Tell a fixer-upper from a flop

Is that bargain house a diamond in the rough? Or should its next tenant be a wrecking ball?

By MSN Real Estate partner May 22, 2014 1:48PM

© Michael Blann/Getty ImagesBy Michael Corbett, Trulia

 

You want to buy a home, but you don't want to pay 20 percent more for a brand-new home with all the bells and whistles already built in. It just so happens that you're pretty handy and are willing to trade in some "sweat equity" for a great deal on a house that just needs a little TLC. Buying a place that needs some upgrades is a tried and true formula for getting more house for your money. However, not all "fixers" are the same, and not all of them are going to be right one for you.

 

There are houses for sale and in need of repair on every other block. How do you know which one is a potential money maker for you? Most properties that are fixers generally fall into one of these three categories- including the one you want to run far, far away from.

 

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1. The cosmetic fixer

This is the house that just needs a bit of clean-up. The sale price is discounted slightly because the sellers and their agent know that there is work to be done. For whatever reason, the sellers didn't want to invest any more time or money in the house prior to sale. Things like new paint, carpet, countertops, lighting, landscaping and a few new appliances will give this cosmetic fixer the face lift it needs. A few dozen trips to the home-improvement store should do it.

2. The downright-ugly fixer

It may be downright ugly, but it is beautiful to you. It has all the right things wrong with it. This is the fixer that needs more extensive repair and remodeling work than the cosmetic fixer mentioned above. If you can see its potential beauty, and are willing to commit to the work, you will get the deal that others miss.

 

Some hallmarks of a "downright ugly fixer":

  • No current curb appeal: It's easy to create with fresh front-door paint, new house numbers, mailbox, flowering plants and fresh landscaping
  • Great bones in bad shape: Good construction and architectural lines that have been underutilized or unaccentuated
  • Dark interiors cloaked in ugly decor: These turn off other buyers, but this is gone as soon as the moving vans pull away with the seller's possessions
  • Outdated kitchens: Upgrading your kitchen will be one of the biggest expenses, however, it gives you the biggest return on your dollar
  • Outdated bathrooms: There are so many great options for bathroom upgrades now at your local home-improvement store. You may need to bring in a plumber and tile guy but it will be worth the effort.
  • A house with pets, smokers or other bad smells: Nasty smells aplenty turn off other home shoppers, but a revamp of carpets and drapes and new paint will usually take care of that smelly issue.
  • Leaks in the roof and a water-stained ceiling: These can really turn away potential buyers – but you will most likely be putting on a new roof, so that will usually eliminate the source of the problem
  • Lots of small rooms, creating a choppy or claustrophobic feeling: Look for potential to remove a nonloadbearing wall that could open up a kitchen to a living room or den, giving you that all desirable open floor plan.

 

3. The fixer tear-down

When I say "a house with the wrong things wrong," this is the one I mean. This "tear down" house with "broken bones" is the money pit you must run from. If a house has major structural, geological, or severe foundation or environmental problems, you don't want it. I repeat – you don't want it. Even if you get the house on the cheap, some problems never go away and are sometimes impossible to fix, no matter how much money you throw at them. This is a Pandora's box you do not want to open, because you will never see that money back.

Some telltale signs of a tear-down:

  • Structural problems that are beyond repair economically
  • Major shifting due to poor foundation work
  • Unsolvable drainage issues and flooding of the basement
  • Illegal room additions that appear to be not to code, especially bathrooms
  • Major fire, earthquake or flood damage
  • An unstable hillside near the house or slipping or shifting due to soil erosion or flooding
  • Overwhelming asbestos or severe mold issues

 

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23Comments
Jun 8, 2014 7:08AM
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We have posted this before however our friends and neighbors were amazed at the results. We owned a 30 year old home in need of major updating as well as more bedrooms and at least one more bath. We are a large family and wanted space for relatives to visit and not sleep on the floor and/or couches. living in greater Phoenix many of our visitors would come for a week to a month in the winter. We literally tore down our home and built a new one. After all bids were in, tear down and build new was the least expensive and fastest option. Whole process was accomplished in 5 months from tear down to moving back in. We have friends who have done remodeling going way over budget as well as taking way more time than quoted.
Jun 8, 2014 7:06AM
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Make sure that the dirt the home is built on and around is stable and perks. Homes can be fixed, dirt can't.
Jun 8, 2014 2:36AM
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Most homes have many of these problems including new homes. Most of the best building sites have been taken, and builders are building on marginal or even bad sites. Buyer and homeowner beware. Beware Tela beware. 
May 23, 2014 9:20AM
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With the rise of PEX plastic water lines, I have found that any good DIYer can update bad plumbing for a few hundred dollars. Bypass the existing corroded copper or galvanized by hitting the main line outside the house and run this flexible plastic in the attic or crawlspace in new branches to each "wet room" of the house. One does not even have to buy an expensive "manifold" to hook into. I made my own with brass Tees since I only had 4 rooms to connect - 6 tees total - 3 hot, 3 cold. Clean, clear uncontaminated water...my best investment.
May 23, 2014 7:59AM
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My husband and I bought "the downright-ugly fixer." The house is over 100 years old, but it's still structurally sound and has lots of character and charm. We're not just redecorating and repainting the place. We're trying to restore it as much as we can. The work involved in renovating the house ourselves has been a bit overwhelming at times, but we have no regrets so far. Going into this, we knew it would be a long-term project involving a lot of work. But, I can understand why a lot of people would pass on homes like ours.
May 23, 2014 5:57AM
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I used to like the "buy an army barracks for a $1 deal". All one had to do was remove it down to the concrete pad and be done. Not much work involved. It was all wood, windows, and a little electrical wiring, and some plumbing fixtures.
May 23, 2014 5:55AM
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I have been fighting with the bank for over 4 years now to keep my home after I lost my job of 10 years.  I now have a good paying, stable job and they still won't budge in working with me.  Well they will be surprised at what they find once they finally evict us.  We just had flooding (which they did not insure; we had to do all the cleanup and recovery), the electrical is outdated, everything leaks, the kitchen is outdated, the foundation is doing something because my laundry room wall is separating from the ledge attached to the front of it.  It's definitely a tear down.  The banks get bailed out by the taxpayers, but they won't work with a family with children.  My husband and I both have good paying, stable jobs and they still won't work with us.  Once they evict us (all our money is in that house and we would have fixed everything had we been able to stay), their appraiser will be giving them bad news.  I get that they need to protect their investment but I don't get why they would fight so long and so hard against a family with children, especially when the parents have good paying, stable jobs.  Good luck, U.S. Bank, when you try to sell the house.  I hope you get some money for it because you have fought a long battle with me and my children. 
May 23, 2014 5:13AM
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The advice is pretty good.  Nothing substitutes for experience, however.  Inexperienced buyers should invest in a professional to do a thorough home inspection.  Nowadays, with most homes built on slab foundations instead of raised foundations it is vital to make sure they are in good condition.
May 23, 2014 3:44AM
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I have bough a few that were condemned,  for the value of the land less the cost to remove the house.  Then I resurrected the house anyway and made a fat profit.
There are no hard and fast rules,  just advice that is offered to amateurs who might not have any idea what they are getting into.
In the end,  the stopper could be a bank and its appraiser.  If they won't lend on it,  you've either got a heavily discountable cash sale property for another investor,  or a long term rental.

May 23, 2014 2:22AM
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If in doubt get a reasonably priced home inspection. Tell the inspector you need their advice and estimated prices for various improvements or upgrades. You'll need it to qualify for a mortgage anyway. This is the time to move with caution.
May 23, 2014 2:09AM
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Damn. When I read the teaser, "Tell a fixer-upper from a flop", I thought this was an article on relationships. My bad.
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Some peoples trash is another's gold mine. Like anything else, you have to know what you are getting into.
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