Don’t let a “fixer-upper” bury you

Phone calls from Buyers wanting to buy a foreclosure or a “fixer-upper” are pretty common. There are a number of people that think buying such a home will be their answer to either home ownership or increased wealth. The sad fact is, that for some of them, it could be the road to financial hardship or ruin.
Many of these inexperienced bargain hunters are trying to find the deal of a lifetime, because it will take everything that they have to buy the home. Just like an undercapitalized new business, the failure rate is high.
Several studies have shown that these homes sell for an average of eight to ten percent below market price. That doesn’t leave much room for repairs, updates, and remodeling. In many cases, after all of the work and expense, a Buyer may find that they have more money into the home than it is worth.
For example, you buy a $200,000 home, for $180,000. Then you spend $30,000 in repairs and remodeling. You now have $210,000 in a home that is worth $200,000.
In some cases, that bargain home that just needs “TLC” and has “good bones”, could quickly turn into a financial disaster. Experienced buyers of these types of properties, know that this can happen, once they start remodeling.
For example, you start work and discover the home has polybutylene pipes running throughout it. This pipe was commonly used in new homes built between the late 70’s and mid 90’s. The pipe was discontinued, after it was discovered that it had a high rate of failure. Replacing all of the pipes in your house will quickly ruin your budget.
Termites can be another issue. Although you hopefully have a termite inspection, these inspections don’t necessarily discover old, or even active, termite infestations within the interior walls. These are often only discovered once you start remodeling and find that there are no 2x4s left behind the drywall.
When buying any home, Buyers need to have a thorough home and termite inspection. These inspections should also include Chinese drywall and mold.
If your idea is to find a bargain, that simply needs some updating, get prices on the updating. If updated homes are selling for $20,000 more than the one you are buying, it makes little sense to spend $30,000 on updates, unless you plan on living there for a number of years so that you can enjoy them.
Finally, don’t count on continued appreciation to bail you out of any unplanned disasters. Florida has a history of “boom and bust” when it comes to real estate. Right now prices are at or near, where they were at before the last bust.
Granted, the last bust was caused by lenders and mortgage fraud. Hopefully enough people went to prison, except for the lenders of course, to have put a damper on repeating that mess. However, don’t assume that the home you buy will simply keep going up fifteen or twenty percent each year. We are now seeing a stabilization and leveling off of prices.
If you are trying to buy a “bargain”, because you think that your credit rating or financial situation will only allow you to do that, maybe you should consider fixing that instead. Talk to a lender and see what you need to do, so that you can buy the home that you want.
Jim Weix, is the Broker/Owner of The Real Estate Company, Inc., with offices in Stuart and Port Saint Lucie. He can be reached at 772-288-1900 or