Hall of Fame Agent and member of the Chairman’s Club.
An experienced Realtor is your best resource for determining an appropriate property price, preparing a comparable market analysis, and answering all your questions. They can also write contingencies into contracts to save you headaches with any surprise problems, and can help you in ways you may have not considered.
“The buyer and agent can also drive through the community and look for properties that appear neglected, run down and possibly vacant,” Levey-Pruyn said. “They can then search town records for the owner and write a letter to see if they would entertain a sale.”
2. Find the worst home in the best neighborhood
The location of the house is just as important as the house itself. You might have success in elevating the worst house in a great neighborhood.
If a location already has bonuses, such as a good school system and nearby transportation, then finding a home priced to accommodate the necessary updates could be a good deal.
In an article published by the American Apartment Owners Association, investors are urged to “…Ask yourself these questions: Does this neighborhood have a good reputation? How has it changed over the past five or ten years? Have property values increased or decreased? Is this neighborhood up-and-coming? In decline? Stable?”
If you’re going to invest time and money in a property, you want the location of the home to help raise its value.
3. Consider what upgrades and changes the home will need
Plan for the required maintenance and upgrades for each home you consider purchasing. Decide if you’ll need to make changes to the structure of the house — which may need an architect — or changes to systems like plumbing or electrical — which also require a professional.
“Carefully consider the issues and determine if they are more cosmetic in nature or if they will require professional help to renovate,” said Levey-Pruyn. “The easiest ‘fixer uppers’ are the ones that can shine by simply taking up old carpets, refinishing floors, replacing some fixtures and repainting. Adding kitchens, bathrooms, roof, windows, heating systems, and the like will require more money and licensed professionals.”
Be on the lookout for any greater concerns with the home. Does it have mold? Foundation problems? Private septic/well issues? These aren’t necessarily deal breakers, but the bigger the problem, the bigger the cost.
“Buyers need to understand what kind of town and/or state approvals may be required for certain work,” said Levey-Pruyn. “If so, what is the time frame involved to obtain the necessary permits? In some cases, a professional survey might be needed. Is there Historic District approval needed for exterior renovations? This is why a CMA from a licensed agent for the future/finished home is important. You don’t want to spend more than what the home will be worth once completed.”
4. Make sure the home’s pricing is appropriate
This is where having an experienced Realtor is of critical importance. He or she can complete a comparable market analysis, evaluate the home’s current value versus the planned post-renovation value, and help you with negotiations and contracts.
You also need to consider how to pay for the house and renovations. Whether you plan to receive financing for your project or pay with cash, the funds must be available to cover all costs. You don’t want to overextend yourself on a fixer-upper and be unable to complete the projects needed to move in or resell.
5. Understand your own abilities
Be realistic about what you can do on your own, and plan to get help with the rest.
“Understand your own abilities and when you need to hire professionals,” said Levey-Pruyn. “Often buyers are terrified if they think a home needs a new roof or heating system when in fact those items may be less expensive than they were anticipating. Find a reliable contractor to view the properties you have earmarked and get an estimate up front before you enter into a purchase and sales agreement.”
There is no harm in getting help, but there may be harm in not getting help. Surround yourself with professionals that you trust. Your Realtor can walk you through your house-hunting and rehab journey.
No matter the scale of your project, it is helpful to keep the entire picture in mind. Plan well, be cognizant of your resources ahead of time, and do your research.