Buying a Fixer Upper: What You Need To Know
With inventory in the housing market low, you may be considering buying a fixer upper rather than a move-in-ready home. You may also decide that a major renovation project on your existing home is best if you haven’t found the right fixer upper to purchase. Sandy Spring Bank has many options and can guide you through the process while saving you time and money. First, let’s look at some key things you should consider before deciding which path to take.
How much of a fixer upper is the home?
A fixer upper or renovation project on a home could be as straightforward as cosmetic changes such as tiling, carpeting, and painting. However, it could need extensive renovations that will take more time, money, and expertise. It’s essential to define what changes are necessary to achieve your goal and decide your best options while avoiding any pitfalls.
Advantages of buying a fixer upper or renovating an existing home:
- Cost savings
Often, a fixer upper allows you the benefit of getting a reduced price per square foot over a move-in-ready home. This initial cost savings can be put toward your renovation costs. Another advantage is that you may get more house for your money. Purchasing a fixer upper can offer more square feet and land over a move-in-ready home and provide you with an excellent long-term investment.
- Make it your own
Do you want a stamped concrete patio dyed to your liking? Always dreamed of a new kitchen with granite countertops? There are certainly advantages of customizing your dream home. With a fixer upper or renovation to an existing home, you get the benefit of bringing your vision to life.
- Less competition
With inventory low, the competition for winning a bid on a home increases dramatically. Some move-in ready homes may have more than 15-20 bids, and yours may not rise to the top of that list. With a fixer upper, you have a better chance of fewer buyers competing against you.
Things to be mindful of:
- More expertise
It’s critical to find out all you can about the home you’re buying and if renovations may be needed beyond just cosmetic upgrades. Are there structural problems that need to be fixed or major plumbing and electrical issues? Before making an offer on any older home, be sure it has “good bones” by getting a home inspection to determine if there are major structural issues that may need to be tended to first. Depending on the renovations, you could barely break even – or even spend more money in the long run.
- Construction and major renovations can take a long time
A fixer-upper renovation can take more time than simple cosmetic adjustments. It’s important to remember that time may not be completely fixed on your project, and you should be prepared for your timeline to be adjusted along the way. You could be living in a construction zone for several months (or even years) while your dream home comes to life.
- Reality is not reality
Don’t go into this project thinking things will be as quick and easy as the DIY or home makeover shows make it seem on TV. Reality TV is not always reality. Renovation projects are fluid and can take more time (and possibly money) than initially estimated. If you set your expectations correctly, you won’t be disappointed or shocked along the way.
How can you finance a fixer upper or existing home renovation?
Sandy Spring Bank has the right programs to help you make the smartest financial choice for your family. Our construction-to-permanent financing program can provide financing for your purchase and construction rolled into one convenient loan. You can lock in a permanent mortgage interest rate and have the flexibility needed to renovate while saving time and money with one loan verification and set-up. When the construction process concludes, the loan rolls over into a traditional mortgage.
Buyers may also want to consider a home equity line of credit (HELOC) with Sandy Spring Bank to finance a fixer upper. This option provides homebuyers with cash for a home remodel and allows them to use home equity for repair costs. That said, if you decide this option is right for you, make sure you plan to reside in the home for a long time. Otherwise, you could find yourself upside down on your mortgage if the real estate market fluctuates.
Whatever you decide, Sandy Spring Bank has the right tools and expertise to guide you through the best financial path for your family and answer any questions you have along the way. To learn more about financing a fixer upper or renovating your current home, contact our Mortgage Team or give us a call at 800.399.5919.
This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.