Buying a fixer upper is a great way to quickly add equity into your home shortly after purchasing it. Rather than paying for the best house on the block that’s already been upgraded as much as it can be, buying a home in need of some serious TLC will provide you with the opportunity to add this extra value to it yourself while benefitting from added equity.

But before you scout out a fixer-upper to buy, keep the following considerations in mind to ensure you don’t wind up with a money pit.

1. Bring a Contractor Along For a Showing

While you will have the chance to bring a home inspector to scope out any major issues with the home after an offer has been accepted and the deal enters escrow (as long as you include a home inspection contingency – more on this later), bringing a contractor with you during a showing can help point out important factors about the property.

For instance, it would be helpful for you to know where any load-bearing walls may be in case you have plans on knocking any walls down to open up the space. It would also be helpful to know what the local by-laws may be about adding another bathroom, building an addition, or finishing an attic to convert it into livable space. A professional and experienced contractor will be able to fill you in on the type of work you may or may not be able to do with the property.

2. Have it Inspected By a Professional

If you’ve decided to buy the home and your offer has been accepted, now’s your opportunity to have a more in-depth look at the property to see if there are any underlying issues that could end up costing you a lot more than you had originally anticipated. Your home inspector will take a closer look at components such as the foundation, windows, duct work, electrical panels and wiring, plumbing pipes, HVAC system, roof, and so forth.

Certain issues can be easily and quickly fixed without putting a huge dent in your pocket, such as replacing kitchen cabinets or flooring. But other issues can take forever to rectify and cost a massive amount to fix, such as repairing a leaky rook or fixing a faulty foundation. An experienced home inspector will be able to uncover – to a certain degree – major issues that would classify the home as a bona-fide money pit.

You’ll get a written report after the inspection which will outline all these issues, and the inspector will highlight problems that require your attention. If there’s something you don’t like on the report, you have the right to renegotiate with the seller, or simply walk away from the deal altogether.

3. Calculate a Rough Estimate of Renovation Costs

If you brought a contractor along with you during a showing and had it inspected by a licensed home inspector, then you’ll have a pretty good idea about what types of things need to be done to bring the home up to par and their associated costs. Along with the advice of these professionals, you’ll also want to do a little research of your own.

Call specific trades to obtain estimates on jobs that need to get done, then add up the potential costs to see if they fall within your workable budget. Draft up a document outlining all renovations, which will help you to come up with a reasonable offer price on the property (that’s within market value range). Don’t forget to add a 10% cushion for any extra unexpected costs that can – and probably will – creep up throughout the renovations.

4. Look Into Getting a Specialized Renovation Loan

Properties that require extensive renovations may qualify for specialized mortgages. A 203(K) home loan, for instance, is backed by the Federal Housing Administration (FHA), and lets you incorporate renovation costs into your mortgage. The amount that you borrow includes both the purchase price of the home and the estimated renovation costs so you don’t have to come up with that cash upfront when paying contractors to get the work done.

In addition, you may be able to obtain a lower interest rate that often comes with these home loan programs. Also, the credit requirements are sometimes more relaxed as well. The downside to these types of renovation mortgages, however, is that there’s only so much that you can borrow – between $271,000 and $729,750, depending on the market price of properties in your neighorhood.

Have a chat with your mortgage broker to see if this option is best for you.

The Bottom Line

When it comes to buying a fixer upper, take your time and have patience. You don’t want to land the first one you see without having done your due diligence. Before you plunk down a huge chunk of change on a fixer-upper, make sure you enlist the services of a professional real estate agent who has experience handling these types of properties. An expert who has your best interests in mind will make sure you steer clear of bad deals that will leave you with a lot more on your plate than you bargained for.

Condominium living might not be for everyone, but there are definite perks to them, including affordability, desirable location, and access to amenities. They’re particularly well suited for those who like the idea of having someone else take care of many aspects of their property for them.

However, the state of your HOA can have a huge impact on your enjoyment of living. An HOA that’s run professionally can ensure that you’ll enjoy your home with minimal issues. On the other hand, an HOA that’s in bad shape can do quite the opposite.

So, how can you tell if your condo association is shady? While many times it’s not possible to tell until it’s too late, there are still some telltale signs that you may want to look out for that may signify that your HOA is in trouble.

1. The HOA Owns the Services Operating the Community

Ideally, all the service contracts for the community or building are with companies that have absolutely no affiliation with the board itself. If the HOA – or any board member on it – owns or has a stake in any one of the maintenance companies – such as the landscaping company, security company, engineering company, and so forth – this is a direct conflict of interest and even a sign of possible corruption or fraud.

2. A Board Member Holds Other Associated Paid Positions

Board members are typically owners who work on a voluntary basis. However, if any board member holds some sort of paid position within the association, this can open the floodgates for all sorts of problems, from constant complaints from owners to harassment and fraud.

3. The Community or Building is Self-Managed

A professionally-run condominium should have a reputable property management company appointed to run the community rather than allow it to be self-managed. While the latter may save owners in HOA dues, the types of problems that can arise are vast.

For starters, it’s highly possible that the appropriate insurance and property taxes are not being filed properly in a self-managed property. It’s also likely that there is no solid accounting measure put in place, which can put an association in financial duress at some point.

4. There Are Obvious Maintenance Issues

If you notice elevators out of service, unkempt landscaping, stains all along the hallway carpets, and overflowing garbage dumpsters, these may all be signs that the condominium is not being adequately managed, especially if these issues have been lingering for weeks or months – or longer – without being dealt with promptly.

Issues will always arise with these types of communities, but an HOA that is well run will know how to handle them in a time-efficient manner. Any obvious lack of maintenance often means there may be other issues lurking behind closed doors that you can’t see.

5. Reserves Are Low

Before a deal on a condo sale closes, you’ll have the opportunity to request documents from the HOA that you and your real estate agent can look over to ensure the community is financially sound. While there are plenty of things that these documents contain, you’ll want to pay particular attention to the financial statements, including the balance sheet, profit/loss statements, and reserves.

If those do not exist, or seem insufficient, that’s a really bad sign. This could potentially mean that there is not enough money to cover future expenses, such as a new building roof, new parking lot, new elevator, and so forth. If there’s not enough money in the pot, the funds will have to come from the owners, which means a big hike in your HOA dues at some point in the near future.

6. The Condo Fees Are Too Good To Be True

Low condo fees might be something you’re looking for, but be careful with advertised fees that seem too low to maintain the community. Of course, it’s possible that the fees have been able to stay low because the building is very well run, but it’s still important to check the reserve fund mentioned above, as well as the profit/loss statement to make sure there is no overspending involved.

If you’re buying a new condo from the builder, it’s important to keep in mind that some builders advertise low HOA fees just to attract buyers, only to raise them shortly after occupancy. Many times the initial budget that is set-up by the developer is inadequate to cover all maintenance issues.

Be sure to compare other similar properties and their HOA dues to get an idea of what an average is so you don’t end up unpleasantly surprised with a fee hike in the near future.

The Bottom Line

At the end of the day, it’s critical to thoroughly review all the documents that you are provided with to look for anything that may seem a little odd. Ask your board members for a copy of the most recent HOA meeting minutes to find out exactly what happens at these gatherings. If at least one or more of these signs are noticed, consider them red flags. If you haven’t bought yet, you may want to look elsewhere.

Roscoe Village is a quaint neighborhood with hidden restaurant gems on every corner. I was lucky enough to visit one such gem this week. Wishbone has been serving up made-from-scratch, down home Southern food for nearly 25 years. Located at 3300 N. Lincoln Ave., this colorful outpost serves breakfast, lunch, dinner, and brunch. Considering my deep love for Southern food, I had to order something with a Southern flare. I ordered the Crab Cake Benedict: English muffins, piled high with spicy crabmeat, Hollandaise, a sweet red pepper sauce, and of course, poached eggs. Cheese grits on the side were a must. The crab cakes were delicious, the meat was tender and spicy and the sweet red pepper sauce perfectly completed the dish. The cheese grits were very tasty as well. The side portion was much larger than I anticipated and I couldn’t finish them! One of my friends ordered the Red Beans and Rice. I happen to think my mama makes the best red beans and rice in the world, so I was immediately skeptical. I have to say, Wishbone makes a very solid dish. Cooked in chicken andouille stock, the beans were spicy and flavorful. Served with over easy eggs and your choice of toast, this is a scrumptious way to start or end a weekend.

Wishbone serves weekday breakfast and lunch from 8 am to 3 pm. Their dinner hours are 5 pm to 9 pm Thursdays through Sundays. Brunch is served Saturdays and Sundays from 8 am to 3 pm. The restaurant is spacious, with a lovely outdoor space for when the weather is warm. You can order online for delivery or carry out. You’ll receive a 25% discount for your first online order! Check it out here. Wishbone also provides catering and party services. With its bright décor and fun atmosphere, Wishbone is perfect for a family brunch or large gathering of friends. Make sure to stop by!

RACHEL HOOVLER & DEAN’S TEAM CHICAGO

It’s very exciting when your real estate deal closes, but it’s imperative not to rush the process until you’ve dotted all your “i’s” and crossed all your “t’s”. There are a few key documents that need to be reviewed before you move in, including the certificate of occupancy (CO). Whether you’re buying an existing home or are purchasing new construction from a builder, obtaining a copy of this document is extremely helpful.

This unassuming little piece of paper is actually quite powerful and holds a lot of weight when it comes to legal protection, negotiating, and ensuring a home loan is approved.

So, what exactly is a certificate of occupancy, and why is it so important?

Certificate of Occupancy – Defined

You want to make sure that the home you move into is safe to live in, right? Well, a certificate of occupancy will verify this fact. Usually, these permits are issued by the city’s building authority and confirm that a particular property has been constructed and maintained according to local government standards. They’re typically first issued when a home or building is first built, and whenever title is transferred to a new owner, additional inspections are performed accordingly.

For new-construction homes, the certificate of occupancy will be issued to your builder after they’ve requested the permit to construct the house. Once the home has gone through and passed the proper inspection process, the certificate is then issued.

Every newly constructed home goes through a number of inspections throughout the entire building process to make sure that every phase is compliant with local building codes. These inspections generally cover things such as ensuring electrical and plumbing work is done properly, or that the home meets fire codes, to name a few. If the builder does not pass an inspection at any particular stage, then the builder legally cannot proceed with construction until the issues are resolved.

When the home construction is complete, a final inspection is done. At that point, a certificate of occupancy can be issued to the builder if the home passes, which should then be provided to the buyer at closing.

A certificate of occupancy also applies to existing homes that have been renovated by previous homeowners. For instance, if a new addition was constructed at some point in the past, a certificate of occupancy should have been issued after that work was done to make sure it was constructed according to building codes. If you are not given this document, it would be tough to decipher if the work performed was done properly and if the home is deemed safe as a result.

What Happens if There Are Issues With the Property in Question?

If you’re buying a brand new home from a builder, a certificate of occupancy is an absolute must. In fact, it should be part of the entire home buying package that you receive from the builder, as it offers proof that you’re not moving yourself or your family into a shoddy structure that could pose a hazard.

If you’re buying resale, then the seller should provide this permit to you before the deal is sealed. The seller will pay a fee to have the initial inspection conducted as part of the process of transferring title. The seller will also have to conduct any further inspections required by the local zoning authority before the permit is issued.

If the inspection comes back with issues that need to be resolved, you can negotiate with the seller. The ideal scenario would involve the seller making any repairs and paying for them before a settlement is reached, after which the property will be reinspected again to make sure the issues in question have been resolved.

However, you could also negotiate a lower price for the home to compensate for the costs involved in bringing the home back up to par yourself. As long as both you and the seller agree, a conditional certificate of occupancy can be issued, assuming the necessary work will be done once the deal closes.

If there is a problem with obtaining a certificate of occupancy, you could have problems getting approved for a mortgage and home insurance, as both entities will often require one before a deal can go through.

The Bottom Line

While the visual appeal of a home is certainly something that may attract you to a home and entice you to put in an offer, what’s more important is that the property is structurally sound and safe for occupancy. That’s precisely what the purpose of a certificate of occupancy is, and why you should obtain a copy for the home you’re planning to buy.