How To Assess The Cost Of A Palm Springs Fixer Upper
When You Want To Renovate A Home, what things should be considered?
When you buy a Palm Springs fixer upper, you can save a ton of money or get yourself in a financial fix. This is only a guide so please be sure to consult a pro!
Trying to decide whether to buy a fixer-upper house? Follow these seven steps and you’ll know how much you can afford, how much to offer, and whether a fixer-upper house is right for you.
1. Decide What Is DYI and What Is For A Pro
It may not be as easy as the TV shows make it look. yes they take it step-by-step but there are many hazards and pitfalls along the way. Its happened to all of us. A simple task or project can take a day instead of an hour. So ask yourself:
- Do I have the skills?
- Is there time in my life?
- What is the completion date?
- Do I have the tools?
- Can I get through the permit process?
- Don’t even THINK about skipping this step
- Am I ready to live in the home while all this is going on?
2. Price the cost of repairs and remodeling before you make an offer
Get an estimate for the work as though a contractor were going to do it. If you are going to do the work yourself, this is a good cost basis to follow because the labor is free yet it will allow for cost over runs and buying or renting tools. If you do the pricing on your own, add 10 to 20 percent as a cushion.
3. Check permit costs
Go to your local planning department and ask if the work you’re going to do requires a permit and how much that permit costs. Doing work without a permit may save money, but it’ll cause problems when you resell your home.
Factor the time and processing of permits into your plans. And remember, the local official may want to do inspections which may slow things up a bit at times.
4. Double-check pricing on structural work
You will need a structural engineer if any walls are coming down or any major demo is taking place. Its 500 bucks well spent. And be sure to take all points of the pre-sale home inspection into account. Just because you’re doing a Reno does not mean that you can forget this all important item.
5. Check the cost of financing
OK, so you have enough money for a down-payment, closing costs, and repairs without draining your savings. Now factor in the costs of the work, tools, permits and inspections. Does it add up?
If you’re planning to fund the repairs with a home equity or home improvement loan: Get yourself pre-approved for both loans before you make an offer. Then make the deal contingent on getting both the purchase money loan and the renovation money loan, so you’re not forced to close the sale when you have no loan to fix the house.
Consider the Federal Housing Administration’s Section 203(k) program, which lets qualified purchasers wrap up to $35,000 into their mortgages to upgrade their home before they move in.
6. Calculate your fair purchase offer
Take the fair market value of the property (what it would be worth if it were in good condition and remodeled to current tastes) and subtract the upgrade and repair costs. Now also subtract your closing costs pn the purchase then also add in the closing costs were you to sell. Does that add up to a profit? Even if you plan to stay in this home for a long time, sometimes life happens and you may have to move sooner. Don’t over-build for the neighborhood
7. Make sure you have inspection, loan, appraisal contingencies in your offer
Most home inspection contingencies let you go back to the sellers and ask them to do the repairs, or give you cash at closing to pay for the repairs.Even if a total Reno is planned, the home should be livable going in. Even an REO (foreclosure) is made livable these days.
The seller can also opt to simply back out of the deal, as can you, if the inspection turns up something you don’t want to deal with. If that happens, this isn’t the right fixer-upper house for you. Go back to the top of this list and start again.
Loan and appraisal contingencies are a no brainer. The appraisal will be a key tool for you to know the true value of the home. And your Realtor will be a key player to help you determine the resale value after the renovations.