If done correctly,
buying a fixer upper in Mission Viejo can be a rewarding experience. But buying a fixer upper is not for everyone. We recommend that fixer uppers are best bought by people who have an interest or skill in doing some of the renovation work themselves, for it is hard to find a cost effective contractor to handle all of the miscellaneous repair odds and ends that you will often find in a Fixer Upper home. Here is our step by step guide to buying a Fixer Upper in Mission Viejo.
1. What is a Fixer Upper home ? – A fixer upper is simply a neglected and/or poorly maintained home that sells for below the market value in the neighborhood. The three main sources of Fixer Uppers in Mission Viejo are a.) rental homes where the tenant damaged the property and the landlord is sick and tired of repairs and decides to sell. b.) older homes owned by an elderly person who has not made repairs to the home for many years. This property could also be in Probate. c.) a home where the owner has come upon hard financial times and has neglected the property for a while. This type of property may also be in foreclosure.
2. Where to find fixer-uppers? – Although you can find a fixer upper in most any community, the odds are most of the Fixer Uppers you’ll come across will be in older moderately priced neighborhoods in Mission Viejo. Fixer uppers can be found in the local newspapers such at the Orange County Register, and the Orange County Penny Saver. You can also find fixer uppers listed for sale by a Realtor and these can be found online in the Multiple Listing Service (MLS). Finally, you can drive by different residential streets on the way to work or shopping and keep an eye out for homes that have been terribly neglected and in bad condition, called the blemish on the block (B.O.B.) and write the owner a letter.
3. Are Fixer Uppers a good value ? – Sometimes… like any other investment you have to do your homework to calculate the potential net profit. To do this, you first need to figure out what the average house of that size in that neighborhood of Mission Viejo sells for in good condition. Then you need to estimate the cost of repairs. Be conservative here, for many new fixer upper buyers underestimate the cost of repairs. You also need to calculate the costs to purchase (ie: title insurance, escrow, loan costs etc), and if your are planning to sell immediately after repairs, you need to include the cost of sales and the interest payments. If your estimates yield a net profit of $15,000 or more, then go for it.
4. What type of home should I buy ? – A detached home is usually a little bit better option than a Condo, for you do not need the permission of the Association for repairs. A 3 bedroom 2 bath is better than a 2 bedroom, 1bath. Also, if you are relatively new to this, a so called ‘cosmetic’ fixer is preferable. A cosmetic fixer is a home that may need new carpet, paint, misc light or plumbing fixtures, some broke windows or doors etc. Unless you’re an experienced contractor it’s a good idea to stay away from properties that have major mold issues, large cracks in the foundation, hillside or soils movement, etc. The general idea is to find the worst cosmetic fixer in an otherwise nice neighborhood.
5.) How do I finance the Purchase ? – Today, there are many options that did not exist 10 year ago. You’ll need two sums of money. One sum of cash will be for the purchase costs which will be title, escrow and the down payment. This number can vary widely from $5,000 to $100,000 primarily dependent upon how much you want to put down. The second sum of cash needed will be for renovation costs, which can also vary widely from $5,000 to $50,000. Plus you’ll most likely need a new loan as a first trust deed to purchase. Many lenders today will allow the purchase of a cosmetic fixer with low down payment, but not always. Sometimes, the appraiser will require that a particular item be repaired prior to funding which could kill the deal… So it’s a good idea to interview several lenders and let them know what you are trying to accomplish before you purchase. There are also other sources of financing such as a low cost line of credit loan on your personal residence, the U.S. Department of Housing and Urban Development’s Section 203 (K) rehabilitation loan program which can advance you money for repairs. Another program is the Federal Housing Administration’s Title 1 FHA loan program where you can possibly borrow based upon future value.
6. What kind of return is there on remodeling jobs? Paint and carpet are usually offer the best return on remodeling dollars. Remodeling Magazine produces an annual “Cost vs. Value Report” that can help to answer this question. Most recently, the highest remodeling paybacks have come from updating kitchens and baths, home-office additions and extra amenities in older homes. While home offices are a relatively new remodeling trend, for example, you could expect to recoup 58 percent of the cost of adding a home office, according to the survey. Bottom line, is if you buy in a middle income neighborhood of Mission Viejo, keep the repairs simple and don’t over do it.
7. Do building codes come into play? It depends on upon who you are and the amount and type of work. If you are simply painting, installing new carpet, and fixing some broker doors, windows and faucets, you usually do not need a permit in Mission Viejo. If you are doing more extensive work such as a room addition, kitchen or bath remodel, etc. than you probably do need a permit from the city of Mission Viejo. Building codes are established by local authorities to set out minimum public-safety standards for building design, construction, quality, use and occupancy, location and maintenance. There are specialized codes for plumbing, electrical and fire, which usually involve separate inspections and inspectors. All buildings must be issued a building permit and a certificate of occupancy before it can be used. During construction, housing inspectors must make checks at key points. Codes are usually enforced by denying permits, occupancy certificates and by imposing fines. Building codes also cover most remodeling projects. If you are buying a house that has been previously significantly remodeled, ask for proof of the permits involved before you purchase to avoid future liability for fines.
If you would like to search for fixer upper homes in Mission Viejo that are listed for sale, then please visit our website: Mission Viejo Real Estate
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