Fixer Uppers in Guelph – A Guide to this Fast-moving Market

fixer uppers in GuelphFinding Fixer Uppers in Guelph isn’t easy. In fact, it’s a really tough market to buy in. It probably won’t surprise you to learn that a large volume of home buyers have the same idea: find a solid house that needs work, purchase it for sub-market value, fix it up, and make money by flipping or, down the road, through resale.

Well, it’s a great plan but it’s harder than a lot of people think. Whether you’re looking for fixer uppers to flip – or you just want to find something that you can renovate and live in, there are a few challenges.

Fixer Uppers & Financing

First, let’s talk about financing. When properties are in poor shape, or “distressed” in real estate lingo, they can prove problematic when it comes to securing a mortgage. Here’s what happens.

You come across a listing and the price catches your eye. There may not be a lot of photos of the home’s interior. And it’s vacant. All signs point to the fact the home needs work. Then come the remarks – and this is where we see problems.

I don’t know why Listing Agents harp on about how much work a home needs in their marketing write-ups. Outside of the fact that it’s not really serving their clients’ interests because they are almost certainly over-disclosing and drawing unnecessary attention to a property’s drawbacks, lenders hate it. Notes like “handyman special” or “sold bones but needs TLC” are red flags for mortgage lenders. These alone can kill financing for a deal or, at the very least, flag the property for an on-site appraisal. When you see comments like on a listing, don’t assume that your pre-approval means anything. Lenders may simply balk.

Stigma and Financing

If a property is characterized by negative stigma, it could put a monkey wrench into securing lender approval. Could a publicized, violent crime that occurred at the home be an issue? Maybe. A lender might, for example, be concerned that – if they had to take possession of the home – it might struggle on the market under Power of Sale due to that stigma. I can’t say I’ve seen that happen, but I’ve often wondered if a lender might get cold feet based upon a dark stigma alone.

Former grow-ops remain a problem for mortgage lending. In spite of the fact that marijuana has been de-criminalized, and the “grow op” registry is defunct… if the home you’re looking at was ever on that registry, you’ll have a very hard time getting an approval. The last home like this I dealt with had Buyers come and it took them a lot of effort – and a much higher-than-average deposit – to get a mortgage on the home. From the lender’s perspective, this is arguably less about stigma and more about the health of the home, i.e. was it really properly remediated for any mould damage, etc.

As for distressed properties sold under Power of Sale through financial institutions, most banks won’t fund those mortgages, so you are likely looking at coming to the table with cash or alternative lender money.

All that is to say, if you want to jump in to the competitive world of buying fixer uppers in Guelph, you’ll need to have your financial ducks solidly in a row before you get going.

Fixer Uppers Aren’t Always a Deal

You have to be careful on price with distressed properties. They are not always a deal, especially if you need to factor in the costs associated with getting the house into shape. That last part is extremely important. We’ve all seen cases in this business of people buying a house without really crunching the renovation numbers. Taking the time to ensure that the home is priced correctly and the repairs are manageable for you is very important.guelph fixer uppers

Power of Sale properties, in particular, can give people a false sense of hope that they’re going to get a sweet deal. Despite common misperceptions, homes sold under Power of Sale in Guelph quite literally cannot be sold under market value. This is an often lengthy and frustrating process, as banks (and their lawyers) are in charge of determining value. From my experience, they don’t negotiate much. They really can’t expose themselves to the liability that would come along with the appearance that they didn’t try in earnest to get a fair price for the home.

Competition Can Be Fierce

It probably goes without saying, but fixer uppers tend to generate a lot of Buyer interest and this inevitably leads to competition. Steeling yourself for bidding wars is a good idea.

In competition, be it for a distressed property or a regular ol’ family home, I always try to emphasize the importance of keeping a level head. Emotional Buyers overpay for property. I cannot state it any more plainly. My former business partner, before she retired from this nutty business, had a great way of putting this. She said, “Homes are like buses. If you miss one, it sucks, but you just wait and another one will come along.” She was right.

These bidding wars can also be challenging for Buyers who find themselves competing with contractors or professional “Flippers,” both of whom tend to have high risk tolerance, for example waiving conditions. Which leads me to the next point which is…

Due Diligence is Very Important

Buying fixer uppers without conducting due diligence is a terrible idea. Trust me, some of these homes are true diamonds in the rough; some are going to be better suited for a teardown. Knowing how to spot the difference is so important, and most of us will require some expert help along the way.

Home inspections (even if done in advance of an offer,) are still one of the best ways to evaluate a home. It’s an opportunity to kick the tires, so to speak. What’s up in the attic? There’s only one way to find out – and it’s better to get up there and take a good look around before you commit to a purchase.

I’m definitely not trying to discourage anyone from buying a house that needs some TLC. I’ve done it myself! I bought a house that was in really rough shape when I first moved back to Guelph. It took a lot of time, effort, and money, but I lovingly restored it and, when I sold it, I did very well on the sale.

These are just some cautionary notes to consider as you venture down the path of fixer uppers in Guelph. A seasoned Buyer’s agent will also help you think through renovations and the math involved for successful resale.

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