Things to Consider Before Committing to a Fixer-Upper

Shows on HGTV glamorize the “fixer-upper” process leaving many to think, “I can do that!” But before you’re knee-deep in plywood and paint, it’s important to understand what exactly you’re getting into. This blog post will discuss different categories of fixer-uppers, the considerations of each, and why it’s important to work with an experienced real estate attorney to help navigate the process.

Types of fixer-uppers

When defining a “fixer-upper,” many people’s first thought is an old, rundown house that needs some love. But in our opinion, it’s much more complicated than that. There are varying levels of fixer-uppers – from simple cosmetic changes to complete overhauls. When you’re browsing homes to potentially buy, it’s important to take all potential renovations into consideration.

Cosmetic Fixer-uppers

Cosmetic fixer-uppers are typically defined as needing simple tweaks such as paint, new appliances, or new floors. When looking at a home that needs cosmetic changes, you should consider the following:

Cost: What would the work cost? If you plan to do it yourself, then you only need to account for the cost of materials and your own time! It doesn’t hurt to have a contractor come to assess the potential cost before making any type of commitment.

Timing: How much of the work is urgent? Can any of it be pushed off to a later time? Keep this in mind when budgeting.

Be realistic: It’s very easy to be optimistic about how a finished product might look – but having the resources and/or patience to do those things is a different story.

Financing: Be mindful of how a home in bad shape would appraise and/or look to a loan officer approving a loan. Be upfront with your lender.

Renovations

Renovations are considered as significant construction work such as kitchen and bathroom remodels. These are the projects that would typically require building permits and significant costs. Considerations for renovations include:

Cost: Similar to cosmetic fixer-uppers, it’s important to have a clear understanding of cost – perhaps even more so for renovations. It’s also best to assume the cost will be more than the estimate.

Permits: Is there any question that the town would not approve the renovations? Would you still want the house if the town denied the building permit? It’s important to speak to your local building department and a real estate attorney to determine permit requirements.

Financing: Similar to cosmetic changes, will the current condition of the house affect the loan approval?

Owner occupancy: Most mortgages require owner occupancy within 60 days. Is this feasible given the work wanted? No one wants to be in breach of their mortgage terms!

Additions

Additions add finished living space to an existing home, such as adding a deck or sunroom, or finishing a basement or attic. Considerations for additions include:

Location: Is the property in a special area, such as a historic district, that might make it difficult to make changes to the exterior and/or footprint?

Do your due diligence: Zoning and setbacks are important when changing the footprint, adding decks/porches, etc. Discuss any town zoning law requirements with a real estate attorney.

Limitations: Are there limitations such as septic tank size that limit the number of bedrooms?

Financing: Same concepts as above with respect to loan approval and if the addition(s) will affect that.

Considerations for Condominiums

These considerations can also be applied if you’re looking to purchase a condo rather than a house. Whether cosmetic fixer-uppers, renovations, or additions, the existence of a homeowner’s association and ruling documents can drastically limit an owner’s right to perform certain upgrades. A potential buyer is well served to carefully review the documents with a real estate attorney and/or discuss plans with the association before buying

As with any major purchase, it’s important to not assume anything about cost, town approvals, or lending approvals. It’s also important to work with experienced contractors and real estate attorneys who not only can get the job done, but are well-versed in any permits or approvals needed.

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