Should you buy a fixer-upper or move-in ready house?

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It is often said there are two types of people in the world: early birds or night owls, chocolate or vanilla lovers, city or town folk. In real estate, the great divider may be between those who want to buy a fixer-upper and those who want to buy a move-in ready house.

Many people won’t have to wonder if buying a fixer-upper or buying a move-in ready home is right for them: They’ll know. In fact, a survey by Coldwell Banker found that 80% of respondents said they preferred to buy a move-in ready home, with 70% of millennial respondents saying they’d be willing to sacrifice house size for a home that is ready for them to move into.

But listening to your gut might not be the best way to decide which half of the divide you fall on. Buying a fixer-upper or move-in ready home will each come with unique challenges.

What’s the difference between buying a fixer-upper and move-in ready home?

Their names say it best: With a move-in ready home, all you need to do is settle down. A fixer-upper, though, will require some work before you can comfortably make it your home. But there are greater differences between these homes than just the timeline to your housewarming party.

Fixer-uppers

These properties require more work than just a new coat of paint on the walls. A fixer-upper is a home that needs substantial repairs or remodels, and those repairs might take a lot longer than popular portrayals on HGTV and other home renovation reality shows.

The lower listing price of fixer-uppers acts as a draw to many homebuyers, but the hidden costs of updating a fixer-upper can snowball. Fixer-uppers required an average of over $13,000 of necessary repairs, plus another $15,000 of aesthetic and practical renovations, according to a report by Buildworld. Many homebuying respondents found their renovations more costly, time-consuming, and challenging than initially anticipated.

Move-in ready homes

These houses are ready to be comfortably inhabited, but they might not be quite to your taste. That means, move-in ready homes might require some minor renovations, like new paint or appliances.

The ready-made nature of these homes is likely why many prefer them. However, they carry a higher listing price than most fixer-uppers. Be prepared to pay a premium for these homes, many of which have undergone some remodeling to list for top-dollar in a competitive market.

You can search for move-in ready homes with Orchard, and we can even help you make a cash-offer to beat the competition. 

Pros and cons of buying a fixer-upper and a move-in ready home

In their report, Buildworld found that homebuyers who bought a fixer-upper were just as satisfied with their purchase as those who bought a move-in ready home, but for different reasons. We break down the pros and cons of each:

Buying a fixer-upper

Pros Cons
Buy more space for less money Repairs and renovations can be costly, negating the lower purchase price
Mortgage programs can help reduce cost Added stress of remodeling
Customizable Work often requires permits and work of skilled contractors, which can be hard to find
Gain DIY experience Difficult to estimate total cost of renovations
Pay lower property taxes (because they’re calculated on your home’s sale price) Saving money is a gamble in the long run — you might save on the listing price but go over budget on renovations

Buying a move-in ready home

Pros Cons
Conveniently ready for move in More expensive upfront
Does not need immediate renovations Lacks personal touch
Easier to stay on budget Harder to justify customizations

How to find a fixer upper

As with any homebuying process, partnering with an expert real estate agent is your first step to finding your dream fixer-upper. Your agent will be able to help you navigate different neighborhoods, considerations, and tools available to aid your home search. An established agent may even be able to connect you to reliable contractors in your area to help with your renovation process.

Auctions and foreclosures are also solid leads for finding a fixer-upper. Banks offload these homes below market value without the updates that make a home list for top dollar. However, it’s important to consider that these homes will likely be sold as-is, which means that you won’t benefit from disclosures or an inspection contingency. You will need to prepare for unexpected costs.

You might even try cold calling. If you’ve ever gotten an unsolicited call to buy your house, you’re familiar with this old sales trick. While it might be annoying for homeowners who aren’t looking to sell, this tactic has been successful for iBuyers and real estate agents looking to pick up inventory in competitive markets.

What to look for when buying a fixer-upper

Not all fixer-uppers are created equal. To help make your road to renovation easier, look for the following characteristics when buying your fixer-upper.

  • Location: While you may be able to change the curb appeal, wall colors, and even the layout of your home, there’s one thing you can’t change: the address. Look for your fixer-upper in a neighborhood you want to live in first and foremost and worry about the rest later.
  • Good bones: Changing the layout of your house will require the most work and will likely involve costly contractors and time-consuming processes like getting permits. Prioritize homes with a good floor plan to avoid these renovations.
  • Good condition: Fixer-uppers don’t have to be structurally unsound — look for homes with a strong foundation, are up to code, and have passed their home inspection with flying colors.
  • Easy updates: Some homes are listed as-is because the seller just doesn’t have the time or desire to complete minor renovations to get the home market-ready. Don’t be afraid of a home that needs a little elbow grease to shine, and look for homes that need simple updates over major upgrades.

Financing options for buying a fixer-upper

When buying a fixer-upper, you may have more financing options than a move-in ready home. Below are a few unique opportunities for this type of home purchase.

FHA 203(k) Rehabilitation Loan

The FHA 203(k) Rehabilitation Loan is a government-backed loan that allows homebuyers and homeowners alike to roll renovation and homebuying costs into one mortgage. This is ideal for homebuyers looking to buy a fixer-upper, as it provides a one-stop-shop for their financing needs: one contract, one monthly payment, and one lump sum held in escrow.

The FHA 203(k) is backed by the Federal Housing Administration and comes with more flexible qualification requirements than a conventional loan. However, the terms of these loans do require that you complete all renovations within six months, so you will need to be mindful of your timeline.

VA Loan

Active duty members and veterans of the U.S. armed services who qualify for a VA loan can roll the renovation expenses for their fixer-upper into their home loan. The repairs will need to be “ordinarily found” on comparable homes, and all funds will be paid directly to the contractor.

Fannie Mae HomeStyle Loan

The HomeStyle loan is a conventional loan not backed by the government that provides more flexibility in how homebuyers can use the funds. Borrowers may receive up to 75% of the “as-completed” appraised value of the property.

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