How to line up your renovation with your home purchase
For many potential homeowners, buying a fixer-upper is one way to attain the square footage and location of their dreams at a more affordable price. Many considerations come into focus when buying with the intent to renovate—not only in terms of cost, but how the construction timeline syncs with the closing schedule. When do you bring in the architect and general contractor?1000px-Graph-Timeline-new
- Speak with a mortgage broker or lender (1 – 3 weeks) In parallel, determine how you want to pay for your renovation: a construction-to-permanent loan will allow you to finance your renovation as part of your mortgage application in one go (rather than having to go through two separate processes).
- Hire a real estate attorney (3 days – 2 weeks for this)
- Find your new home and make an offer (1 – 4 months) Take into consideration how much of a reno budget you’ll have after the purchase. On the reno front, decide the time/budget of what you can afford. (Don’t forget about closing costs; your agent and attorney can guide you on the cost range.) Keep in mind how long you want to carry a property after closing given that you will most likely be paying for housing elsewhere unless you plan on roughing it in the unrenovated space.
- Negotiate the offer (2 days – 2 weeks) In the meantime, educate yourself via Sweeten’s blog about how much labor and materials cost, along with the average home renovation costs. If you get a head start on filling out your project details on Sweeten, you can take some time to get a better handle on what you need (ie. alteration agreement, building insurance requirements, space dimensions for the renovation). Then, post your project after you close on your property.
- Schedule and conduct an inspection, if applicable. (In a hot market, this is a contingency a buyer may choose to forgo to make their bid more attractive). This can also be done while negotiating the offer (1 – 2 days). If you’re buying to renovate, you’ll want to know what will be possible to change, given existing conditions. You may not care whether the appliances are working or if the walls are orange, but you’ll want to know about the state of the electrical and plumbing systems and whether they can handle the upgrades you’re imagining. The inspection will provide additional insight into the condition of the apartment and the building.
- If you plan on moving walls, be sure to indicate you’ll need an architect or a designer in your Sweeten project post.
- Get a heads-up about other financial or building issues. If the inspector tells you the apartment building needs a new roof or boiler, for example, look into whether there will be an assessment levied or if money has already been raised. If there will be an assessment you’ll have to bear as the new owner, it may cut into what you have allocated toward your renovation. The same goes for a house: if there are pressing repairs, you’ll foot the whole bill.
- Have your attorney conduct due diligence (2 weeks) At the same time, the attorney should also review the alteration agreement to make sure nothing prohibits you from doing what you want most from your renovation wish list and nice-to-haves; ie) Checking the wet-over-dry rules if you plan to relocate the kitchen.
- In a house, be certain zoning allows what you’d like to do: ie) If you’re in a landmarked district, you’ll be restricted in what you can do to the home’s exterior.
- Sign the contract to your new home (5 – 7 business days) Now’s the time to post your renovation project to Sweeten with details about your wish list, budget, and timeline. You’ll be matched within 48 hours to vetted general contractors interested in your project. Review your contractors’ work and reviews and then select your favorites.
- Apply for a mortgage and receive a commitment (3 – 6 weeks) Then reach out to your contractor(s) and set up site visits. Here’s how to prepare for it.
- Complete and submit your co-op/condo application package (10 – 20 business days or within 3 days of receiving mortgage commitment)
- Keep the conversation going and negotiate the terms of the renovation budget, timeline, and other contractual details with your Sweeten contractor. Here’s a primer on how to evaluate different bids (Sweeten can help).
- Figure out what the contractors’ schedules are for the coming quarter/6 months, to see where your project could fit in. Make sure the contractor is able to start immediately after your closing date.
- Meet for a board interview (this can take anywhere from 1 week to a few months).
- Receive board approval (again, be prepared for a wait time from 1 week to a few months after the board interview).
- Schedule a closing (2 weeks after approval). Once your closing is scheduled, let your general contractor know so that room can be made in the schedule for your project to commence.
- The keys to your new home are in hand! Sign the contract with your Sweeten contractor. If you’re in a condo or co-op, you’ll also need to get the renovation approved by the board.
As you can see from this timeline, some overlap exists between your renovation and your property purchase schedules. Keep in mind, however, that the bulk of the renovation work that happens prior to closing is prep work: this is the time to educate yourself about costs and processes while familiarizing yourself with various contractors to see who might be the best fit for your project.
While you can lay the groundwork, don’t pull the trigger until you own the property (you never know what might happen!). Only after you have the keys in hand should you pick up that sledgehammer.
Still debating homeownership? This guide will take you through the costs.
Sweeten handpicks the best general contractors to match each project’s location, budget, and scope, helping until project completion. Follow the blog for renovation ideas and inspiration and when you’re ready to renovate, start your renovation on Sweeten.