What agent hasn’t been there? Your client finds a house that draws them in. It’s in the right neighborhood, within budget and has the potential to explode in value over the next few years. However, the home’s a fixer-upper or has weathered serious damage from past residents. There are signs of mold on the ceiling, damaged insulation or foundation issues.
It is not always easy to know how to advise buyers and investors who eye a less-than-perfect property. While past damages need to be disclosed, some love a good home repair project while others will not even want to deal with painting the walls. Some expect to do one or two repairs and forget about it while others specifically seek out properties that have been damaged in hurricanes and fires as a cheap investment.
“Generally, the less expensive the property is, the more it will cost to bring it up to par,” Cara Ameer, a broker associate from Northeast Florida, told Inman. “You may have to weigh the cost between doing repairs and tearing it down and starting all over.”
Buying a damaged property is always a risk and a commitment. Here’s what both investors and agents who are working to sell damaged homes need to know:
Have A Clear Plan:
Does the buyer plan to live in the house or tear it down for the land? The answer to this question will affect how both the nature and the necessity of the required repairs. Making a risky purchase should always start with a plan — make sure your clients know what they plan to do with the property before they get knee-deep into the buying process.
“The dangers are that the repairs or remedies cost more than anticipated, and the house is no longer a ‘good deal,’” Lesslie Giacobbi, a Seven Gables Real Estate agent from Southern California, told Inman.
Get A Professional To Estimate The Damage:
It can be easy to see a property and want to go with your gut — it “feels” right, so you want to chance it. But it is especially important to have a specialist inspect an as-is property. The roof, the foundation, the sewer system, the walls, potential pest infestations and signs of past drug activity all need to be examined by a professional. That way, buyers will be able to not only know of things that are currently wrong but also be aware of problems that can arise in the future.
“Get the property thoroughly inspected – every component should be thoroughly checked by a specialist beyond a general home inspection,” Ameer said. “By bringing in multiple experts to check out the roof, foundation, systems, etc. you can hopefully avoid surprises or at least minimize them.”
Read The Sellers’ Disclosures:
No buyers should go off of what they see alone. Giacobbi advises thoroughly reading all disclosures and insurance claims for at least five years. You also need to go over titles to ensure that you’re not inadvertently getting unresolved liens with the purchase.
“The buyer should examine the title report to make sure that any liens will be removed and also that there are no easements on the land that will affect the way the buyer plans to use the property,” Giaccobi said.
Go Back Years:
Older properties and damage often go hand in hand. Along with regular signs of age-related decay, you also need to check for foundations, construction that aligned to past building codes and any fixes that previous owners may have made.
“Older homes tend to have off-grade foundations and the floors may not be flush and appear to slope to some degree,” Ameer said. ” There could be structural issues with the foundations underneath.”
Do Not Rush:
There are few things worse than making a financial commitment without knowing what you’re getting into. A good agent should not push a sale but rather be upfront and encourage hir or her clients to weigh the pros and cons of buying a house as-is. Just because a seller isn’t bothered by necessary repairs now does not mean that it won’t become a problem later.
Be Prepared For A Risk:
If you have weighed the pros and cons and decided to make the purchase anyway, be prepared to invest time and money into the property. It could turn into a cheap and easy investment or, even after putting in high-quality repairs, you can end up struggling to find tenants.
“You have to look at the current competition, comparable sales, current state of the market, as well as what the buyer expectations in the area are,” Ameer said. “Repairs can often be hesitation points for a buyer.”
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