Buying or Selling a Northern Virginia or
Washington, D.C. "Fixer-Upper?"

Summary:
The oft heard phrase "Buyer Beware!" is never more appropriate than when you're considering the purchase of a fixer-upper.  You really need to know exactly what you’re getting into before buying.  If you're selling, it's probably not as easy as you think.

Detail:
Buyers often mistakenly believe that fixer-upper properties represent easy money -- 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.  However, with proper planning and foresight, it is possible to make a profit from some "distressed" properties if they are bought at less than market value and have appropriate improvements and repairs made before re-selling.  For many first-time buyers who intend to live in the house while working on it, remember you're LIVING IN THE HOUSE while fixing it!  Ask yourself, "Can I stand it?"

The most important thing to know before making a decision on such a purchase is what needs to be fixed and how much it will cost.  Any time you are spending money to improve a home with the notion of selling it later, strive to spend your money on things that buyers can easily see and that improve the home's function.  Things like new paint and removing trash from the property cost little, but have instant impact on curb appeal.  Updating kitchen and bathrooms gives some of the best returns on investment; you may also need to update the heating and cooling systerms, water heater, and windows.  Houses that have only cosmetic problems usually give you a good return on investment, particularly when you can do the work yourself.  However, properties with structural damage, or a floor plan that requires major work to remedy, usually can’t be "fixed up" at a profit by the do-it-yourselfer; you need professionals to help you.

Always have an inspection with a home inspector or construction professional before buying a fixer-upper to understand current and potential issues.  Make sure that satisfactory completion of such inspections is a condition of purchase in any contract you sign. 

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 profit. Research the market for re-selling and have a plan for selling the house in place before making an offer. 

Fixer-uppers can also be a challenge when it comes to financing the purchase.  If you're planning an all-cash offer, no problem.  If you need a bank loan, however, be ready for close scrutiny of the property by the appraiser and loan underwriter.  If the property is deemed either as "unsafe" or "not habitable" in its current condition -- even if it's a strictly "as is" sale -- you'll be stuck unless the seller agrees to make repairs to the property to get your sale approved which they likely will not do.  VA and FHA loans are especially difficult for "fixer-uppers;" FHA does offer their 203(k) loan program, but it takes extra time and effort to qualify and get approval for these loans.  Be aware that some loans and lenders also have rules and timetables regarding the re-sale of flipped properties; this affects both buyers and sellers.

If you own a fixer-upper or distressed property that you're considering selling, review the property to make sure that it's at least in fair condition with utilities working, no exposed wires, basic bath and kitchen fixtures operating, heat, etc.  If you don't take care of this when you put the home on the market, you'll have to do it to get the buyer's loan approved -- unless you're lucky enough to have an all-cash buyer.

If you're seriously considering buying or selling a fixer-upper or otherwise distressed property, I'd be glad to work with you.  Please contact me to discuss your plans and options.