(ARA) – You’ve seen the real estate listings: ‘in need of TLC,’ ‘fixer-upper,’ and ‘great potential.’ While some cringe at the thought of buying a house that needs to be renovated, others see a chance to get a great deal on a house they can customize and make their own.
Thanks to recent changes in the real estate market, a surplus of homes is available for purchase across the country. While some are in move-in condition, others need work. For those willing to take on the added time and effort of renovation, the rewards can be great.
‘A fixer-upper can provide great opportunities for homeowners,’ says Scott Medrow, national consumer sales manager for GMAC Mortgage. ‘However, one of the most common misconceptions that scares off potential buyers is that they need to have a lot of cash on hand to pay for the improvements a fixer-upper may require. That is simply not true.’
Many lenders offer renovation loans, which feature a single loan for buying the home and fixing it up, explains Medrow. Homebuyers get access to increased borrowing power up front to finance the renovations and improvements that their fixer-upper needs. There’s also the potential for lower monthly payments by financing a mortgage and renovation together with improvement costs spread across the term of the loan.
So beyond the number crunching, why consider a fixer-upper?
The most obvious reason to buy a fixer-upper is the reduced cost. Quite simply, homes that require work are harder for real estate professionals to sell. There is often more room for price negotiation if the home needs work.
You get to be your own designer. Much like buying a newly constructed home, you can pick the paint colors, carpet, appliances or design features to transform the home into your dream home. You have control over how the house will look after the renovations are complete.
Location, location, location. Sometimes the only chance to get into a desirable neighborhood is to find a fixer-upper. It’s a great way to purchase a home in an area that might otherwise be out of reach.
Buying a fixer-upper comes with risk, however. Before you sign on the dotted line to purchase one, take a close look at the repairs it will need. If there are major structural deficiencies, the cost of improvement might outweigh the adjusted value of the house post-renovation. A professional home inspector can help you determine if the house is worth renovating. An inspector will tell you whether the mechanical, electrical and plumbing systems are functioning properly and can provide additional information that may factor into your decision.
If you decide to move forward, consider these renovation tips from GMAC Mortgage:
Among the most potentially profitable fixer-uppers are homes that need relatively minor cosmetic repairs, which may allow you to quickly build equity in your home through minor work, such as painting, replacing carpet or updating appliances.
You can further build equity by considering larger-scale renovations. Adding square footage, building a second story or adding a bathroom can increase the value of your home. Building a deck enhances your enjoyment of your outdoor space and can allow you to recover as much as 85 percent of the costs with increased home value.
Renovating the kitchen, bathroom or other common areas can be among the most profitable types of renovations. Adding new light fixtures, vanities with plenty of storage, ceramic tile or marble, and a new paint color scheme can dramatically change the appeal.
Converting an attic into a bedroom or adding a family room are great ways to add value and let your home grow along with your family.
Replacing your old furnace, putting in new windows and doors, and replacing your roof can pay you back with savings on energy costs while enhancing the home’s resale value. Some states even offer credits for remodeling projects that enhance energy efficiency.
If you are up to the challenge, buying or renovating a house in need of repair and remodeling can give you the opportunity to create the home of your dreams. For more information on how to finance the purchase and renovation of your dream home, visit your local GMAC Mortgage branch or visit www.gmacmortgage.com to find a branch near you.