Buying a home is a major life decision. Long before you are at the point of viewing various homes for sale, there are things you should consider. One of the threshold issues is which of these two options suits your unique situation better: buying a fixer-upper home vs. buying a brand new home - the pros and cons. Only after looking at the pros and cons can you decide which option is right for you. Well, this post lays the options out to see if we can help you answer that question.
The pros in favor of buying a fixer-upper.
Fixer-upper real estate ads will say "needs tender loving care". That's a code phrase for "needs work". For some buyers, who like the idea of making a house over into their dream home, the idea of a fixer-upper is enticing even if it means the work will take some time before the home is move-in ready.
- Of course, the price of a fixer-upper is usually a lot lower than the market price the home will command after the fixes bring it up to snuff. The lower price and potential increase in value entices people -- especially in today's economic climate.
- Property taxes are another consideration. Your local taxing authority determines your property taxes based on the sale price of your home. That means your annual property tax is often a lot lower for a fixer-upper than the tax on a move-in ready home. In some cases, the buyer can qualify for an investment tax credit based on rehabilitation costs, too.
- If you love unique design details or architectural details from bygone eras, rehabilitating an older home is just for you.
The cons against buying a fixer-upper.
Well, the obvious argument against buying a fixer-upper is the amount of work involved. If you are not handy yourself, you will need contracted labor to help you make the necessary changes to your home. The professional labor costs are something you will want to keep in mind when you are framing your bid for the home. Also, you will want to consider how much of your time the various projects fixing up the home will entail. You will need to vet the professional laborers and then keep tabs on the ones you hire to see the project completes the way you want. Get a realistic idea of what you are in for with your fixer-upper. Do your research on the average cost for the remodeling you need. And keep a rainy day fund for those surprises that pop-up in every remodeling job. One last caveat: If you work against time (with an expiring lease or you have your current house up for sale), the fixing-up process can fray a few nerves. In some cases, buying a fixer-upper may mean living in the home while remodeling is going on -- amidst all the dust and the noise.
The pros for buying a brand new home.
The first big pro is a no-brainer: no painting, no carpeting, no knocking out walls, no plumbing fixes or electrical problems, no adding rooms or landscaping changes. Just moving in and unpacking boxes. New homes have all the modern conveniences:
- modern appliances, with energy-efficient ratings
- security systems
- wired in cable/internet, and
- the latest in design features like walk-in closets, hardwood floors or wall-to-wall carpets
Not only is life simpler for move-in ready homes but financing is too. Loans for both fixer-uppers and move-in ready units depend on credit history, employment history, down payments, etc. When it comes to the 30-year fixed mortgage, however, the new move-in ready home may have an easier time qualifying for the loan.
The cons against the move-in ready home.
The elephant in this room is the cost, of course. All those modern conveniences and modern design features are why move-in ready homes are more expensive. Instead of you having to pay for the conveniences separately, the developer (or seller) rolls everything into a higher asking price for the home. If you are really into designing your own space, the move-in ready home may not work for you. You can expect restrictions on any redesigning or custom amenities -- unless you can do the work yourself or pay additional money for professionals to remodel. In either case, the redesigns will add to your cost for the home and may or may not increase its value. In addition, the flip-side of the modern design means that newer, ready-made home generally will not have the quaint architectural flourishes on which you may have set your heart. Made your decision? Contact your local lender at First Savings Mortgage and get started.