You have made the decision of buying a renovation project. It may be the challenge of doing it all yourself or because of your budget, but you are in the market for a renovation. Just how rough can a house be before a lender decides not to take the risk on a mortgage?
Before you negotiate the contract, make sure that you have had done a building report for structural integrity, defects and potential problems.
This isn't part of the contract as it’s done prior to putting in an offer but at least up front you know exactly what you are getting yourself in for. As part of your report, you will receive a list of what needs to be repaired or replaced, the time frame and the potential costs.
Maybe there are no major problems, just minor ones? Maybe the carpet is worn and needs replacing. Perhaps the deck needs a little work. New paint and fresh air could be all it needs. These are lovely and extremely rewarding.
Minor, cosmetic concerns are usually not strong enough to scare away lenders, but could lead to negotiations between the buyers and sellers. Unless you've done this before, let Encore Property Group’s sales team negotiate for you.
To make lending a little easier, the vendor may agree in the offer to fix certain things up for you such as the mailbox or the deck painted. This needs to be in writing on the offer so the vendor must perform. This can help you when getting a mortgage, as lenders will only lend on the valuation of the property. Just make sure that it is all in the contract.
Another way is to negotiate a reduction in price if the vendor is not willing to replace carpets etc etc. Instead of installing a $5,000 carpet before settlement, the seller agrees to reduce the purchase amount by the $5,000 it will cost the buyer to put in new carpeting.
Buying a fixer-upper can be rewarding. You get to choose how you want to improve the home. But it is a lot of work and definately not for every buyer or lender. Your best bet is to be completely upfront with your lender about your intentions. This will help the transaction to go smoothly.