8 Things You Need to Do After Closing a Real Estate Deal

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After searching for a new home, negotiating an offer, and going through escrow, buyers are aware of the steps that need to be taken to ensure a successful transaction. But the work isn’t over just yet. As soon as you get the keys to your new abode, there are a few things that need to be tackled before you kick your feet up.

Here are 8 things you should do right after your real estate deal closes.

1. Store Your Closing Documents in a Safe Place

All the documents that you signed at closing should be secured in a safe place to prevent theft or destruction. Make copies of the originals and store them each in separate areas. Keep the photocopies in a robust filing cabinet that locks, and the originals in a safety deposit box at your bank. You can also choose to store them virtually on a cloud-based website or software like Dropbox. That way you’ll still have easy access to them while keeping them safe at the same time.

2. Change the Locks

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Many buyers don’t think to change the locks after they get possession of their new home, but this is a task that should be done for security purposes. While one of the contingencies in a real estate contract is for all the house keys to be provided to the buyer at closing, there’s no way of knowing whether a key or has been copied and retained by the seller.

You may also want to consider installing keypads on all of your exterior doors rather than just changing the locks. This smart home feature is becoming increasingly popular and allows you to gain access to your home without a key. You can always change the code whenever you wish to increase security measures on your home. If the home already came with a keypad, you’ll obviously want to change the code immediately after moving in.

3. Inform People and Companies About Your New Address

Once the deal closes and you move from your old home into your new one, you will need to get in touch with important companies to inform them of your new mailing address. This list can be rather lengthy, and can include the following:

  • United States Postal Service (USPS)
  • Work
  • IRS
  • Bank
  • Insurance company
  • Phone, internet, and cable company
  • School
  • Department of Motor Vehicles (DMV)
  • Place of worship
  • Medical offices (doctor, dentist, etc)
  • Accountant
  • Newspaper

Of course, you’ll also want to keep your friends and family in the loop of your new address so they know where to go to visit you for your housewarming party!

4. Give the Home a Deep Cleaning

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While your real estate contract might stipulate that the sellers must leave the home free of debris, they likely won’t be giving the place a good scrub-down before they vacate. As such, you should have the home deep-cleaned before you even move your belongings in.

That includes washing all the windows, steam cleaning the carpets, mopping the floors, washing the drapery, cleaning the appliances, scrubbing tile grout, and cleaning out the gutters. You might even want to go so far as to wash the walls, especially if the previous owner was a smoker. To really freshen things up, go the extra mile and give the walls and ceilings a fresh coat of paint.

5. Locate the Main Water Shutoff

You’ll definitely want to know where the main water shutoff valve is if you ever experience a broken water pipe. Every second matters when it comes to the amount of damage that open water can cause, so the quicker you can shut off the main source of water, the better. Not only should you ask where this water shut-off valve is, you should also test it to make sure it actually works.

6. Consider Improving the Home’s Energy Efficiency

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If you’re buying an older home, odds are it’s not very energy efficient if the sellers have never made any improvements. There’s a lot of money that can be saved on your utility bills every month and every year, so it may be worth your time and money to have an energy audit conducted to identify any areas in your home that are wasting energy – and therefore wasting your money.

Professional energy auditors will scope out your home, pinpoint areas that require attention, and make recommendations on how to rectify any issues to help save energy and keep more money in your pocket.

7. Look Into Tax Credits and Deductions

Many first-time buyers aren’t aware that they can take advantage of some tax credits and deductions when buying a home. In California, first-time homebuyers have several tax credits that they can tap into.

The Mortgage Credit Certificate (MCC) tax credit program allows first-time homebuyers to deduct a portion of mortgage interest that was paid directly from federal taxes that they owed. This tax credit is equal to 20% of mortgage interest that is paid during the year. If this is itemized on your tax return, you can still take a deduction for the remaining 80% interest that was paid.

8. Go Out and Meet the Neighbors!

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It’s nice to get to know the neighbors who you will be living amongst after you move into your new home. While you don’t necessarily have to be best friends with everyone on your block, it’s still a good idea to be able to rely on each other to keep the neighborhood safe, report any suspicious activity, and even have contact information in the case of an emergency.

The Bottom Line

After escrow closes, you probably just want to move your belongings in and start enjoying life in your new home. You certainly can, but there are certain tasks that need to be done right away to help maximize your enjoyment of your new place. Being a homeowner comes with new responsibilities, many of which should be taken care of immediately following the closing of the deal.

Three Things That Can Happen After Putting an Offer on a Home

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After searching for the perfect place to call home, you finally find one that perfectly suits your family and lifestyle. You decide to put in an offer and cross your fingers that all goes well at the negotiating table. Of course, an offer should only be submitted after careful consideration of the offer price, earnest deposit amount, and closing date, among other things. The seller will certainly carefully analyze all aspects of the offer before making their move.

So, what happens after you’ve put in an offer on a home?

Your Offer is Countered

This is a typical scenario in an offer situation. Sellers can counter an offer based on more than just upping the purchase price. They can also counter based on things like the closing date, contingencies, earnest deposit, and so on. If the seller counters your offer for whatever reason, you have another shot at offering closer to what they’re looking for.

If you’re fine with what the seller countered with, you can accept the offer and the deal now enters escrow. On the other hand, if you don’t like the counteroffer and want to counter yourself, you’re free to do so. You and your real estate agent should carefully review the counter offer before deciding upon the changes that you end up making.

Keep in mind that once you counter the offer and submit it to the seller, you’re obligated to go through with the contract if the sellers accept your counter offer. That’s why it’s critical to make sure you’re fine with the offer that you make. 

This back-and-forth bantering can go on and on until someone accepts or rejects the offer.

Your Offer is Rejected

Sometimes sellers don’t even bother with a counter offer if they don’t like what they see and reject it altogether. This can happen if sellers are offended or upset about a low-ball offer, but it can also happen if there are far too many contingencies or the closing date is way out of their range, for instance.

If this happens to you, stop and re-evaluate your offer. If you’re still keen in the home and aren’t ready to give up on it just yet, you can submit a new offer a few days later after the dust has settled. Just make sure that it accurately reflects a price that matches the home’s current market value. Submit a list of comparables with your offer as proof that what you’re offering is fair.

Of course, you can always just move on and continue with your search until you reach a successful deal, as the price gap between what you’re willing to pay and what the seller is willing to take is probably too wide to bridge. There will always be other homes out there that you’ll love that can suit your needs.

Your Offer is Accepted

This is precisely what every buyer wants. Now all you need to do is cover all your bases during the escrow process to make sure the deal successfully closes. This is the exciting part! But, it’s also the start of a whole new phase of tasks for you to complete.

For starters, you’ll need to make sure you have your financing in order. Send your lender a copy of your purchase agreement and submit all the requested documents needed to get the ball rolling for mortgage approval. You will also need to secure homeowners’ insurance before your lender approves your home loan, so get on the phone with an insurance provider to put a policy into effect by the time closing day arrives.

You’ll then want to schedule a home inspection (if you’ve inserted a contingency that allows for this, which you should have). This will give you the chance to see if there is anything potentially wrong with the home that would warrant renegotiation. Or else, you could walk away from the deal altogether.

Lastly, conduct a final walk-through. Your real estate contract should include a contingency that allows you to scope out the property one last time right before closing day to make sure the home is in the exact same condition that it was in before you agreed to purchase it and that everything is where it’s supposed to be.

The Bottom Line

Ultimately, the goal is to get the seller to accept your offer. Whether that happens right off the bat or after countless back-and-forth counter offers, both parties inevitably want to end up with a deal they’re satisfied with. Your best bet is to work closely with an experienced real estate agent who will provide you with sound advice about how to optimally draft an offer that the seller will accept, as long as you’re comfortable with it.

What to Focus on When Remodeling Your Kitchen Before Selling

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Fixing up your home is a great idea when you’ve decided to put your home on the market. However, you need to be careful with the types of projects you take on and what you decide to invest your time and money in. While some projects may bring in a high ROI, many others won’t let you recoup all that money spent.

It’s widely known that the kitchen is undoubtedly one of the most important spaces in a home, if not the most important. As such, it would be worth it to focus on this room when planning any remodeling.

Having said that, you can take things a little too far and have a huge renovation done that involves completely gutting the space to create a brand new one. But these in-depth projects are typically very expensive and will likely make your ROI suffer. In fact, you even stand the chance of lowering the value of your home if you “over-improve” your kitchen if the neighborhood doesn’t call for it.

To make the most of remodeling your kitchen, consider the following.

Focus on Things That Will Ensure a Higher ROI

Obviously, the higher the ROI on the improvements you make in your kitchen, the better. Ideally, the upgrades you make should bring in the highest ROI possible. For instance, there’s no point spending money redoing the floors if your counters are out of style and in rough shape.

Find out exactly what prospective buyers in your area are looking for and expect in a home, and focus on that. If they like granite counters, give them that. If they’re not fond of white appliances, replace them with stainless steel ones. Come up with a clear budget with your contractor, and find out exactly what type of improvements would help sell your home.

Replace or Reface the Cabinets

Kitchen cabinets are important features to consider revamping, especially since they’re at eye-level and take up a lot surface area. While you could replace them altogether, you would spend a lot less money just sanding them down and refacing them, which can have a similar effect at a fraction of the price. This is definitely a job you want to do if your cabinets are in rough shape or are made of outdated material.

Replace the Hardware

It’s amazing how much of an impact seemingly understated components like knobs and handles can make in a kitchen. If your kitchen currently has out-of-date hardware, like gold- or bronze-plated knobs, swap them for something more updated.

Install a New Sink and Faucet

Again, a kitchen component that’s often overlooked is the sink and faucet. There are tons of new models available that are very stylish and much more efficient. You can easily replace yours on your own.

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Go With Granite

If your counters are currently made out of some sort of cheap, outdated material – such as vinyl or laminate – you’ll definitely want to get rid fo them in favor of granite. In fact, buyers have come to expect granite counters when they’re on the hunt for a new home. Regardless of what price point your home is listed at, buyers want granite on kitchen countertops.

The good news is that granite has come down a great deal in price. You no longer have to pay a premium for this natural stone, so it’s actually a rather cost-effective way to update your kitchen.

Create an Open Concept

Buyers will be impressed if they see a spacious kitchen that’s open to the living area. This encourages easier interaction when entertaining and also helps parents keep a closer eye on their little ones who are playing or watching TV in the living room.

If your budget permits, look into knocking down a wall to open up the living space with the kitchen. If it’s a load-bearing wall, you may still be able to open the space up by incorporating a column. If that’s not possible, have a chat with your contractor to see if you can brainstorm a way to revamp your kitchen to allow for more space and better flow.

Add Some Updated Lighting

When homeowners think of components of the kitchen that could use an update, lighting is often last on the list. Yet lighting can make a massive difference in the look and feel of this space, which is why this is certainly an important area to consider improving.

When it comes to the kitchen, layering is key. Add pot lights throughout to illuminate the entire space, and add dimmer switches so you can adjust the brightness as needed. If you have an island, hang pendant lights over top. Add some under-cabinet lighting to enhance the ambience and provide task lighting for meal preparation.

The Bottom Line

Buyers will certainly place a lot of weight on your kitchen when deciding if your home is the right one to put an offer on. Depending on the state of your kitchen, you can get away with doing much smaller-scale – and less expensive – jobs that will bring in the highest ROI. Keep the above tips in mind before you start taking hammer to nail.

The Ins and Outs of Signing a Listing Agreement

Selling a home is a lot easier and more streamlined when you’ve got a professional real estate agent blazing a trail for you and ensuring all items on the list are checked off. After you’ve chosen the right agent to market and sell your home, you’ll both sign a listing agreement, and in California, this document is referred to as the Residential Listing Agreement.

But before you enter a listing agreement with your real estate agent, it’s in your best interests to understand exactly what you’re signing, since this is a legally binding contract.

So, what’s included in a listing agreement?

signingagreement Expiry Date

Your listing agreement is not binding forever. There will be an expiry date stipulated somewhere in the contract that specifies how long the agreement is in effect. This can be as long as six months or even longer if you agree to it.

Having said that, it’s usually best for you if the time frame is shorter. That way you’ll be off the hook sooner rather than later if you’re not happy with your agent’s work. Of course, you can always renew the agreement after the expiry date comes and goes.

Commission Paid to Your Agent

Your real estate contract will specify exactly how your real estate agent will be compensated for the work they’ve done with the transaction. Usually, agents are paid a percentage of the sale price of the home, or a commission. While this number can be negotiated, it’s typically in the 5% to 6% range. However, there may be some instances where agents are paid a flat rate for their services, though this isn’t typical.

Exclusive Right to Sell

This section of the contract specifies the exclusive right that your real estate agent has to sell your home before your contract expires. While there are other types of arrangements with a real estate agent that are possible, your agent will likely prefer an exclusive arrangement. An exclusive right to sell basically means that regardless of who buys the home, your agent will get the listing commission.

exclusiverighttosell Protection Clause

As stated above, your listing agreement will contain an expiry date. However, it will probably also contain a protection clause that protects your real estate agent. Some buyers may attempt to avoid paying their agent’s commission by finding a buyer on your own while still bound to your Listing Agreement. They then wait until after the contract expires to sell to that buyer. A protection clause will help your agent recoup their owed commission in a case like this.

Fiduciary Duties

The Listing Agreement will detail the fiduciary duty that your agent has to you while you’re being represented under contract. The agreement will specify what the agent is permitted to do on your behalf. This can include things such as posting your property on the Multiple Listing Service (MLS), making a listing sheet with details of your property, and so forth.

The agreement will also list the duties that agents are obligated to follow through with while representing you throughout the duration of the contract. These typically include loyalty, confidentiality, disclosure, obedience, accounting, and reasonable care.

How Disputes Are to Be Resolved

If there is an issue between you and your agent, your listing Agreement will specify how disputes are to be resolved. If you feel that your agent is not fulfilling his or her duty, you can first ask if you can be let out of the contract. Many time agents are willing to dissolve the contract with little issue.

If you want to list your home with another agent, you will have to ask for an Unconditional Release, which differs from just getting your listing off the MLS. After you’ve been released, you can sign on with another agent.

disputesThe Bottom Line

A listing agreement is an important document in the sales process because it outlines all the terms involved in the transaction, and basically protects both you and your agent. It lists all the agreement terms, such as the listing price, listing time period, agent commission, and legal requirements that are involved in the transaction.

But this is a legal contract, and as such, you’ll be bound to it under the law after signing it. Like any other type of contract, it’s always best to fully understand precisely what’s in the document before signing on the dotted line.contract

Can You Sell Your Home With a Lien On it?

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The home selling process is an intricate one that involves a number of steps and contingencies. One of the more common processes involved in a real estate transaction is a title search, which is conducted to ensure that the person who is selling the property actually has the legal right to do so.

But a title search also reveals if there are any liens or encumbrances on the property, and if there are, they could be problematic for sellers.

The question is, can you still sell your home is there’s currently a lien on it?

What Exactly is a Lien?

Essentially, a lien is a public record that’s filed in county records for actual property. Lenders and creditors use liens on real estate to collect money that consumers owe them for various reasons. When a debtor fails to make payments on a loan, invoice, taxes, legal judgments, or other type of debt, a creditor can sue the debtor and place a real estate lien on the debtor’s property.

Liens are attached to the actual property title – not the debtor. So, when the home is sold, the lien stays with the property title when ownership is transferred to the buyer.

The Problem With Liens When Selling

If there is a lien on your home, many mortgage brokers won’t approve financing for the buyer to purchase it. That’s because there’s an added level of risk for the lender, which is why they usually require a title search on the subject property before a home loan is approved.

Already-recorded liens have priority over any other liens that are recorded afterward. As such, a new mortgage would mean the lender would have to record a second lien on the property, which takes a back seat to the liens that are already on title. If the owner of the home defaults on the mortgage, the lender would have little recourse to recoup their losses.

Because of this higher risk, the lender will likely not approve a home loan for the buyer. In cases where lenders do extend a mortgage for a property with a lien recorded on title, the interest rate will likely be much higher. Other loan terms may also be adjusted to accommodate for the added level of risk, such as the requirement for shorter repayment terms.

It’s Still Possible to Sell Your Home With a Lien on Title

While not ideal, it’s still possible to sell your home if it’s got a lien it. You would have to sell it in “as is” condition and would have to find a buyer who would be willing to purchase it with a judgment against it.

It should be noted that not all liens are created equal, and need to be dealt with in their own specific way:

• Property tax liens

• IRS tax liens

• Judgment liens

• Contractor liens

• Mortgage liens

You should look into working with an expert who will get in touch with the lien holder to see if they would be willing to negotiate for a release of the lien, at least partially. While you are typically obligated to pay off a lien before it can be removed, you might be able to offer creditors some other form of collateral other than cash.

If not, the lien will have to be paid for at closing, and the amount paid can come from your sale proceeds. Ideally, there would be enough equity to cover the price of the lien, because it will need to be paid in order for the new buyers to obtain clear title. Your agent should be able to provide you with an estimated settlement statement so you’ll have a clear indication of what your bottom line will look like.

The Bottom Line

Selling a home with an unpaid lien on it will certainly pose a real challenge for you. It can already be tough to find a qualified buyer who is willing to pay you what your home is worth while agreeing to all other terms of our real estate contract. But finding one who’s open to assuming title on your property even though there is still a lien on it can be even tougher.

Having said that, you don’t necessarily have to come up with the cash upfront to pay off your lien. Instead, the money needed to make good on your debt can come from the proceeds of the sale. Hopefully, the amount you sell for will be more than enough to cover the costs of the lien pay-off and still leave money left over to pay all of your closing costs.

Luxury Pool Design Trends For 2017

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Thinking of putting in a pool in your backyard? You’ve got a lot of options to choose from. Modern pool design is constantly evolving as homeowners’ tastes become more sophisticated and available technologies help improve building and design techniques.

Lately, pool design has been trending in the direction of luxury, and the following ideas are becoming hotter by the day in 2017.

Zero Depth Entry

Also known as a “beach entry,” a zero-depth entry to a pool allows bathers to enter the water gradually rather than having to dunk right in. Like entering beach water, there’s a gradual slope from the surrounding deck into the water. There’s no need for stairs or a ladder to enter or exit.

This is perfect for those with small children who want an area for them to wade in without actually having to get right into the pool, as well as for sun-bathers who want to stay cool while they’re soaking in the sun.

Infinity Edge

This unique pool design concept allows water to spill over the edge of the pool into a basin a couple of feet below by shortening the pool wall. Also called ‘negative edge’ or ‘vanishing edge’, an infinity edge component is fantastic for backyards with a great view.

Pool Shelves

Whether you call it a pool shelf, bench, or tanning ledge, these clever pool design components are simply flat ledges that are usually located at the pool entrance and are about a foot deep. Just place a lounge chair on the shelf or ledge, and enjoy the refreshing water without having to be fully submerged in the pool.

Swim-Up Bar

Combine your outdoor eating area with your pool with a swim-up bar. With this design, the kitchen and pool are placed adjacent to each other so swimmers can make their way over to the dining area without having to get out of the water. This is especially practical if you’re a bit low on outdoor space but still want to enjoy the luxury of both outdoor features.

Fire Bowls

When designed right, a pool can be the focal point of an outdoor oasis and can create a peaceful retreat right in your own backyard. Adding a fire bowl to your pool can provide you with plenty of light for a night swim and even a little cozy warmth during chilly evenings.

Swim Spa

For fitness enthusiasts, a swim spa is a fantastic design component to add to a backyard. They feature jets that add resistance for swimmers to work out against the current, and are also great for water therapy. Swim spas are also ideal for backyards that are short on space as they are typically much smaller than the average swimming pool.

Automation

More and more components of a home are becoming automated, and that extends to the pool. Now you can maintain the water temperature, turn on the pool lights, and check the chemical balance of the water all from your smartphone. Automation allows you to use today’s innovative digital technology to control your pool no matter where you happen to be.

The Bottom Line

Having a pool is becoming increasingly standard these days, especially in warmer climates. But you can easily take your pool to the next level by integrating any one of these luxury pool design trends that are gaining steam into 2017 and beyond. There are so many options available these days to help you create a truly unique and fully customized pool area that you and your family can enjoy for years to come – until the next wave of pool design trends hits!

5 Reasons You Shouldn’t Buy a FSBO Home

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There’s really only one reason why sellers would choose to go the FSBO route – to save money on realtor commissions. Unfortunately, what many of these sellers do not realize is that it’s highly possible to actually wind up wasting money due to costly mistakes made throughout the process that could have otherwise been saved had they hired a professional to help in the first place.

There are tons of reasons why homeowners should not sell their homes on their own, but that’s an entirely different discussion. Here we’ll talk about things that buyers should be wary of when considering a FSBO purchase.

FSBO Sellers Have No Code of Ethics to Follow

Licensed real estate professionals are bound by a specific Code of Ethics as per the National Association of Realtors (NAR), and are trained in certain standards when dealing with the public and their peers. Basically, this Code guides real estate agents in their business and gives their clients peace of mind knowing that these professionals are educated and committed to providing honest, quality service.

A FSBO, on the other hand, has no Code of Ethics to follow. Their commitment is to themselves and to selling their home. Their main objective is to get the most money possible for their property, without always ensuring that anyone else’s best interests are catered to. While not all FSBO’s are necessarily shady, you still don’t have the comfort of knowing that they’re being completely honest and upfront about all aspects of the transaction.

FSBO Sellers Could Withhold Important Disclosures

A professional real estate agent will understand all the necessary documentation and disclosure statements that need to be provided to sellers. By law, homeowners need to disclose the known condition of the home and any repairs and renovations that have been done to the property.

If a new bathroom was installed at some point in the past, for instance, you will want to know if the required permits were pulled before the project started to ensure the work done is adequate and even safe for use. Issues like these will need to be disclosed, and the FSBO seller could give you a hard time obtaining this information either because they are simply unaware that such documentation is required or because they may be trying to hide something.

FSBO Sellers May Be Tough to Negotiate With

When it comes to negotiating the sale of a home, it’s always best to have two unbiased third parties handle the wheeling and dealing on behalf of the buyer and seller. When the seller is directly involved with handling the negotiations by themselves, things can get heated very quickly. After all, they are being tasked with selling their own home, a place where they perhaps raised a family and built memories. Given this fact, they may be a little more challenging to negotiate with, especially when it comes to the purchase price.

Real estate negotiations involve plenty of other complexities aside from just the offer price, and include the closing date, inspections, financial terms, appraisals, and so forth. Ideally, real estate professionals should be the only ones on the front lines handling all this.

FSBO Sellers Could Make the Escrow Process Difficult

Even after an offer is agreed upon, there are still processes that need to be tackled before closing, such as having a home inspection done, obtaining mortgage approval, performing a final walk-through of the property, and so on. While these contingencies should be included in your real estate contract, FSBO’s could still make things difficult for you.

Whether they make it hard for you to book a time slot to have an inspection performed or are hounding you for verification that you’ve been approved for a home loan, dealing with a FSBO rather than a professional real estate agent can be a real nuisance.

FSBO Sellers Might Not Be Serious About Selling

How urgent is the FSBO’s need to sell? It’s quite possible that they may only be testing the waters of the market to see what kind of bites they can get. In the meantime, you could fall in love with a home that the owners aren’t even ready to part with just yet. On the other hand, sellers who hire a real estate professional and sign a Listing Agreement contract with them are likely more serious about selling.

The Bottom Line

Homeowners who go FSBO will most certainly encounter issues along the way, but buyers can also face potentially unpleasant situations when they purchase these owner-listed homes. Your real estate agent will be able to guide you to homes that meet your criteria and are listed with other agents to boost the odds of a much smoother and more professional transaction.

5 Tips For Buying a Fixer Upper

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Buying a fixer upper is a great way to quickly add equity into your home shortly after purchasing it. Rather than paying for the best house on the block that’s already been upgraded as much as it can be, buying a home in need of some serious TLC will provide you with the opportunity to add this extra value to it yourself while benefitting from added equity.

But before you scout out a fixer-upper to buy, keep the following considerations in mind to ensure you don’t wind up with a money pit.

1. Bring a Contractor Along For a Showing

While you will have the chance to bring a home inspector to scope out any major issues with the home after an offer has been accepted and the deal enters escrow (as long as you include a home inspection contingency – more on this later), bringing a contractor with you during a showing can help point out important factors about the property.

For instance, it would be helpful for you to know where any load-bearing walls may be in case you have plans on knocking any walls down to open up the space. It would also be helpful to know what the local by-laws may be about adding another bathroom, building an addition, or finishing an attic to convert it into livable space. A professional and experienced contractor will be able to fill you in on the type of work you may or may not be able to do with the property.

2. Have it Inspected By a Professional

If you’ve decided to buy the home and your offer has been accepted, now’s your opportunity to have a more in-depth look at the property to see if there are any underlying issues that could end up costing you a lot more than you had originally anticipated. Your home inspector will take a closer look at components such as the foundation, windows, duct work, electrical panels and wiring, plumbing pipes, HVAC system, roof, and so forth.

Certain issues can be easily and quickly fixed without putting a huge dent in your pocket, such as replacing kitchen cabinets or flooring. But other issues can take forever to rectify and cost a massive amount to fix, such as repairing a leaky rook or fixing a faulty foundation. An experienced home inspector will be able to uncover – to a certain degree – major issues that would classify the home as a bona-fide money pit.

You’ll get a written report after the inspection which will outline all these issues, and the inspector will highlight problems that require your attention. If there’s something you don’t like on the report, you have the right to renegotiate with the seller, or simply walk away from the deal altogether.

3. Calculate a Rough Estimate of Renovation Costs

If you brought a contractor along with you during a showing and had it inspected by a licensed home inspector, then you’ll have a pretty good idea about what types of things need to be done to bring the home up to par and their associated costs. Along with the advice of these professionals, you’ll also want to do a little research of your own.

Call specific trades to obtain estimates on jobs that need to get done, then add up the potential costs to see if they fall within your workable budget. Draft up a document outlining all renovations, which will help you to come up with a reasonable offer price on the property (that’s within market value range). Don’t forget to add a 10% cushion for any extra unexpected costs that can – and probably will – creep up throughout the renovations.

4. Look Into Getting a Specialized Renovation Loan

Properties that require extensive renovations may qualify for specialized mortgages. A 203(K) home loan, for instance, is backed by the Federal Housing Administration (FHA), and lets you incorporate renovation costs into your mortgage. The amount that you borrow includes both the purchase price of the home and the estimated renovation costs so you don’t have to come up with that cash upfront when paying contractors to get the work done.

In addition, you may be able to obtain a lower interest rate that often comes with these home loan programs. Also, the credit requirements are sometimes more relaxed as well. The downside to these types of renovation mortgages, however, is that there’s only so much that you can borrow – between $271,000 and $729,750, depending on the market price of properties in your neighorhood.

Have a chat with your mortgage broker to see if this option is best for you.

The Bottom Line

When it comes to buying a fixer upper, take your time and have patience. You don’t want to land the first one you see without having done your due diligence. Before you plunk down a huge chunk of change on a fixer-upper, make sure you enlist the services of a professional real estate agent who has experience handling these types of properties. An expert who has your best interests in mind will make sure you steer clear of bad deals that will leave you with a lot more on your plate than you bargained for.