By: John Matarese , Emily Hanford-Ostmann

Record home prices and high borrowing costs push some buyers toward fixer-uppers, but hidden problems can cost more than anticipated.

Kellen Mullen learned that lesson the hard way after buying a house that needed major work, including a clogged sewer line that led to a $20,000 repair bill.

"Somebody knew there was a problem, and didn't tell the next person, and we got stuck with it," she said.

Pros of move-in ready

Realtor Michelle Sloan of RE/MAX Time said move-in ready homes can help buyers avoid those kinds of costly surprises.

"If you spend a little bit more upfront, and buy the move-in ready, you won't have a lot of expenses for the first couple of years," Sloan said.

The cost of building materials has gone up 40% since December 2020, according to the National Association of Home Builders, making major home repairs and upgrades much more expensive.

"All of those items that you have to spend money to renovate cost a lot more today than they did five years ago," Sloan said.

Watch as a realtor explains the hidden costs that come with many fixer-uppers:

Fixer Upper vs Move-in Ready: Which is the better bet in 2026?

Preparing for hidden costs

For buyers still considering a fixer-upper, NerdWallet lending expert Kate Wood said never skip the home inspection, even if you know the home needs work.

"You could also consider doing a walkthrough with a contractor to get an idea of what might be needed and how much it's going to cost," Wood said.

Wood recommends building a 20% buffer into your renovation budget for unexpected issues and cost overruns.

"We never know what we're going to run into with supply chain issues, potentially driving up the costs of the material," Wood said.

Borrowing options for fixer-uppers

Renovation loans can cover both the purchase price and repair costs, meaning buyers only have one loan to manage — but Wood cautioned there are trade-offs.

"These can be complicated to deal with. There is a large amount of paperwork," she said. "Depending on the lender and the loan type, you may also be looking at additional layers of oversight throughout the renovation or construction process."

According to NerdWallet, fixer-upper mortgage options include:

• FHA 203(k) offered through the Federal Housing Administration
• HomeStyle mortgages guaranteed by Fannie Mae
• The CHOICERenovation loan guaranteed by Freddie Mac
• VA renovation loans for VA borrowers

With kitchen remodels, for example, now costing up to $89,000 on average, Sloan said newer homes may save money over time.

"The savings you are getting with a fixer-upper may not be what you think it is," she said.

And while doing some of the work yourself can save money, DIY also costs significant time.

"Whatever time you are spending working on the home is time you could be spending doing something else," Wood said. "So your labor is not free labor."

Buying a home that needs work might seem like a smart way to save money in a tough housing market — but before committing to months of renovations, buyers need to make sure they have the time, cash and patience to deal with a fixer-upper, so you don't waste your money.

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