Everything You Need to Know Before Buying a Fixer-Upper

Do you get your nightly TV fix from Fixer Upper, Farmhouse Fixer, Property Brothers, and all the home renovation goodness HGTV has to offer? Or are you simply looking for the best deal possible on the home you purchase? Either way, you may be wondering if buying a fixer-upper is right for you.

In a nutshell, the term “fixer-upper” means a house in need of serious attention. Generally, these homes have been neglected and not renovated for quite some time, rendering them sorely outdated. They commonly require demolition “down to the studs” and replacing major systems like plumbing and electrical — essentially rebuilding the home from the inside out.

Buying a fixer-upper isn't for everyone, but if you have patience, vision, and a good real estate agent, it might be an option for you. In this fixer-upper buying guide, we'll review the pros and cons of buying a home that needs some TLC. We'll also teach you how to find and purchase your first fixer-upper. Finally, we'll review the main things to consider when buying a fixer-upper.

If you're ready to buy a home, let's dive right in!

How to Find a Fixer-Upper

Before arming yourself with a sledgehammer and paintbrush, you first need to find that perfect place just begging for your creative touch. Here are a few popular ways to find your first fixer-upper.

Use a Major Real Estate Website

One of the best house-hunting tips, in general, is to begin your search on major real estate websites like Zillow and Redfin. These sites pull listings directly from the MLS (Multiple Listing Service), which is a comprehensive database of houses on the market. You can also use these sites to search for affordable homes and fixer-uppers.

Search for homes in your target area and look for pictures with outdated finishes, old appliances, and signs of distress. Often, the listing agent will also note in the property description if a home needs major renovations.

Another handy trick is to filter for homes that have been on the market for 60 days or more. This may bring up fixer-upper homes that have scared away other buyers.

Recruit an Experienced Real Estate Agent

Another great resource for locating fixer-upper homes is a knowledgeable local real estate agent. Many agents have “pocket listings” or homes they haven't put on the market yet. Some of these pocket listings may need updates or renovations before they go to market, but not every homeowner wants to foot that bill. It may be possible for you to buy a pocket listing “as is” at a discount.

If your agent doesn't have any pocket listings that match your needs, they can reach out to their network of contacts to see if someone else does.

Is a fixer-upper really the right choice for you? Let's look at some of the biggest pros and cons of buying a home that is anything but turnkey.

Pro: You'll Save Money on the Purchase

Home prices are higher than ever, and in many parts of the country, even entry-level homes are often out of reach for average earners. The biggest benefit of buying a fixer-upper is that you'll pay less upfront for the purchase of the house. Compared to a new or turnkey home, you could save tens or even hundreds of thousands of dollars on a fixer-upper, depending on how much work the property needs.

However, there's a reason fixer-uppers are often priced to sell.

Con: Repairs Can Be Costly

There's a popular saying when it comes to home renovations: “Take what you think it will cost and double it.” Even minor home repairs can be breathtakingly expensive, and large repairs can quickly empty your savings account. Just to give you a taste, according to Remodeling Magazine's Cost vs. Value report for 2023, the average cost of a midrange bathroom remodel is $24,606, while a midrange major kitchen remodel could set you back $77,939.

Of course, if you happen to be handy and the required repairs aren't major, you could save a significant amount of money performing them yourself.

Pro: Put Your Own Stamp on the House

Buying this type of property means you can implement all the fixer-upper house ideas you've been dreaming of. You can pick out the flooring, countertops, paint colors, and cabinets you’ve always wanted. Fixing up a house means you can personalize the space (within your budget) to perfectly match your tastes.

Though speaking of fixing up your house…

Con: Dealing with Renovations

When you buy a fixer-upper, you have two options, neither of which are ideal. You can move directly into the house and put up with its deficiencies while you begin repairs, or you can fix up the house before moving in, which may require paying two mortgages or rent plus a mortgage. If you can sneak back into your parent’s house for a few months or crash on a friend's couch, cheers to you. Many homeowners, however, will need to live in the madness of a house in transition for however long it takes for the renovations to be completed.

Pro: Increased Equity in Your Home

The great thing about putting a lot of blood, sweat, and tears into your fixer-upper is that you should be able to reclaim some of that renovation effort and money by increasing the equity in your home. Remember that $77,939 major kitchen remodel we mentioned? According to the same report, it would add $32,574 in resale value to the home. That's still a costly renovation, but at least you should get a gorgeous new kitchen and over $30,000 in equity out of the deal. You can realize that extra equity by doing a cash-out refinance, opening a HELOC, or selling the house.

Con: Surprise Repairs

The thing about fixer-uppers is that older or poorly kept houses often have many problems. Maybe you were aware of a home's aging roof and broken dishwasher, but you could be surprised to discover foundation issues, bad wiring, or an HVAC system on its last legs.

That's why it's critical to get a good home inspection and to carefully review your inspection report before closing on a fixer-upper. Even inspection reports have their limits, and it may be a good idea to hire specialists to look at essentials like the plumbing, wiring, and foundation. Your real estate agent should also be able to advise you on how best to protect yourself against unforeseen (and expensive) issues.

How to Buy a Fixer-Upper

If you happen to have a lot of cash on hand, you could seek a traditional mortgage for your fixer-upper and pay for your renovations out-of-pocket. Remember, the money you save by purchasing a lower-priced fixer-upper will free up more of your cash to pay for the renovations. This might also work if you plan to do most of the repairs on your own and can cover the costs of materials without a loan.

If your planned renovations are extensive, however, you might need something besides a traditional mortgage. Here are a few tips on buying a fixer-upper house.

Seek a Mortgage Renovation Loan

Fortunately, mortgage companies have developed special loans that factor in the money you’ll need to purchase the home, as well as the cost of renovations you'll need to perform. Popular loans of this type include Fannie May Homestyle Renovation loans and FHA 203(k) Rehab loans. With this type of loan, your renovation costs are added to your mortgage, giving you the convenience of a single loan and monthly payment.

Make sure to work with an experienced mortgage broker to see what types of renovation mortgages are available to you. Keep in mind that these loans may have special qualifying standards or restrictions.

Take Out a Personal Loan

In most cases, you'll get better loan terms if you roll your renovation costs into your mortgage, as described above. However, if you don't qualify for a renovation mortgage or simply want to pay for renovations separately, you can take out a personal loan. Another option is to take out a Title I Property Improvement Loan, which is designed to help homeowners with little equity in their house access funds.

Get a Private Money Loan

If you are struggling to get a personal loan to help pay for the repairs to your fixer-upper, one final option is to seek private money. That may mean asking for a low-interest or no-interest loan from friends or family. If they have the funds, they may be willing to help.

Depending on your arrangement, you can pay off your private money loan monthly or even do a cash-out refinance after the completion of your repairs and use the extra equity to pay off the loan.

What to Know When Buying a Fixer-Upper

Still not sure if you want an old house vs. a new house? Before you make what could be one of the biggest purchases of your life, here are five more things to consider when buying a fixer-upper. Answering the questions below can help you understand if a fixer-upper is right for you.

1. How Long Will You Be Living in the Home?

How long you're going to live in your new home can help you determine how much you should invest in fixing it up. If you’re only going to live there for a couple of years, you probably want to avoid moving walls or adding rooms. But if it's your dream home or a home you plan to be in for a while, then taking on more and spending more might make sense.

2. What Are You Willing to Take on?

Having a roof replaced, updating an ugly kitchen, or redoing an outdated bathroom are straightforward projects, but problems with the foundation or structure can get extremely expensive. You'll also want to think twice before dealing with mold — it can be dangerous, as well as very difficult to get rid of completely. Older homes can have their own hidden challenges, too — especially when you start opening up walls. This can expose electrical or plumbing issues as well as rotting wood.

3. What Can You Do Yourself?

Be realistic about your skills. Are you handy and comfortable with home projects? Do you feel comfortable painting a room? Maybe you would rather hire someone to do everything. Knowing what you can and are willing to do is important.

4. How Much Do You Have to Spend?

Sticking to a budget can be one of the hardest things about renovating or remodeling. Being realistic about what you can afford can help you avoid a lot of stress and headaches. For most houses, the kitchen and bathrooms are where most remodeling dollars go. Before you decide to redo an entire room, look and see if there is anything you can save. Maybe the layout is good, and the cabinets just need refacing or painting.

5. What is it Going to Cost?

A fixer-upper can be very appealing if you can get it for a good price. But what may look like a good value at first glance could be a money pit if you don't know what you're really dealing with. Get realistic estimates from one or more contractors before you make an offer. And don't forget the hidden costs that invariably crop up on all fixer-uppers: add 10% to 20% to cover unforeseen costs. Most people underestimate the amount of work and what it will cost to remodel or renovate a house. Talk to someone who has done a remodel, and you're probably never going to hear, “It was so fast!” or “It cost less than we thought.” The stress of a remodel is another “cost” you should probably factor in.

Do you still think you want to take on a fixer-upper? Your real estate agent should be able to help you navigate some of the ins and outs of a major renovation. They'll be able to help you determine what is a good value for where you want to buy and what remodeling projects make sense for you, depending on how long you plan to stay in the house. Your agent should also be able to suggest reputable contractors.

Is a Fixer-Upper in Your Future?

The renovation shows on HGTV often make buying a fixer-upper look fun and exciting. While transforming and personalizing a home in desperate need of a facelift can be extremely rewarding, it can also be difficult and expensive. We hope this fixer-upper buying guide offers you more perspective on the pros and cons of this housing choice. One final recommendation is to invest in a home warranty plan.

A home warranty is a great idea if you are buying an older property or a property that hasn't been well-maintained. If a covered household appliance or system unexpectedly breaks, you'll have a convenient repair or replacement solution, helping you protect your budget and save time having to search for a contractor. Learn more about homebuyer warranties when you get a free quote today.

The contents of this article are provided for general guidance only. First American Home Warranty does not assume any responsibility for losses or damages as a result of using this information.

Please be aware that if you disassemble a covered system or item, it can invalidate your home warranty or manufacturer's warranty.