How do you find the right house?
If you think you would be interested in a fixer-upper and you have not owned a house before, consider these points as you begin your search:
1) Buy in the best neighborhood you can – This point sounds obvious but buying right will be the single most important item in determining whether you are financially successful or not. Location is so important. Take your time to find the right house.
2) Make sure the house has the basics – I always suggest finding the house that has 3 bedrooms, 2 bathrooms and a minimum amount of square feet (determined by neighborhood norms). Also, consider things like lot size, lot location and whether there is a garage. If these are things that are norms for the neighborhood, your house should have those as well.
3) Try and get well maintained systems – I always try to find the dated house that has good systems. I consider systems as your furnace, A/C, water heater, electrical, plumbing, basement/foundation and roof. These are things that every buyer wants to be acceptable at a minimum level. You won’t get anything extra for redoing these but you might spend a lot extra if you have to improve them. You may not be able to do the work for systems and the tradesmen for these professions charge some of the highest in the trades. Also, sometimes neglected systems can be a bad omen for other, greater neglect throughout the house. If you go into a house that has systems that are ancient, look closer at the rest of the house and definitely take into account what it will take to get these systems up to an acceptable level.
4) Look for the expansion potential – When I look at a house, the first thing that I look for are unfinished spaces that can be finished inexpensively that will directly add value to the house. These are usually unfinished attics and basements. When you finish an attic or basement, you directly add value to your house for a minimum price. It could also propel the house into a new price category, if for example, you can make a 2 bedroom house a 3 bedroom house.
5) Strongly consider the kitchens and bathrooms – Kitchens and bathrooms sell houses. If you have a house that has a floor plan where the kitchen may always be small or dysfunctional, you might want to reconsider the whole house. With bathrooms, try to get a least 1-½ bath. If you buy a house with just one, you need to figure out how to get that second bath in. Many people will not even consider a house with only one bathroom.
6) Don’t bite off more than you can chew – As a first time homebuyer, there is a great temptation to minimize the amount of work that will be required to finish the house. Be realistic and consider taking on a house that you know you will be able to finish. With this smaller success, you might be ready to take on the bigger project next-time.
7) Be realistic with your budget – Most of the time, fixer-uppers always have a few surprises in store for you. So when you are looking for that right fixer-upper, plan that it will take more than your budgeted amount and will take more time to finish as well. I usually do a good, itemized budget and add about 40% more to it.
8) Work with the right buyer’s agent – Although this may seem like crass self-advertisement, it is not. Buying a fixer-upper is different than buying a regular house. In my experience, the guy that is selling a fixer-upper is the last person to know (or admit) the house is a fixer-upper. Usually, he thinks it is just as nice as the nice house that sold down the block. Even when you settle on a price, you are not done. The inspections will be more difficult, there could be defects and you might even have to get reputable bids quickly to get seller concessions. You don’t have to use me but find someone that can represent you well and will be able to work with the seller to help them appreciate that they have real issues with their property. A transaction like this is where a buyer’s agent really earns his/her money. It is also an area where the buyer can get taken advantage of if they are not prepared.
I hope this has been useful to you. I don’t want to over-glamorize the fixer-upper – it will be a lot of work. But doing them has brought my wife and I a lot of satisfaction and we hope you can benefit from our experience.
