In normal housing markets, Americans want houses that are ready to move into. But the post-pandemic housing market is far from normal, and soaring prices have caused home buyers to change their expectations.
According to a survey by TD Bank of Americans looking to buy their first home in 2021, 71 percent are not looking for a dream home. Instead, they buy a starter or fixer upper.
For buyers frustrated by lack of inventory and skyrocketing prices, older homes can be a good compromise. Of course, buying a Fixer upper means you are embracing a project that is fraught with uncertainty.
Scott Lindner, national sales director at TD Bank Mortgage, says buyers need to prepare for the unique challenges that come with home renovations, such as: He asks a few questions about the fixer upper trend:
Q: What drives interest in fixer-uppers?
A: We see rising prices. The National Association of Realtors says prices rose 23.6 percent from May 2020 to May 2021. This low inventory has been a problem since the 2008 financial crisis. We didn’t really add a lot of inventory.
Q: What types of loans are there for renovations?
A: Many lenders have an FHA 203 (k) loan that allows people to purchase a fixer-upper. If it’s a smaller amount, you can replenish the old credit card balance – but you also need to understand what that means from an interest perspective.
If you already own a home, a home equity loan is a good idea. Many home equity loans will be up to a 90 percent loan-to-value ratio. And at today’s interest rates, it can make sense to do a cash out refinance if you haven’t refinanced in the past year and a half.
Q: What advice do you give to a first-time buyer considering a fuser face?
A: First and foremost, be part of the inspection process. Buyers don’t always take this seriously. Maybe they hang out in the living room while the inspector goes around. They should be attached to the hip. Really think of the inspector as someone to walk around with and find out about the property.
Another great way to buy a home is to invest a lot of welding capital. If you can do a lot yourself, you can potentially save a lot of money.
There is the potential to discover additional issues so be aware of cost overruns.
Q: What is a common mistake made by fuser head buyers?
A: The biggest and most hurtful mistake is to underestimate the cost of your renovation. No matter how well you judge, there are always surprises. You have to assume that there will be cost overruns. It is better to get involved with it. You should probably keep a 15 to 20 percent cost overrun in mind.