Buying a house is a high-stakes investment.
Purchasing a house costs a lot of money but this is not the only reason why buying a new home is such a big deal. People invest a lot of emotions in their homes because their aspirations and social status are often tied to it.
So when buying a new home, you may find yourself trying to meet two nearly irreconcilable objectives: to buy a home that is inexpensive and yet very attractive. Most times the best homes you find will be priced out of your reach and the more affordable ones will be in less than satisfactory condition.
When faced with this situation, you have two choices:
- Paying more for an expensive home that is move-in ready, or
- Paying less for a cheaper home that needs some work.
Deciding whether you should go for a move-in ready home or a fixer-upper is not an easy decision to make. Each option has its distinct advantages and disadvantages. The right decision for you will depend on which of the factors below are most important to you.
Buying a fixer-upper
The primary reason you may want to buy a fixer-upper is because of the home’s lower sales price. But as Dawson Management warns, that price can be deceptive since it does not include the cost of renovations. Before you buy a fixer-upper, you should weigh the following pros and cons.
- Lower taxes
In addition to buying the home at a lower price, you also pay less in taxes, because property taxes are based on the purchase price of the home. Additionally, you can save money from tax credits for energy-efficient upgrades to the home and other improvements that qualify for tax credits.
- Opportunity to customize the home
Regardless of how nice a move-in ready home is, it will be designed according to someone else’s idea of what a perfect home should be. If you want to personalize that home, you have to start renovating afresh, which means spending more money. With a fixer-upper, you get more or less a clean canvas.
- It’s easy to go over budget
The first problem with a fixer-upper is the difficulty of estimating the actual cost of renovating it. Even with the best home inspector and contractor, it is hard to detect all the issues with the home. When you start renovating a fixer-upper, your final costs may eventually be higher than the cost of buying a move-in ready home. An estimated 30% of fixer-upper homes go over budget, there is no assurance yours won’t be one of them.
- Renovating a home is not easy
Unless you have a lot of experience renovating properties, renovating a fixer-upper is a lot of hassle. Even when you have the expertise, the project will still take a lot of your time. It is also easy to miss important deadlines, which may further complicate your plans and increase your costs.
- Financing the purchase will be challenging
Lastly, you will have some trouble getting a loan to buy the property, since lenders often want to avoid the bigger risks associated with buying a fixer-upper. You may eventually have to use a hard money lender and that option can be expensive.
Buying a move-in ready home
Buying a move-in ready home is not just more convenient, there are other advantages, as well as disadvantages.
- No surprises
No home is perfect, but with a move-in ready home, there are fewer surprises. You know exactly what you are getting, to a greater extent. Buying a move-in ready home gives you more control of the variables involved in a house purchase. There is less risk involved and that is a huge plus.
- No delays and ease of planning
With a move-in ready home, you are in control of your schedules. You can decide when to move into the new home. There is no risk of incurring additional expenses in your current home due to the new home being under renovations. When you buy a move-in ready home, you protect your time.
- Budgeting is easier
Your costs are far easier to calculate when you buy a move-in ready home. Unlike what you have with a fixer-upper, there are no unknown costs with a move-in ready home. Being able to budget accurately means the house purchase is less likely to upset other areas of your life, financially speaking.
- Easier financing
The majority of lenders structure their loans with turnkey properties or move-in ready homes in mind. Move-in ready homes present fewer problems for lenders because it is easier to determine the market value of the property. When you buy a move-in ready home, you will have more options for financing the purchase.
- The home may not be everything you want
Buying a move-in ready home will always force you to make tradeoffs or compromises. That is because the home is almost certainly not going to be everything you want. With a move-in ready home, you have to sacrifice some of your desires for the convenience that a ready-made home offers.