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People who want to buy a home that needs some repairs.

In a difficult buyer’s market, it can be hard to find a great home, especially in the lower price ranges.

That could be why a 2019 survey from is interesting. It found almost 60% of home shoppers age 18-34 were willing to buy a home needing renovations. Many of these shoppers are first-time home buyers.

And 95% expected that a little extra work would give them a positive return on their investment.

Homes that need some work tend to sell for less per square foot than similar homes that are move-in ready.

So, this idea has a lot of appeal. Being able to buy a home that needs some updating or repairs into a dream home is a popular idea. People love the concept of getting a good deal and ending up with a nice home for the effort.

But that appeal can come with many problems. So it pays to look at such a decision very carefully, and only move on the idea if it makes good, logical sense.

Don’t let emotion rule such a decision, or you could live to regret it and wonder what you got yourself into.

Do you have what it takes?

Consider if you have the ability and aptitude for this. Can you manage to fix or renovate a property that needs it?

Are you someone who is handy with this type of work? Can you understand and do much of it yourself? If yes, you’re in a great position. If not, you’ll need to hire more of the work done. Then you end up with the higher cost. And you have less knowledge to manage the project.

Do you have the emotional desire to be involved in these kinds of details? Or are you better off moving into a home that is ready to go? And are you ready for the emotional roller-coaster you will ride? You will have ups and downs as you transform a property that needs fixing up.

Are you willing to put up with the inconveniences that come with renovating a property? This is especially challenging if you’re living in it at the same time. It is also stressful if you need to live in temporary housing during the project.

You could find this project to be exciting or a burden. Be sure to think about which it will be for you.

What does “as-is” mean?

A house selling “as-is” means you can expect there will not be improvements. The seller is not interested in making any changes or improvements to make the sale.

This means that the buyer is accepting any problems that the house may have in its current condition.

The seller still has the responsibility to disclose all known problems. The buyer can negotiate accordingly.

Seller advantage of “as-is”

An “as-is” property will be available at a lower price. It may be a deeply discounted price, depending on what work is needed and the motivation of the seller.

Seller disadvantage of “as-is”

Of course, there could be many things wrong with the house, maybe worse than meets the eye. The house could turn out to be a pit, swallowing mountains of cash.

Definitely, get a home inspection

A home inspector will examine the house to discover everything that could be wrong with it.

You already know that this house is being sold “as-is” so you expect that the inspector will find problems. You need to rule out problems that you did not know about. You need an assurance that known problems are not worse or more expensive to repair than you thought.

You are paying the inspector to give you the full picture of what you are getting into.

Then if the commitment is more than you planned, you can back out. You could also renegotiate based on that inspection. Be sure that your original offer has an inspection contingency.

Any of these properties listed below could be an opportunity for a first-time homebuyer. This assumes the buyer is capable and willing to do much of the work. This saves the buyer much of the labor cost of hiring someone to do the work. It’s a great opportunity to get a basically good house at a discounted price. A willingness to put in “sweat equity” can result in a good house after bringing it back to market value.

An inexperienced buyer faces danger without good advice to depend on. This buyer might be getting in too deep and it could end up costing much more than expected.

That is why it pays to make good use of the home inspector. Draw on advice from anyone who is knowledgeable about remodeling and construction techniques.

Definitely do a good job pricing out the materials and any labor is needed. Then estimate whatever time you think you need to do the work itself. Double or triple that time to plan on the actual time you need.

The different types of properties that may need some work

Deferred maintenance

This is a “fixer-upper”, priced and sold “as-is”.

There will probably be multiple items of deferred maintenance. This is work that should have been done but was deferred because the sellers could not or did not do it. There could be very valid reasons they could not do it. Examples include health problems, no one available, or they couldn’t afford it.

Here’s how to get to a sale price. Compare the subject property to other similar properties in normal market conditions. Then subtract the estimated cost of repairs to arrive at a discounted “as-is” price. The seller may even deduct more to encourage a fast sale.

This type of property could include a “pack rat” house. The occupant has lived there a long time. The occupant has accumulated so much stuff. It is stashed in every part of the house that one can hardly move through the house. And who knows what disgusting things might be under all that junk? This could be the worst of all and the price may be substantially reduced, but at what risk to the seller?

Newer homes that need updating

These would be more recent homes but with outdated décor. Examples include an older paint scheme, older appliances, cabinets, and countertops.

Most likely there would not be significant deferred maintenance or structural problems. You will still want a home inspection to be sure. By the way, a home inspection is recommended for every home purchase. It doesn’t matter how good you think the home is.

With the outdated nature of the décor, the home will likely be discounted. This is below a similar home updated to the current style.


A foreclosure has reached the point where the bank owns the house. The bank likely has done little to nothing to maintain it. It very likely will be sold “as-is”.

The property likely has sat vacant. The bank does not even know what the problems might be. The buyer will need to doubly beware of such property.

The home inspection will be ever more important in this situation.

Negotiation with a bank on foreclosure will often be more difficult. Problems with the property make it worse.

Short sales

With a short sale, a lender needs to accept less than the mortgage balance due for the seller to be able to sell the house.

Banks are not motivated to further reduce the price. They are not concerned with needed repairs or improvements. They have set a price they need and will do everything they can to get that price.

This could be the most difficult type of fix-up home to buy. The inflexibility of the bank to negotiate a price to make it challenging for the buyer.

Consider whether buying a house to fix up is right for you

As you can see from the above information, you have different levels of disrepair to consider. Some repairs may be more than you want to tackle. Others with cosmetic needs might fit for you. This still gives you the opportunity to get a discounted house. Then you can build value through your “sweat equity”.

What to consider

Are you planning to do the work yourself or do you need to hire it done? Or will it be a combination of the two? Then how much and what will you do yourself? What will be the cost for materials and any labor you need to hire?

Can you live on the property while the work is being done? Can you live without a functioning kitchen for a while? Can you get by with only one bathroom while the other is being remodeled? Or does the home need to be fully or mostly ready to live in?

How long will the fixing up process take?

How much cash will you actually have available for this? Keep in mind where cash needs to go. It is needed for a down payment … to closing costs … to keep some in reserves for emergencies … and then you will need more to actually buy materials and do the work. Do you have enough cash on hand to make it all work?

Once you have determined what types of work you are able to do and what you want to do – and what you can afford to do …

What are some possible houses that might be available?

What will you consider when you are looking?

Location. A great house in a poor location isn’t much good, so it’s important to consider location. What’s in the neighborhood? Examples to consider include schools … churches … shopping … parks … dining … crime statistics … etc. What are the average prices in neighborhoods that will work? Will the renovated value fit in with the value of other houses in the neighborhood?

Condition. What is the work to be done? You will want to be selective on the type of work and the cost to do the work.

Layout. Does the layout of the rooms fit your desires? Changing walls and rearranging the floor plan could be a bigger job than you want to take on.

Configuration. How many bedrooms and bathrooms do you need and does the house already have what you’re looking for? Making changes, especially to bathrooms, may be more than you want to do.

Smaller renovations. Are you good with these types of projects? For example … adding a deck … painting the exterior … patching and painting the interior walls … refinishing floors … laying tile … carpet or wood flooring … installing light fixtures and switches … replacing doors … installing or refacing kitchen cabinets … fixing broken windows … among other possibilities.

Larger renovations. Are you able to do the following projects, or would you need to hire it done? If you need to hire someone, how does that fit your budget? For example … remodeling the kitchen or bathroom … fixing the foundation … replacing windows … adding a garage or an extra room … replacing the heating system or adding central air conditioning … installing new plumbing, wiring, or even sewer lines … replacing the roof … the driveway or steps … could be some of the ideas.

The fix-up home purchase process

Follow through this process step by step.

Step #1 – Decide what you can do on your own.

It looks a lot easier on television than it really is. Be sure you really have the skills and desire to do the work you’re thinking to do. Do you have enough time to do it? Will you need to take off work? Will be stressful living in a house you’re working on? Or do you have another place to live in the meantime?

If the work you’re going to need to be done you can’t do it yourself, will you be able to pay to have it done? If you do pay to have it done, how will that affect the overall cost of your project?

If the renovation cost becomes too much, what does it mean for you? Would you be better off purchasing a home that has the work done already, even at a higher price?

Step #2 – Get pricing on the work that is needed before you make an offer

Price out the materials for the work you are going to do yourself, then add 20%. Estimate your time, then multiply it by two or three to get the actual time estimate.

For anything, you aren’t going to do yourself, get pricing from a contractor who will do the work, then add 20% to that.

Add up the project cost and set a budget

Be realistic about how much money you must set aside for renovations. This will include costs like rent for another place to live (if necessary). Then add 20% for going over the budget (which will happen). Consider incidental expenses like heat while contractors are working, and so forth.

Bring in any professionals, contractors, etc., you need at this point. Their advice to advise you and provide cost information. It will also define the project for you.

Put together the right team at this point and know who you will work with. Quality will be important, the lowest price may not be the best choice. Confirm their quality of work. Check references and reviews.

Be careful at this point, you don’t want to miscalculate here and get into something you will regret.

Step #3 – Check permit costs

Check with the local government if the work you will do requires a permit and what it costs. You will need the permit, otherwise, it will cause problems when you sell later.

Either you or the contractor will need to get the permits. The process can be time-consuming and unpredictable, so allow for it. Inspectors may require some changes to the work you are planning.

Research and know the building codes, zoning requirements, and homeowner’s association rules. Any of them could cause problems later and you need to know about them now and plan well.

Step #4 – If there is major structural work, double-check the pricing

Hire a structural engineer to check what needs to be done and confirm the pricing. This may require paying up to $700 for an inspection to be sure you’ve planned and priced it properly. Be sure to get written estimates.

Does the house need major structural work? If yes, be sure you are getting the property at a huge discount. Be sure you know about the problem for sure, and that it can be fixed. Get a binding estimate for the repairs.

Step #5 – Check the financing

Have enough cash to cover the down payment, closing costs, and repairs. You also need an emergency fund. And, set aside a fund for cost overruns.

Your purchase agreement needs to be contingent on approval for the financing. More information is below about financing options for a property that needs renovation.

Step #6 – Calculate your offer

Start with the fair market value of the property assuming it is in good condition and updated to current décor.

Consider with your real estate agent if it is a good idea to share your cost estimates with the seller.

Step #7 – Include inspection contingencies

You can’t skip this for any home purchase, but it is especially important for a renovation purchase.

Here are the inspections you need:

Home inspection. The home inspector will inspect the property. The report will detail all obvious and hidden defects in the property.

Radon, mold, lead-based paint. You need to know the status of whether these exist in the house.

Septic and well. These are expensive to deal with if it is necessary, so it is very worth having them inspected.

If the inspection shows problems, you have options. Will you accept the problems? Or do you decide to negotiate with the seller to fix them? Or will you ask them to give a reduction in the sale price so you can fix them? Or will you cancel the deal?

How to finance a renovation project

Renovation loans

Special mortgage loan products are available for renovations. They allow financing the purchase and renovation costs of a property in the same product.

The loan amount is based on the value of the property after the necessary repairs have been made. One loan covers both the purchase and the necessary repairs.

This is future value financing. It is available through a few loan products, with varying degrees of availability.

One of the products that has been available for some time is the FHA 203(k) improvement loan. This factors in the cost of authorized repairs and renovation into the loan. It allows you to borrow money for both home purchases and home improvements.

The 203(k) loan is insured by the Federal Housing Administration (FHA). It is more complicated than a normal loan. The 203(k) involves more paperwork than the regular FHA loan. It must account for the extra funding and construction activities needed.

The pre-approval is based on estimates of the sale price plus the repair costs. The sales price estimate is provided by an appraiser. The lender selects the appraiser. The appraiser values the property on both an “as-is” basis and an “after-repairs” basis. A licensed general contractor provides the repair cost estimate.

For repair costs more than $35,000, the FHA requires a HUD-approved consultant. This consultant helps manage the process. The consultant’s fee can be included in the loan.

Other renovation mortgage programs are less well known. Others in this category include the following … Fannie Mae’s HomeStyle Loan … Freddie Mac’s CHOICERenovation Mortgage … and the VA renovation loan. These are newer programs and are not as readily available.

These renovation loan options come with higher costs. Use them carefully. They can be a good choice in the right circumstances.

Your best option is to contact your credible Real Mortgage Consultant at Winner’s Mortgage. Together you will plan your financing options for your situation and for what you’re planning to do.

Traditional mortgage

Using a traditional mortgage to finance your property purchase is different. Any renovations or repairs will need to be paid for with cash, a credit card, or a personal loan.

A traditional mortgage must allow the necessary work to be done after the loan closes. If the work must be done before closing, a traditional mortgage will not work. The exception is if the repairs can be made and paid for before closing by the seller.

A traditional mortgage uses a value based on the lower of the sale price or the appraised value of the property. This value is based on the current condition. No allowance is given for renovations that will increase its value.

If the traditional mortgage can be used, then repairs can be made after closing. Cash is the preferred way to finance any repairs needed. If you can put your “sweat equity” into it as well, this gives you a great way to get extra value.

You can use credit cards to finance the repairs, but it is not highly recommended. You have a high-interest cost if you do not pay the balance within a month when the bill comes due.

A personal loan could also cover the cost. Again this comes with the disadvantage of higher interest costs.

Your financing cost will be lower if you can do the renovations after closing. That saves you the higher fixed costs that come with a renovation loan.

Is renovation right for you?

Purchasing a home is one of the largest purchases you will ever make. The financing to buy your next home is likely the largest and most expensive loan you will ever take in your life.

You can’t afford to get this wrong, or it will negatively affect you for years to come.

But when you get it right, it can be a huge head start to your future financial freedom.

It can be the beginning of your ability to be free of all loan payments, free of your job, and free to do what you want.

Consider it all carefully. Talk to your fully-trained Real Mortgage Consultant at Winner’s Mortgage to make it the best possible blessing for you. The choice is as clear as crystal.

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