Enthusiastic sellers usually list their homes after making improvements, doing repairs, or at least, painting or cleaning -- often offering a stark contrast to foreclosures. When mortgages go into foreclosure due to financial hardship, it’s probable that the homeowners haven’t been able to perform needed upkeep. Fixer uppers have potential if you know what to look for when buying.
Dewinterize the home, if it has been winterized. Typically, in the winterization process, all water lines are emptied and then refilled with a special non-toxic antifreeze. Bank- or real-estate-owned homes that sit vacant and unheated in cold climates are subject to burst water pipes if they aren't winterized. Hire a plumber to test the system's ability to hold pressure, properly open all water lines and faucets, flush out the antifreeze and check that all lines and seals are still watertight. Ask your real estate agent if the bank pays to dewinterize the home, and to turn on the gas and electricity. The bank may cover these costs -- and the cost to again winterize the home, if you don't buy -- to allow for a home inspection, says the magazine.
Check walls, ceilings, cupboards, the attic and a crawlspace for mold that has grown due to common foreclosed-home issues like stagnant conditions, a lack of ventilation or water damage, suggests Business Insider. Obtain a quote or estimate from a moldn remediation company to rid the home of any mold growth.
Calculate the cost to replace missing appliances and fixtures like ceiling fans or lighting, or stolen copper pipes and wiring. Evaluate the expense of floors, walls, ceilings, doors and windows that have been damaged, smashed, spray painted or vandalized by vandals or by the previous owners. Speak to the bank's insurance provider who's covering the home to determine which costs are covered in the policy. Ask your insurance provider if any existing damages are severe enough to require a dwelling-under-construction rider, suggests Bankrate.com.
Hire a home inspector when you’re serious about purchasing a foreclosed home -- or any home. Be prepared; a home that hasn't been maintained -- for whatever reason -- could have problems that aren't visually obvious, such as old plumbing, unsafe wiring, insufficient insulation, a failing roof, or a crumbling foundation, which will set your schedule and finances back. Request a copy of the home inspection report from your lender in writing, if applicable.
Consider project duration and cost. While you might spend one week and $300 to hire cleaners to wash walls and ceilings, scour grime from around windows and steam-clean carpets in one home, you may spend upwards of 3 months and $30,000 hiring contractors to remodel a kitchen or to replace old or missing wiring or plumbing.
Maximize profit by doing any work that you’re skilled to do yourself; obtain all necessary building permits and approval from your city's planning department. Total all supplies, expenses, fees and carrying costs, and then factor in at least 10 percent for unforeseen expenses -- hidden costs aren’t a possibility, they’re a probability.
Renovate or remodel using finishing materials that are practical for the location. For example, in an upscale area with stately executive homes, you'll increase resale value and marketability by choosing hardwood or natural stone rather than laminate or vinyl flooring.
Attend open houses in the area for finishing ideas.
- Remodeling Magazine: 2013 Cost vs. Value Report
- Remodeling Magazine: Cost vs. Value Report 2013 -- San Francisco, CA
- Active Rain: Keller Williams Realty: Stripping Foreclosure Homes
- Bigger Pockets: Cold Truth about the Winterization of REO Investment Properties
- Bankrate.com: Should You Buy a Home That Has Been Vacant?
- Business Insider: America's Foreclosed Homes Are Literally Filling With Mold
- Attend open houses in the area for finishing ideas.
Lorna Hordos is a home-flipping business owner and freelance writer. She writes friendly, conversational business, home and lifestyle articles for Bizfluent, azcentral, Daltile, Marazzi, Lowes, Philips Lighting, WordPress.com and numerous other publications.