In This Market What Makes a Fixer Upper a Good Choice?

Ever watch that real estate show on TV? The one where the couple looks at three houses and picks one? And, at least from your point of view, they always pick the "wrong" one? The most intriguing part of the program is the end when the cameras return in six months to show viewers what the buyers have done with the place. Sometimes the "perfect" house isn't bought, it's made, but how do you know when buying a place with good "bones" and fixing it up is the right choice for you?

** The Term Fixer Upper Has a New Meaning These Days **

In this market, buying a "fixer upper" doesn't necessarily mean a creaky Victorian with plumbing from the turn of the century. During the decline in the real estate market and the financial stress of the recession, a lot of great properties stayed on the market months longer than usual. And if the previous owners were feeling the economic crunch -- and weren't we all -- they might have put off minor repairs or updates.

** Run the Numbers, All the Numbers **

The best thing, and the one that attracts most buyers to these kinds of properties is the fact that you are essentially getting a blank slate. Anyone who has ever lived through a major renovation knows that the time to make big changes is before you move in, not when you're tripping over the ladders and choking on the dust just trying to get a cup of coffee in the morning. Which raises the first set of questions:

• Can you afford to remain in your existing home while the work is being done?

• Can you pay two mortgages for the length of time required to sell your previous home?

• If you do have to move in immediately, are you prepared to live with the work in progress?

Buying a property and making major changes immediately -- think taking out walls, redoing the bathrooms, gutting the kitchen, installing hardwood floors -- is a game of numbers. And every number has a dollar signed attached.

** Consult with a Contractor **

Before you sign the contract meet with a contractor. Do a walkthrough of the property with the person who will be -- or might be -- in charge of the work. Get measurements and estimates -- in writing -- of both the money and the time involved. Then extend both. Costs always run over. Schedules are rarely met. If your contractor says he'll be finished on August 1, don't plan a backyard wedding for August 2 unless you can make tarps and sawdust look festive.

Every sale involves a home inspection. That's the time to find out if there are any potential issues with major systems, like the plumbing or the electrical, that could lead to code compliance problems during a renovation. Also, check out homeowners association covenants. Is there anything to stop you from adding a room or tacking on a garage? Some HOAs, for instance, forbid garage doors that face the street or open-face garages.

** Will You Do the Work Yourself? Really? **

If you are planning on doing the work yourself, be more honest than you've ever been:

• Do you have the necessary skills?

• Do you have or can you afford the right tools?

• Do you have the time, and more importantly, will you make the time?

Any do-it-yourselfer husband who has ever attempted a major home renovation based on enthusiasm and optimism alone will tell you that after a woman has washed dishes in the bathtub for six months, she gets hard to live with.

** Make Changes That Pay for Themselves in the Future **

Finally, look to the future. American society is more mobile than ever. If you know you will only live in the house for a few years, pick the renovation projects that will get you the most return for your dollar in the end. Updated kitchens and bathrooms top that list. With more people staying at home to save money and live with fewer expenses, a little luxury like a spa tub or a professional-quality stove can go a long way. Don't ignore pleasant cosmetics like nice light fixtures and wall treatments, but remember, if you bought the house for its "bones" the next buyer might well do the same.

With the current low interest rates and good buying climate, opting for a home in less-than-perfect condition can get you in an area you otherwise might not be able to afford. Bottom line, do the math, then do it again, check it, and then discuss it with a better mathematician -- your contractor. A "fixer upper" can be a great option, especially for first time buyers who have saved up for the day they take possession of the keys. But don't make the step until you know exactly what you're stepping into.