If you’re looking for the perfect turn-key home, you may find that the already limited home inventory is further limited by the many homes with deferred maintenance and those that are in need of updates. If you’re like the many frustrated home buyers in today’s market, you may opt to take the “Property Brothers” route of buying a home.
As you know, HGTV’s Property Brothers is one of the most popular real estate shows on cable. What makes the show work is the concept of transformation; creating a model home from one that is crying out for TLC. Of course, the magic of TV makes it seem easy; home buyers appearing on the show put their trust into the dynamic duo to find the right home and to make it perfect.
A warning, however, this process is not for everyone. Undergoing this type of project is taking an already exasperating process and making it an emotional and financial challenge. It is also a time consuming, as you’re totally involved – from buying to rehabbing the home. Your experience may be similar to those on TV, nevertheless it is more likely to feel like the movie “The Money Pit” or somewhere in between.
Unlike the Property Brothers, you don’t need your real estate agent and your contractor to know each other. Each has a distinct role; one is helping you acquire the home, and the other is remaking it. However, it’s a good idea to make sure each is licensed and experienced in this type of process. Ask for references; some contractors will even have a portfolio of their work.
Before you begin, make sure you have the funding and your team in place.
Talk to a lender about a renovation loan. Besides providing the money to buy the home, a renovation loan will provide funding for renovations. Loan programs and mortgage limits vary, so it’s a good idea to get qualified before you write a contract to buy a home. Make sure your contractor can provide details about the renovation, as the underwriter will review the plans. Consider a FHA 203K program, which also offers a “streamline” version for less expensive renovations,
Working with a top notch agent is key in not only finding a home, but also negotiating a price. The ability to think outside the box is very helpful in this phase. They should be able to find the “diamond in the rough,” that provides suitable space at the right price. If you’re communicating well with your agent, they will understand your requirements.
Once you identify a home (and before you write the offer), meeting with the contractor will determine if your vision is possible, and its price. Be realistic and flexible. Be prepared for bad news and to move on to another home. Sometimes the home needs too much work and/or the cost of the renovation could be beyond your budget.
Even if you have lots of cash to spare, it’s recommended that you start by creating a budget. Besides the acquisition cost, consider the renovation costs and carrying costs (if the project is long term). Also decide on your limitations. You may decide on limiting renovations to kitchen and bathrooms; or you could broaden the project to be more ambitious. Consider creating a short term and long term plan for the house; focusing on critical repairs immediately, and making other updates over time.
Dan Krell is a Realtor® with RE/MAX All Pro in Rockville, MD. You can access more information at www.DanKrell.com.