As prices continue to increase, many hopeful homeowners who have been priced out are now considering purchasing fixer-uppers. However, when doing so buyers must use extra caution and be fully aware of the hurdles ahead.
Start by looking for properties that have been on the market for an extended period of time. When a property first hits the market, owners have high hopes and are less receptive to low offers. Once the listing begins to age, owners are often more reasonable.
Next, find a licensed contractor you can trust. Ask other homeowners, friends, and colleagues for referrals. Your real estate agent should be able to refer you to three or four contractors as well. Make sure to interview each contractor and ask for references. Don’t just go with the lowest offer; go with a reputable contractor that you feel comfortable with. As with all things in life, you get what you pay for.
If you have time, tour the property with a contractor or architect before you decide to buy. It will help you to get an idea of your renovation costs. Your contractor should be able to give you an accurate estimate of the scope of the project, and an architect will help you with plans if a gut-renovation is in order. You should also hire an inspector to view the property once your offer has been accepted. They can warn you of any structural issues.
If you’re buying a co-op or condo, get all the building rules before you buy (so you know what kind of projects are permitted). Your real estate agent will be able to provide you with the alternation agreements for the building. Keep in mind that many buildings prohibit adding washers, dryers, and bathrooms. Some buildings only allow renovation work during the summer.
Make sure to hire the right team. The right group of professionals can save you thousands of dollars; this includes a lawyer, architect, contractors, subcontractors, and an expeditor. Many newbies try to save money by not hiring an expeditor, but it ends up costing them more money in the long run. While a good expeditor can cost $5,000, they can save a homeowner thousands of dollars and valuable time. Case in point – a new owner of a townhouse rental decided to forgo an expeditor, and lost out on more than $20,000 in rent because of permit delays, while spending countless hours with the DOB and utility companies.
For townhouses, the right team is even more imperative. Almost 70 percent of Harlem townhouses are boarding houses or SROs (single-room occupancy). They require a certificate of non-harassment before any work can commence. In order to obtain the certificate, the city has to investigate the building’s history for the past three years to make sure that there aren’t any issues. If you’re converting an SRO into a multi-family or single family home, you’ll also need a new Certificate of Occupancy from the DOB.
Understanding the length of the project and how it relates to your own personal timeline is imperative. While contractors can give you their best guess, delays are to be expected. Most delays involve obtaining permits from the DOB, hence the need for an expeditor. The last thing you want to deal with is not having a place to live because the project took too long. Your contractor should be competent at managing his or her own time as well. Some even offer liquidated damages or financial penalties if they do not complete the renovation project on time.
On the same note, having a realistic budget and a decent reserve fund for unexpected expenses is vital. Many prudent homeowners and investors obtain insurance on renovation projects to avoid unexpected expenses. A good contractor will provide an itemized list of expenses and labor, as well as a daily checklist of completed tasks. Also, never pay for the entire project up front. A deposit of 10 percent is reasonable. You can pay the rest in installments when agreed upon project milestones have been reached.
For those who are willing to put in the extra effort, there are still deals to be found. As always, if you have any questions or need a referral, please don’t hesitate to contact me.
You can reach Deondra Carter, Licensed Real Estate Salesperson, Douglas Elliman Real Estate,
at mobile: 917-882-8718