When I hear the term “fixer-upper” I think about The Money Pit, the 1986 comedy starring Tom Hanks and Shelley Long as a yuppie couple who buy a beautiful-but-seriously-dilapidated old house that nearly ruins their relationship. It makes for a funny plot, but in real life there’s nothing funny about buying a home and discovering that the roof leaks, or the wiring hasn’t been upgraded in decades.
First, don’t jump to conclusions about the term “as is” — it doesn’t necessarily mean the home is in a state of disrepair. It means that the homeowner has elected to sell the property without making any changes or any representations that everything works as expected.
On the other hand, there’s no guarantee you’ll get a deal when you purchase a fixer-upper. The money you save can easily get eaten up in renovation and repair bills, and you might even need a place to stay for a while if the house needs a major overhaul. Do an extensive financial analysis to weigh the pros and cons of this type of real estate investment. You could even wind up competing against people who want to tear it down and build a new home because the location is so ideal.
Don’t be afraid to ask for some expert advice. Your real estate salesperson is an important resource. A good first step is to have an experienced home inspector check out the property’s essential systems — roofing, doors and windows, foundation, plumbing, electrical, heating and air conditioning — and provide you with an appraisal of the home’s overall condition, without poking holes in the structure. You may also want to hire an experienced general contractor or structural engineer to have a look too.
Be sure to check with a real estate lawyer to ensure that the property, and any major renovations you’re considering, are in line with the local zoning bylaws.
Your real estate rep can assist you by obtaining pertinent details about the home and including a specific contract clause to make your offer conditional upon the results of the home inspection. Depending on how the inspection clause is worded, you might be able to walk away from the deal without paying any penalties if the inspection uncovers serious issues with the house. Be aware that if you choose to exercise the inspection clause, the seller could ask to see a copy of the inspection report and may take issue with it. Please talk to your real estate salesperson and lawyer about this sort of clause before you submit an offer.
It’s also a good idea to consult with contractors, electricians, plumbers and other licensed professionals about the work, time and money it will take to fix the fixer-upper. When you hire skilled tradespeople, ask for detailed written quotes to avoid surprises should you go ahead with a renovation.
You may also want to discuss with your salesperson the impact the renovations may have on the longer-term value of the home.
If you’re thinking of purchasing an older home that needs some work, research the things you need to know, talk to some skilled professionals, and ask yourself if you can carry the costs — financial and otherwise — of major renovations.
Provided By: Real Estate Council of Ontario (RECO)