Welcome back everyone to my blog. This week I want to talk about something important, especially with the growing popularity of HGTV and those trendy shows like “Property Brothers,” “Flip or Flop,” or “Fixer Upper.” These shows are great to see the process of where a home is and what it can be after a bunch of remodeling and renovation. The downside of these programs is the fact that they make the whole process seem easy. Another thing to remember is that they are cramming anywhere from 8-12 weeks’ worth of work into a 30-minute episode. Don’t be naive and think that this process is easy. Remember, this is ENTERTAINMENT not real-life. Check out this article from Fox News about the stars of “Flip or Flop.” It looks like they’re catching some heat for offering classes that making the home flipping process easy. You can check out the article here.
I had a few clients this year that told their realtor, “I watch those shows on television, so I know how the negotiation process works.” This is such a huge mistake. First, let me just tell you that when you are buying a home and you hire a realtor, you do not pay that realtor. The best part about it is that they work for you but get paid by the seller. It is literally a win/win situation. They’re negotiating the best possible deal for you and get paid by the seller. This is literally having your cake and eating it too. Another misconception is that people can buy a $50k house and put in $50k worth of renovation and then have a home that is worth $500k. These shows are often filmed in different areas of the country which have a higher cost of living, therefore the prices of these homes are a lot higher than the local market.
If you are looking at buying a home that needs a lot of work, this is what I recommend. Make sure that the home is in decent shape. What I mean by that, is make sure there are no major defects in the home. When obtaining a mortgage, a home must be appraised. Even if you are putting down a substantial down payment, the home still needs to be in acceptable condition. At the end of the day, the home is the collateral for the loan, so the home must be in acceptable condition to the lender. Another thing to remember is that you need to have the renovation money saved up. Not all lenders offer renovation loans, and if they do, the work and renovations must be completed by an approved contractor. Most people don’t realize this and they think that they can do the work themselves and build some “sweat equity.”
Here is what you should do when looking to buy a “fixer-upper.” Do your research and make sure you hire the right realtor to help you find a property that fits your need. (If you need help with this click here and I can put you in contact with some of the area’s best realtors.) Make sure that you have enough money saved up, not only for down payment, but for the renovations as well. Having a realtor with experience in this will help you as well because they can give you advice on roughly how much of a renovation budget you should have. Make sure you are in contact with the right lender so they can give you advice on properties that you are looking at as well. Remember, the realtor and lender are on YOUR team, we want to make sure that this goes as smooth as possible for you.
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