Thursday, Sep 27, 2012









Fixer-upper house: Is it worth it?
6 red flags to watch out for
By Bobbi Dempsey, INVESTOPEDIA


Low water pressure could be a sign of old, inadequate piping. (Photo: Shutterstock)

At first glance, the low price on a fixer-upper may seem irresistible. However, the "handyman special" that seemed like a great deal can quickly become a money pit. Before you jump at a bargain-priced home, make sure you know what to look for.

Here are some common pitfalls and red flags often found in fixer-uppers.

In pictures: Home renovations that don't pay

Outdated electrical systems

Rewiring an old home is no small task. Look for numerous electrical cords, which is often a clue that the electrical system is outdated and can't handle the typical power needs of a modern family.

"Today's electrical needs have grown significantly, and as a result, the home could require an entire electrical upgrade to meet these new demands," says Kathleen Kuhn of HouseMaster, one of the largest home inspection firms in the U.S.

In addition to the inconvenience of an old wiring system, a house with old "knob-and-tube" (generally found in homes built between 1890 and 1930) wiring may not be insurable, as some insurance companies see this as an increased risk.

While all buyers should get a home inspection before committing to a deal, Kuhn says an inspection is especially important with fixer-uppers, where buyers can easily overlook seemingly minor details that to a trained professional would be an obvious cause for concern.

Low water pressure

"If you turn on the faucet and the pressure is low, it could be evidence of a problem with older galvanized piping or inadequate piping," Kuhn says.

This is the type of problem that can range from a minor annoyance to a big, expensive headache. The only way to know for sure is to have a professional take a look and evaluate the type and age of the piping. While it's possible an entire new plumbing system may be needed, "in many instances, sections of piping can be replaced on an as-needed basis," Kuhn says.

Read more on the home inspection process.

Horizontal foundation cracking

This problem is the basis of many fixer-upper horror stories because it is so costly and time-consuming to correct.

"Vertical cracks are, for the most part, within normal tolerances," Kuhn says. "Horizontal cracks are not. A horizontal crack generally results from hydrostatic pressure against the home's foundation. Correction will often involve excavation and drainage provisions, as well as repairs to the wall itself."

If you spot horizontal cracking, have a structural engineer inspect the property before you go any further.

Less-than ideal location

As nearly everyone knows, the golden rule of real estate has always been "location, location, location." But in these economic times, that's more important than ever, says Anne Loveland of Loveland Carr Properties, a large Coldwell Banker real estate agency in Southern California.

"These days, cities and neighbourhoods don't have the money to add new stores or make improvements. You can't count on that, so make sure you love the location as it is right now," Loveland says.

Water, water, everywhere

If water is getting into a house, rest assured you'll have bigger problems such as water damage and mould, which can be difficult and costly to repair.

"Water is the root of all evil," says Loveland. "Whether it's in the yard or basement - which can signal a drainage problem - or on (or coming through) the roof, water often signifies a problem that, even if it's not a serious issue, will probably be an ongoing annoyance."

Signs of sabotage

Former occupants may have expressed their frustrations by damaging the house. This may simply be a cosmetic issue - former owners frequently strip appliances and light fixtures and cause minor damages - but it's not uncommon for disgruntled tenants/owners to cause more serious and insidious damage before they leave. If any damage is suspected, be sure that your inspector turns the house upside down for signs of secret sabotage.

The bottom line

When considering buying a fixer-upper, it's important to know what you're getting into. A maintenance issue may not automatically be a deal breaker, but it warrants serious thought. A major repair project can be a stressful, time-consuming endeavor.

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