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It all depends on how motivated the seller is. You want to buy the house for almost 20% less than the list price. It all depends on if $365K is a realistic price. Are there multiple offers, how strong of a buyer are you? With regards to the condition, get a competent home inspector, preferably a licensed contractor. By the way, if you have an inspector that's a contractor and he does repairs, that would be a conflict in my opinion.
I've been working with buyers specifically looking in the Cenral Area as well. There is a wide spectrum of "fixers" in the area - some in need of some cosmetic work, and some in need of significant structural repair. Don't be afraid to spend the money up front for the inspections, by multiple specialists as well. If it's a old home, I'd also do a sewer scope (costs roughly $150-$200). I know many fixers in the area are also short sales - so negotiating hard up front is key. Most banks sell the property "as is" and won't give concessions based on an inspection. I just had a client utilize the new re-hab loan offered via FHA. It's a TON of work to get the approval, so you should be aware of that as well.
If you have not partnered with a Realtor, you must do that. It doesn't cost the buyer anything, and an experienced, knowledgeable Realtor can ensure you are protected from a contractual prospective.
Good Luck! (and feel free to email me if you have any other questions)
--Rebecca
Since November 2009
Fixer uppers can be a good deal or a money pit. Taking a professional contractor to look over the property with you to give you numbers for fix up is definitely advisable. I would say to do this before an offer, especially with your being a first time buyer. And, you can use the repairs needed to negotiate the price. To determine if it is a good deal, ask your agent for comparable homes sold within the last 3 to 6 months in good condition. Take the completed value less the cost for repairs and a percentage of profit you would want for your time and effort to come down to a bid amount. Focus on the exit strategy that if you would need to sell within a short timeframe, say 1 to 2 years from purchase, you would still make money on the property. Still put a home inspection clause in the agreement to make sure your contractor did not miss anything. Best of luck.
Since October 2009
Lots of good advice here. I would second Barry's comments about having an inspection. Have the inspector prioritize the repairs needed in order of cost, and have them discuss the work involved to do the repairs so you know what you are getting into.
Realtor.org and Remodeling Magazine put out a great annual report called "Cost vs. Value Report" that shows what percentage you can expect to recoup from various upgrades based on where you are located if you sell it right after they are completed. That might help you determine what projects make more sense.
First you should definately do an inspection. The sellers most likely will do no work but you should know all of the issues of the home so you go in with your eyes wide open. You might decide to terminate based on what you find. An additional inspection you may want to consider is a sewer scope. A camera is run down the sewer line to check for breaks. This is a very expensive repair.
If you are getting an FHA loan you will have difficulty closing the loan as the FHA appraiser is going to require that the home be in a certain condition. The seller is most likely not willing to get the home in a condition suitable to the lender. A conventional loan with a higher down payment will be an easier road.
My experience with home projects is that it always takes much more time and money to do the project than you plan for so you should be prepared for that.
There are fixers and then there are homes that need updating. That would be an easier transaction to complete from the lender side.
Lender rating
Since October 2009
mnikishyn-
A fixer upper is only contingent upon an inspection if you include it in your offer (and the seller has no obligation to fix anything, regardless of the inspection results).
However, your lender's appraisal may require necessary repairs be made on the house in order for you to secure the loan, but again, the seller does not have to make any repairs. Unless the seller is willing to complete the lender's required work order, the sale will fail.
It is important for you to work with your own agent who is working for you. Not using an agent will not save you any money, the commission structure is set whether you hire your own agent or not. If you choose not to work with a buyer's agent, you will lose the benefit of having your own professional advocate during negotiations and have to rely on the advice of the agent who works for the seller.
Good luck! (Feel free to drop me a line or give me a call, I can help!)
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Looking at a fixer upper in Central Seattle. As a first time buyer, what do I watch out for?
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mnikishyn
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