If there’s one thing we have many of in North Central Florida, it is older homes. So, often a homebuyer looking to purchase a home that’s been around for awhile has to make a choice.
Do I buy a home where the previous owner has made the repairs? Do I look for a fixer-upper and make the repairs myself or hire a contractor? Do I do some combination of both?
A number of factors go into that decision. The most significant of these factors is cost.
If the seller does all or some of the necessary upgrades before the sale, that increases the value of the home and, along with it, the sale price. If they are selling the home as is, the sale price should reflect that the new homeowner has expenses to consider on day one after the sale, maybe even before being able to move in.
So, as a buyer, your first step is to do a cost analysis.
You start with the sale price of the home. Then, you have to add the cost of all the repairs that need to be done.
The first step in determining the second amount is making sure an inspection is done as part of the sale. That’s the only way to avoid surprises. An honest seller may disclose every issue with the home that they’re aware of, but there may be additional issues they don’t even realize.
Once you’ve determined the work that needs to be done, make a realistic estimate of the cost for those repairs. It’s important that this estimate includes materials and labor.
That brings into account the second step. Who is doing the repairs? If you are a DIYer, you may be able to make some of the repairs yourself. But be realistic about this. Don’t get in over your head.
Another issue to consider regarding the repairs is, if as a DIYer, you can do some of the repairs, and you have to bring in a professional contractor for others, there are new factors.
It may not be easy for you to be doing some repairs while a contractor is doing others at the same time. And depending on what the repairs are, a timetable for work may create conflicts in that regard.
There’s also the possibility that, while you may want to do some of the repairs yourself, it may be more cost effective to let the professionals handle it. While it is usually more cost effective to do the repairs yourself, that may not always be the case. It may depend on the full scope of repairs that are needed.
There are cases where buying a fixer-upper doesn’t necessarily mean repairs but improvements. If that’s the case, you need to take a good look at the neighborhood. Adding square footage, a pool or other amenities may result in your perfect home. However, it may make your home the biggest and most expensive in the neighborhood. That may not be a position you want to be in when you choose to sell the home later.
Finally, with all this knowledge in hand, it’s time to go back to the cost. You may buy the home for a certain amount of money, and the renovations increase the value. If that’s the case, you may be able to get financing for those repairs over and above any loan needed to purchase the home. But it’s vital to make sure you are not overextending yourself. So, the bottom line is there are many factors when making the decision about buying a fixer-upper or a home where repairs were done by the seller. The important thing is to consider all the factors before making your decision. As we often hear, this is the most important financial decision you can ever make.