Fixer-Uppers

A. Contractors/Investors/Home Repair Experts:

NCaHome's 1Listing Program makes sense for contractors. Why give a huge percentage of your profits to a real estate agent? A traditional 2.5% or 3% commission is based on the home's sale price, but is paid out of Seller's gain. For example, if a house sells for $500,000, and Seller's net proceeds (gain) is 10% ($50,000), then a 3% commission ($15,000) actually represents 30% of Seller's gain! Using the 1Listing Program saves commissions. 

B. Owner-Occupied Fixers:

The phrase "Buyer Beware" is never more appropriate than when considering the purchase of a fixer-upper.You really need to know exactly what you’re getting into before buying.

It’s commonly believed that fixer-upper properties represent easy money that is ripe for the taking - that you can buy it, do a little work on it in your spare time, and then resell quickly for a large profit.  Usually, this simply isn't the case. Although, with proper planning and foresight, good profits can be made by buying fixers at less than market value, making appropriate improvements and repairs, and then reselling.  And for many first time buyers who intend to live in the house while working on it, buying a fixer-upper can be the very best option. It’s less risky buying a fixer-upper when you can live in the house while fixing it. And of course, by living in the house for at least 24 months you should be able to avoid paying regular income taxes on the profits.

The most important thing to know before making a decision on such a purchase is what needs to be fixed. Any time you are spending money on improving a home with the notion of selling it later, strive to spend your money on things that buyers can easily see. Things like new paint and removing trash from the property cost little but have instant impact on curb appeal. Houses that have only cosmetic problems like peeling paint, a trashy yard, bad carpet or wallpaper are the best bet. This is especially true for the first time buyer looking to live in the house for a while before reselling. Fixing and cleaning cosmetic issues is fairly easy and inexpensive. It virtually always gives gives a good return on investment, particularly when you can do the work yourself. Kitchen and bathroom remodeling usually pays a nice return. Don’t be afraid of buying a fixer-upper in need of this kind of repair. Properties with structural damage, or a floor plan that requires major work to remedy, usually can’t be "fixed up" at a profit. 

Always have an inspection for hidden damage performed by a home inspector or construction professional before buying a fixer-upper. Make sure that satisfactory completion of such inspections are a condition of purchase in any contract you sign. Then be sure to negotiate to try and get the seller to pay for all or part of the cost of needed repairs uncovered by the inspection.  Sellers will be willing to lower the sales price to sell the home "AS IS" instead of paying for the repairs, but sometimes "AS IS" is improperly used by Sellers to disguise serious defects. However in California, "AS IS" has been statutorily modified through required disclosures to really mean "AS Disclosed". Except for estate and trust conveyances, foreclosures, and certain other statutory exceptions, there is no such thing as a true "AS IS" sale.

Be careful that you don’t over pay. Especially if you plan to resell quickly, paying too much up front can doom your plans for quick profit. Research the market for reselling and have an exit plan for selling the house in place before making an offer.

Don't buy a fixer in a neighborhood that isn't selling. Don't buy a fixer where the whole block is comprised of fixers. The ideal neighborhood to buy into is one where the fixer is the worst house on the block, and all of the other homes are well-maintained. Often it's the neighborhood where the fixer is located that determines whether certain repairs or improvements can realistically add value on a resale. 

Finally, use common sense - "bargain-shopping" for fixer-upper real estate can become an expensive lesson of "You get what you pay for."