Interest in distressed homes continues to grow. Often referred to by the term "fixer-upper", these homes have usually been the victim of serious neglect or damage that affects their ability to compete with homes that are ready for occupancy. Many distressed homes are bought by real estate investors who have the resources and knowledge to renovate them in a cost-effective manner, but many buyers are now seeking them out with plans to renovate them as owner-occupants. If you are planning to purchase a home soon and wondering if a fixer-upper is right for you, the following information can help you make the right choice.
The time factor
Homes that are ready for occupancy typically require only a few short weeks to move through the steps of the purchase contract, including negotiations, inspections, and closing. In contrast, a distressed home purchase can take much longer to close. These delays can be caused by several factors, including whether the home is owned by a local bank or is considered to be an REO property. Additionally, some distressed homes may still be occupied by squatters or even their former owners and removing them may take court orders or other solutions that can take time to arrange.
The inconvenience factor
When buying a distressed property that will need to be renovated, home buyers often find that they are forced to remain in their current home or rent another one while the work is being done. This can lead to significant inconvenience and additional expense that the buyer must be willing to accept if considering this type of home purchase.
The money factor
Many of the most commonly used loans, such as FHA and USDA Rural Development Home Loans, require the home being purchased meet specific guidelines for health, condition, and safety at the time of purchase. Since most distressed properties are unable to meet these mortgage conditions, buyers must either have cash to pay for the home or be able to qualify for a construction loan or the FHA 203k rehab loan that is specifically designed for the purchase of homes that will need repairs or renovations before the new owners are able to move in.
To find out more about distressed homes and whether there are any in your area that might be a good option for your housing situation, ask your real estate professional for expert guidance. In addition to helping your find willing lenders and the best repair contractors, your agent will be able to help you navigate the sometimes difficult distressed home purchasing process.Share