Homebuyers and their dream homes come in all shapes and sizes. Some want a detached house with a large backyard. Others want a condominium requiring minimal maintenance. Others still want a townhouse that is close to amenities like shopping and public transportation. There is another group of buyers that does not fit into any of the molds afforded traditional buyers. It is comprised of those who buy what is commonly referred to as a “fixer upper”. This column examines what a fixer upper is and how you can adequately protect yourself if you are in the market for such a home.

A “fixer upper” is a home in need of extensive repairs. This type of home is usually quite old and needs many repairs to modernize it and improve its appearance both inside and out. There is a large group of buyers who will buy a fixer upper. The reason? The asking price for these homes is usually low in relation to the price of other homes of comparable value because few people want to buy a home in need of extensive repairs.

Those who are in the market for this type of home should be very prepared for what lies ahead, as homes in need of extensive work are usually sold “as is”. This means that the vendor will not guarantee the overall condition of the home or its major systems (e.g., heating, plumbing and electrical). Similarly, the vendor will not guarantee that the roof won’t leak, the floors won’t creak or the paint won’t peel. Simply put, with this type of home, what you see is what you get.

If you are in the market for such a home, proceed with caution. Insist that a reputable home inspector conducts a thorough investigation of the home before you agree to buy it. This way, you will know the condition of what you are buying. If the inspector determines that the roof needs to be replaced, you can use this information to your advantage when it comes time to negotiate a fair sale price with the vendor. You would not want to buy a home before learning that you will need to spend thousands of dollars to have the roof replaced.

Once you receive the inspector’s report, you should obtain quotations from contractors or trades people as to what the ultimate cost will be to carry out the necessary repairs to convert the fixer upper into your dream home. Keep in mind that any estimates you receive are just that – estimates. In order to protect yourself and to avoid surprises later on, it is wise to add a minimum of ten per cent to these estimated prices. Finally, you will need to determine if you will be able to live in the home while renovations are being made. If not, you will have to pay for an alternative living space.

Once you know how much it will cost to repair the home and replace whatever needs replacing, you will be in a better position to know what you are willing to spend. If you determine that after spending all the money, the house will not be worth as much as comparable houses in the neighbourhood, you will likely not want to buy it. You should not decide whether or not to purchase the home on your own. Rather, an experienced real estate professional can advise you of whether you are making a worthwhile investment.

Depending on the neighbourhood, some houses are worth buying, renovating and then selling. An experienced real estate agent can assist you in making this determination. Involve your agent in the buying process as early as possible.