Buying Advice

Facts About Fixers

It’s fairly common, especially now that prices are high, that REALTORS® receive calls from buyers looking for bargains in the form of a “fixer-upper.” Some buyers think accepting a fixer-upper might provide a much-needed price break while others are looking for something to improve through sweat equity.

Financing Challenges With Fixer-Uppers

Keep in mind that trying to buy a “fixer” using OPM (Other People’s Money) is not a simple process. Fact is, buying such a property with no money down is virtually impossible. Just like the auto lender who wants assurance that a car runs before they loan on it, home lenders want to be sure a house can really “house”.

Buying a fixer involves much more than just the willingness to make repairs. Remember, the two components of a loan are buyer strength and collateral (the property). Loans with little or no money down are highly scrutinized by underwriters who must cautiously assess the lender’s exposure. Lenders don’t want to be stuck with a property that will bring far less than owed at a foreclosure sale. This is the exact situation when a home needs major repairs.

Repairs and Renovations

These days, even a healthy down payment and good credit aren’t enough. Those lucky enough to find a lender willing to accept a challenged property can expect that a licensed general contractor will be required for renovations. A construction loan may be required. An FHA Section 235 loan (3.5% down payment) or a conventional rehab loan may allow a buyer with verifiable experience to do the work themselves. It’s not an easy process and one requiring a very patient seller (not many of those these days).

It may be possible to have some repairs done prior to recordation. Look around for a contractor who will agree to be paid out of the seller’s proceeds. An appraiser is normally required to certify completion of repairs. There is an additional charge for this. It is difficult to get lenders to agree to repairs after closing. In fact, withholding money for any reason is a major issue.

Consider Alternatives and Adjust Expectations

Those short on patience and weak in the pocket are well advised to consider other options. Remember, get started however you can. Adjust expectations of location, house or land size but not property condition. Today’s buyers no longer consider their home purchase a forever commitment. Start small and work your way up. Until then, remember to “Keep the Faith”! Congratulations to Faith Makanalani Kraus, who will soon join Team Nakanishi as a member of our sales team!

About the Author

Denise Nakanishi

Denise Nakanishi is a REALTOR Broker with Hawai'i Life. Denise Nakanishi is one of Hilo's most acclaimed real estate agents. She reached the rank of Major in the US Army and is now known by many as "Major Mom." The nickname fits–not only does Denise bring the discipline and mission-oriented attitude you'd expect, she's also caring and compassionate, always looking out for her clients like they're her own family. Having made the Big Island her home since 1987, Denise combines her extensive knowledge of the area with a sharp focus on customer service and the results speak for themselves. She's the recent recipient of the Best East Hawai`i, Best of Zillow, Chairman's Circle Award, President's Circle, Top Producing Agent since 2001, and Realtor of the Year awards. Denise stays ahead of the curve because she's passionate about education–she served as Education Chair for Hawaii Island REALTORS® for many years. She's one of Big Island's best real estate resources, known for her weekly article in the Hawaii Tribune Herald. Denise leads Team Nakanishi for Hawai`i Life, who is committed to their family, work, and community. In her little time away from work, Denise is a committed runner and Grandy. She also devotes many hours to various Veterans' Organizations, the East Hawaii Cultural Center, and the Hawaii Island REALTORS®. You can email me at or via phone at (808) 936-5100.

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