Ask Yourself These 3 Questions Before Buying a Home That Needs Work

It could help you avoid a big mistake.

These days, the U.S. real estate market sorely lacks inventory, and home prices are still pretty elevated on a national level. Throw in expensive mortgage rates, and it's easy to see why so many buyers have struggled to find a place of their own.

If you're trying to buy a home, you may be at a point where you're willing to make some compromises. That could mean settling for a starter home and upsizing down the line, when home prices come down or when your income rises. Or it could mean buying a home that needs work and dealing with the repairs.

The good news is that homes in need of repairs will often come with a lower price tag than those in better condition. That means you might save money on your mortgage.

But is buying a fixer-upper home a good idea for you? Ask yourself these questions before moving forward.

1. Have I gotten an estimate for what the work will cost?

You might pay less for a home that needs work. But one thing you don't want to do is sign up to spend so much money on repairs that you're completely negating your savings and losing out financially. And also, you'll need to make sure any repairs you take on work for your budget.

Unless you're a home repair expert, you probably can't determine the cost of fixing up a home by yourself. So before signing a home purchase agreement, get some contractors in to provide you with estimates so you know you're dealing with.

2. Do I have a place to live while the work is being done?

Depending on the condition of the home you're buying and the nature of the work it needs, your new home may not be habitable while it's being renovated. And that means you may need to secure temporary housing during the repair process.

That's not always such an easy thing, though. Finding a short-term rental can be tricky when you have pets, or when you have kids and you need to stay in close proximity to their schools. Make sure you understand how long your repairs will take and figure out where you'll situate your family while they're in progress.

3. Can I spin the situation positively and turn it into an opportunity?

The idea of having to deal with extensive home repairs may be daunting. But on a positive note, if your home needs a lot of work, it gives you an opportunity to put your own stamp on it. You can have the flooring you want in your living room, the appliances you want in your kitchen, and the fixtures you want in your bathroom -- as opposed to having to settle for a previous owner's choices and taste.

Buying a home that needs work isn't always a poor choice. In some cases, it can be a great one. But be sure to run through these important questions before making an official offer and locking yourself into a purchase.