The Fixer Upper
Whether it’s an unfinished loft in South Loop or a diamond-in-the-rough single family home in Naperville, buying and fixing up a property can be a real money maker. The listing for such a property always lures in extra buyers when the possibility of finding a property that, with just a little touch-up, can be worth thousands more than the purchase price almost instantly.
What is considered a “fixer upper?” From a lender’s perspective, it means the property is in good enough shape in which to live and can be sold and financed “as-is” also referred to as “habitable.” The as-is section of the sales contract will be examined in a greater detail by the appraiser as well as reviewed by the home inspector. But lenders are curious as to the degree of fixer-upper; does the property need to be fixed or does the word “razed” come into mind?
For example, an as-is property has outdated kitchen cabinets and tile. A lender has no problem with outdated furnishings. Perhaps the carpet needs to be replaced. It’s not a requirement, the carpet’s in decent shape but fresh flooring will do wonders to the value of the home.
On the other hand, the appraiser noticed diagonal cracks above several doors throughout the home and made a notation in the appraisal report. Now the lender has a more keen interest in the property…a damaged foundation will mean the foundation needs to be repaired and the flooring leveled before a loan can be placed.
Does the heating and air conditioning system work? No? The home needs to have working heat in order for it to be habitable. Roof falling in? Exposed wiring throughout the house? Those items need to be repaired before moving forward with financing.
Paint? Landscaping? Updated bathroom hardware? Those things can be fixed after the loan has closed as long as the property is sold as-is. Fixer-uppers can be a real gold mine; but they can sometimes be a disaster if they affect the livability of the property and your buyers need financing.