52% of First-Time Home Buyers Are Interested in a Fixer-Upper. Beware These 2 Pitfalls, Though

It’s not an easy time to be a first-time home buyer. Not only are home prices elevated, but mortgage lenders are charging pretty high interest rates for the privilege of financing a real estate purchase. 

If you’re worried about being able to afford a home in today’s market, then you may be toying with the idea of buying a fixer-upper. Recent data from TD Bank finds that 52% of first-time home buyers are interested in a fixer-upper. But if you go this route, you may encounter these major drawbacks.

1. What you save on your purchase price, you might spend on repairs

The upside of buying a fixer-upper is that you might save a fair amount of money on your home’s purchase price compared to buying a home that’s move-in ready or otherwise in better condition. But what you save in terms of a purchase price, you might spend to get your home into decent shape. You might end up not only negating your savings, but spending more money all-in. If you’re going to purchase a home that clearly needs a lot of work, get estimates from contractors before moving forward with an official offer. 

Let’s say the typical home in your target neighborhood costs $350,000, but there’s a fixer-upper on the market for $250,000. That might seem like a great deal. But if you’re given estimates totaling $130,000 to get that home into move-in condition, then suddenly, it’s clear that you’re not getting a bargain at all.

Plus, remember that it’s not so pleasant to live in a construction zone. So unless you’re looking at a lot of savings by purchasing a fixer-upper, you may want to go a different route.

2. You might incur additional costs when fixing up your home

Having work done in your home can be unpleasant due to the noise, dust, and disruption. But living in a construction zone might also make your home unusable for a period. 

You may have to stay at a hotel if the work being done creates so much dust and debris that it’s not safe to occupy your home. But then you’re incurring an additional expense — and a potentially significant one at that. Similarly, if you work from home full-time but will have a week of jackhammering and noise during renovations, you’ll need to find an alternative solution. That could mean having to rent a coworking space temporarily, which is another cost.

Or, let’s say you’re buying a home whose kitchen isn’t really functional and needs a total gut job. You may end up having to dine out or order in food for weeks on end in the absence of a working kitchen. You might spend $100 or more each week on takeout compared to the cost of buying groceries.

If you decide to move forward with a fixer-upper, ask the contractors you plan to hire what sort of disruptions you can expect, to get a sense of the changes you’ll have to make and their associated costs. That way, there won’t be unwanted financial surprises.

The nice thing about buying a fixer-upper, aside from potentially saving money on your purchase, is getting a place you can put your own stamp on via making extensive renovations. But keep these pitfalls in mind before making an offer on a fixer-upper, and do your research so you don’t wind up in over your head.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.