I frequently have calls from people who express an interest in purchasing a fix up property. Some are from buyers who are looking for a "good deal" because they are short of funds or would like to get more house than they have been told they can afford. Most of the time, these folks have every intention of living in the property. Typically, they are applying for a conforming 30 year loan, usually with a minimum down payment. In other words, they don't have a lot of spendable capital. Whether or not I would recommend that they purchase a fix up property, depends largely on how much work the home requires. Even though it may be tempting to buy something at a reduced price, the buyer must remember that the property has to meet the requirements of the lender and the appraiser. Should the appraisal require the seller to make many repairs, the seller will no longer be able, in most cases, to offer the discounted price. In addition, even if the buyer and the seller agree to the reduced price because of needed repairs, the buyer must understand this fully, and not expect the seller to do extensive repairs as a result of home inspections conducted after the parties have reached a contractual agreement. The purchase of a fix up requires thorough investigation on the part of the buyer before entering into an agreement to purchase, and the seller must be certain that the offer is carefully prepared to protect them from warranties that they may be unable to honor. Caution on the part of both parties, as well as representation by a knowledgeable real estate professional are the important ingredients in this type of transaction. The other type of call I receive for "fix up" properties is from Investors. They are looking for a property they can purchase at a discount and resell at market value. Some investors hold the property and use it over the long term as a rental investment. Others, do the repairs right away, put it back on the market for sale, recover their costs, and if everything goes according to plan, make a profit in a relatively short time period. As with the person who intends to occupy the property, there are some risks to investors. If they are inexperienced or do not have sound advice from a contractor, they could inherit some unforseen repairs. If, for example, they did not adequately inspect the heating and cooling system prior to making their offer to purchase, it would eat into any potential profit should they discover after the closing that an additional $2,500 in repairs were necessary. Most experienced investors take their contractor to the property for a precontract inspection. I always make sure that the utilities are on, to facilitate this process. I advise my sellers of "fix up" properties that every possible avenue of discovery should be made available to a prospective buyer. There are other protections which should be put into the purchase agreement, for the benefit of both parties. Investors normally take the property in "as is" condition....a fairly dangerous proposition for the typical home buyer. There are all sorts of disclaimers which should be included, as well as some changes to the preprinted portion of the purchase contract. In addition, most investors offer all cash because they understand the difficulties in meeting lender requirements when a property is in disrepair. A cash transaction avoids those delays and adjustments, and allows the buyer and seller to agree on any unusual conditions without the involvement of a third party. Buying a fix up property can be a good investment, however, caution should be exercised. The buyer needs to clearly understand what they are getting, and the seller needs to understand their responsibilities and obligations. Whether you are the buyer or the seller, you should discuss it with your attorney and/or your accountant, and seek representation by a competent and experienced real estate practitioner.