When buying a home, some people prefer older, fixer-uppers, thinking they can negotiate a lower price and renovate it themselves to create their perfect home, which can seem like a romantic and fulfilling endeavor. Others prefer move-in ready homes, recently renovated by investors, where they can simply unpack and settle in. However, both of these approaches can come with significant risks. In this article, we'll analyze three major pitfalls to avoid when considering either type of property.
Pitfall 1: The Condition of the Home. For older homes, it's crucial to thoroughly review the home inspection report. Issues such as corroded plumbing, worn electrical wiring, foundation problems, chimney damage, mold, or severe termite infestation can all affect livability. These issues may lead to costly repairs that are hard to estimate. For example: - Foundation Problems: These can be complex and expensive to repair, potentially costing thousands of dollars depending on the extent of the damage. - Termite Infestation: Eradicating termites typically involves tenting the entire house and using chemicals, costing between $2,500 and $7,500, and further repairs may be needed if the infestation has caused structural damage.
For newly renovated homes, it's important to check the time gap between the last listing and the renovation. Also, scrutinize the inspection report to ensure that any existing issues have been addressed, rather than being hidden by superficial staging and decoration.
Pitfall 2: The Home’s Value. When buying a home with a mortgage, the bank will send an appraiser to value the property. The appraiser uses recent sales of similar homes in the area as comparables. If the home is in poor condition, it might be appraised lower, potentially affecting your ability to secure sufficient financing and requiring you to cover the difference out of pocket.
For renovated homes, check whether the renovation work had the necessary permits. Unpermitted structural changes can lead to loan denial.
Pitfall 3: The Time and Effort Required for DIY Renovations. For older homes, tackling renovations like updating the kitchen and bathroom, replacing windows and doors, and more can be time-consuming and physically demanding. The effort involved in buying materials, painting cabinets, installing new countertops, and fixing plumbing issues can be overwhelming, especially if you're doing it yourself.
For renovated homes, don’t let the appealing appearance of the property make you complacent. Ensure that the seller provides a one-year home warranty to cover any unexpected issues that may arise shortly after purchase.For more information, please check this: Essential Protections for Your Bay Area Home: Home Warranty and Homeowners Insurance
Understanding these three major pitfalls will help you make a more informed decision, whether you're considering a fixer-upper or a newly renovated home. If you have any questions or need further advice, feel free to contact us for a discussion.
