Buyer Beware When Buying a Fixer-Upper Home!
You always need to take precautions when buying, but with a fixer-upper, there are more questions than answers, without extra due diligence. There may be hidden problems that could dramatically change the equation after you have completed the purchase.
Talk to any remodeling contractor. They’ll tell you that they never know what they’ll find when they open up a wall, and that is exactly right! With a structure that has decades of history all it’s own, you just don’t know what additions, modifications or repairs have been made, by people with widely varying levels of construction knowledge and talent. It’s a place where someone else’s “thinking outside the box” has a cost all its own!
Your best protection lies in making your purchase contract contingent upon a list of items. A home inspection report procured early in the buying process is just the beginning. From there you want to have additional inspections by contractors and/or engineers (unless you have an unusual level of expertise yourself), looking at each specific critical building element. Remember always the limitations of building inspections.
Here is a list of items which you should seriously consider making contingencies to the sale contract:
- Termite and other Wood Destroying Organisms (WDO’s)
- Roof Issues
- Sewage Lines
- Other Plumbing Issues
- Electrical Systems
- Hazardous Materials (asbestos, lead paint, PCB’s, sulfides, etc.)
Mold and Mildew and Chinese Drywall issues are already covered by reliable standard contracts such as the Florida Realtors® / Florida Bar contract, plus Sellers of residential properties have a duty to disclose latent defects (defects in properties which are not readily apparent to Buyers, which materially affect the value of the property, of which the Seller is aware). The problem is, things often go unreported (and may even be actively hidden by some Sellers), and it may be impossible to prove the Seller knew about the problem, or a Court may conclude that it was not “hidden”, i.e., “latent,” or even important enough to materiallyaffect value. There is no substitute for finding out on your own as much as you possible can about a property you would buy.
The Bottom line: Get an Engineering Report!
“Pretty” (Cosmetic) Money & Repairs vs. “Ugly” (Structural) Money
Not all money spent on remodeling and improvements is equal. I like to think of “Pretty Money,” (relatively small amounts of) cash dedicated to (quickly and easily) improving the curb appeal and overall attractiveness of a property, which adds significantly to resale value, versus “Ugly Money,” which is usually much larger amounts of money (which you find out too late that you MUST spend) to make a property what it should have been in the first place. You might also think of it as “invisible” money.
Here’s an example: you decide to spend $50 to $100 at Home Depot to purchase a lovely new toilet for the Master Bedroom, thinking it will go nicely with the lovely tile already there. The problem is, you take out the old toilet, and discover that the sub-flooring is damp with bacteria-laden leakage from the toilet, so the whole floor has to be replaced. You end up spending a lot more money, which won’t necessarily even be seen by a buyer, but is necessary to eliminate a health hazard, and to keep the floor from becoming further compromised in the future.
Depending upon the age of the home, one problem can often lead to another simply because repairing items becomes impossible due to their age, and you have to often completely replace the entire item or system.
Clearly, you want to spend your fix-up money on small-ticket items that improve buyer appeal, not big-ticket items which may not even be visible to the buyer.
Here’s a quick list:
|“Pretty” Money||“Ugly” Money|
|Installing Light Fixtures||Replacing Windows throughout the house|
|Installing Ceiling Fans||Replacing Air Conditioning Systems|
|Adding a Deck or Patio||Foundation Work|
|Replacing Faucets||Remodeling Bathrooms|
|Removing Wallpaper and Painting||Remodeling Kitchen|
|Replacing Broken Glass & Windows||Roofing|
|Patching Small Defects in Walls||Updating or Replacing Electrical Systems|
|Replacing Trim or Baseboards||Adding or Replacing Bathroom Fixtures|
|Refacing or Replacing Cabinets||Adding a Garage|
|Painting Outside of House||Adding Rooms|
|Replacing Light Switches, Receptacles, & Covers||Concrete Work on Sidewalks, Steps, Driveways|
|Replacing Carpet or Tile Floors||Remodeling Inside Structure|
|Replacing Doors / Storm Doors||Moving or Removing Walls|
|Planting Shrubs, Bushes and Flowers||Major Landscaping|
If you can look at a house and see that the foundations of the home are solid and all you will really need to do are cosmetic repairs, it’s a definite plus. But many people have problems seeing a diamond in the rough, and can’t get past the ugly unkempt surroundings. There are a lot of quick, fairly inexpensive, and easy repairs that can turn that fixer-upper into a beautiful home, ready to move in within a fairly short time after buying the place.
The best advice when choosing a fixer-upper is to do so with guidance of another professional, or covering all of the repairs before you sign the papers to buy. The problem is that fixer-uppers usually sell for well under what the home would be worth in the market if it were in good condition, and those who know about flipping houses for profit tend to act fast.
If you find a home you really love that’s in a neighborhood you want and it’s a fixer-upper, you may want to put a bid in with a down payment and a list of contingencies that consider the high cost items. This can buy you a few extra days or weeks to cover all the angles and know how much things are going to cost.
The good news is, if you’re a person that can see past outer appearances, you may find that you can have a dream house for a fraction of the cost you would expect to pay.