You’ve found your dream home. You’re ready to finalize all the details, get the keys, and move in. But before you can wrap up the process, some unexpected details about the house come to light: inspections have revealed that the home you were about to buy actually has significant structural damage. Perhaps the damage was caused by a natural disaster, a maintenance issue, or a house fire that got out of control. Either way, you suddenly have second thoughts about the property. Should you take a chance anyway, or will you end up digging yourself into a financial hole? Think about these factors before you purchase a damaged home.
Evaluate the Cost of Repairs
First, Redfin explains that you need to assess the state of the house and estimate the cost of necessary repairs. Sit down with a pen and paper, write down everything that will need to be repaired in order to make the home livable, and research the costs of each individual repair. You may also want to consider landscaping projects.
Tack on an additional 20 percent to your final overall cost estimate, especially if there are issues with the home’s electrical or HVAC systems, if the foundation is structurally unsound, or if the house is harboring hazards such as asbestos or mold.
Analyze the Local Market
Are you buying in a seller’s market where home prices are rising? Buying a fixer-upper might be your best option, even if going through with repairs is pricey and inconvenient. In fact, USAA recommends that house hunters in seller’s markets to be more flexible on what they’re willing to accept. You won’t have much leverage to push for the seller to cover repair costs, but in a competitive market, purchasing a damaged home can sometimes be a sound financial choice.
Look at Your Timeline
Do you need to close on a home and move in right away because you’re starting a new job in the area? If that’s the case, you may be better off putting down an offer on another house. However, what if your schedule for the next few months is actually quite flexible and you’re not in a rush to move in? As long as you have somewhere else to live for the time being, you may still be able to buy the damaged home.
Moving with Kids?
If you’re a parent, buying a damaged home may not be a smart choice. After all, your kids are probably anticipating moving in right away. While you may be able to handle the inconveniences that come with living in a home while it’s being remodeled, it can really throw off your children’s sense of stability. When you have to consider the needs of your children in addition to your own, you will likely come to the conclusion that buying a damaged home is not a smart investment.
The Final Decision
Overall, you need to consider both the costs of renovating a fixer-upper and how this choice would affect your lifestyle. For instance, TransUnion recommends spending no more than 28 percent of your gross monthly income on home payments, and if you’re moving into a damaged home, you’ll have to account for significant ongoing repair costs for at least a few months. But if the numbers check out and you’re willing to make a few sacrifices, then get ready to call some contractors — this investment could work out in your favor.
When you find out that the home you had your heart set on is damaged, it’s normal to feel confused, disappointed, and frustrated. But if you’re in the right financial position, you can make the most of this challenging situation. This doesn’t have to be a setback. Buying a damaged home can be the perfect opportunity to dive into a fulfilling renovation project.
Written by Brittany Fisher
Image by Steve Buissinne from Pixabay