The notion of buying a fixer-upper these days seems high on everyone's list. Everyone wants to get that “deal” and gain equity in their new home! When is the right time and then begs the question, when isn't the right time? Some questions to ask yourself:
What kinds of problems does the house have?
Does the house have structural damage?
Do you have the time?
Will you live in the property or sell it after renovations?
Do you have the proper licensed help if needed?
Is it in your budget?
Are your expectations realistic?
In a perfect world, figuring out what you should pay to buy a fixer-upper begins with a relatively simple equation. First, add up the costs to renovate the property based on a thorough assessment of the condition of the house. It is highly recommended to have a licensed contractor walking the property alongside you talking through each quote. Be smart with this estimate because you need to anticipate the “unknowns” and “oh, I never thought this would be an issue.” This estimate should include materials and labor — yours and the contractor's. Then, subtract that from the home's “likely” market value after renovation, obtained by a local Realtor who will provide comparable real estate most recent sales in the neighborhood. From that, deduct at least another five to 10 percent for extras you likely need to add, unforeseen problems and mishaps that have to be dealt with, and inflation. What's left should be your offer. Like I said in the beginning, this is in a perfect world! Today’s market has low inventory and leans to a seller's market which will leave less room for negotiating!
When making an offer, it is essential that the real estate contract includes an inspection clause. This inspection allows you to go through the property with eyes wide open to make sure your investment will pay off. During any inspection, the inspector will document a series of problems, some are small and some are large. No property will likely have a perfect inspection. This time allows you to gather all the information and quotes necessary to determine at the end of the day if this purchase and upcoming renovations you make will create the equity you desire for your new home!
As I have said before, please call a local Realtor for all your real estate needs no matter how big or small. We are trained professionals here to make your life easier. It's best to surround yourself with the right team of professionals that can continuously give you the right advice for all your circumstances.