Are you in the market for a diamond in the rough. Maybe you're a handyman and enjoy fixing up these homes or maybe it's a budget issue. Is there a point that a lender decides the home is in too bad of shape to take the risk on a mortage? Is there a point that your mortgage lenders says that the "Fixer Upper" home that you are looking at, is not worth fixing up? Even though you may be a wonderful handyman or maybe this is all that your budget will allow, you need to know what you're getting into.
When you negotiate the contract, make sure that you include a provision for a home inspection for structural integrity, defects and potential problems.Home inspections are conducted separately from the appraisal and are generally paid for by the buyer for their own safety. A home inspection will give you an overall look at the homes operating systems. A professional inspection looks at all of the details such as the age and condition of the roof, plumbing systems, heat and air conditioning systems, and termite damage and much more. As part of your report, you will receive a list of what needs to be repaired or replaced, the time frame and the potential costs. When buying homes that are considered "fixer-uppers" some lenders will also require an inspection. Whether the lender does or doesn't, you want to make sure that you have one done for your own peace of mind.
Hopefully, you'll be one of the lucky ones who finds that there aren't any major problems with the house, only small fixes. Maybe the carpet is worn and needs replacing. Perhaps the deck needs a little work. New paint and fresh air could be all it needs.
Lenders are usually not concerned with minor cosmetic problems, but the buyers and sellers may negotiate on repairs or replacement costs on these items.Unless you've done this before, you may find a good agent is invaluable to negotiate for you.
Make sure any items that wish to be repaired, such as the deck painted or carpet cleaned by the seller, are in the contract. If it is, the seller must perform. You may be able to have the appraisal include the repairs spelled out in the contract. This can help you when getting a mortgage, as lenders will only lend on the lesser of the appraisal or purchase price. Just make sure that it is all in the contract.
Sometimes, the Seller may ask to have the repairs done after the closing. If this is the case, many times a buyer will simply ask for a seller's concession. Let's say that instead of having the home re-roofed before the closing, the seller agrees to reduce the price of the home by the same amount as it will cost to have the roof repaired.
But if you don't have that money in hand to repair the roof, don't expect your lender to give it to you. Even if your contract states that the seller will give you back $5,000 after closing, don't expect it to happen. Cash allowances written into contracts can't happen. The lender will not allow the seller to hand over cash at closing. Your real estate agent should steer you away from this and help construct a sales contract that will please both the buyer and the seller. But don't expect to come home with $5,000. It just won't happen.
The purchase of a fixer-upper can be a great experience. You get to choose how you want to improve the home. But it is a lot of work and definately not for every buyer or lender. Your best bet is to be completely upfront with your lender about your intentions. Following these suggestions, you should have no problems and enjoy your new home.
Author Resource:
W.C. Thomas is the Marketing Director for First Thomasville Realty in Thomasville Georgia . For more helpful information for Home Buyers or Home Sellers, visit our blog .
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