A home that needs major renovations may seem like an attractive opportunity to acquire property at a more affordable price. However, a low purchase price does not always mean a good deal. Construction work, unexpected costs, insurance, and possible financing difficulties are added to the acquisition expenses. Specialists from the Quebec Professional Association of Real Estate Brokers (APCIQ) advise assessing seven key factors in advance before signing a purchase contract.
The recommendations were shared by Nathalie Bégin, Director of Professional Brokerage Practice at APCIQ.
In brief: what to check before buying
- The real cost of the home, taking future renovations into account.
- The condition of the building and a preliminary estimate of construction work.
- A financial reserve for unexpected expenses.
- Mortgage and additional financing options.
- Property insurance conditions during renovations.
- The need to obtain municipal permits.
- The legal terms of the offer to purchase.
1. How to properly assess the cost of the home and the renovations?
One of the most common mistakes buyers make is comparing only the price of the property being purchased with its current market value, without taking upcoming expenses into account.
According to Nathalie Bégin, it is necessary to evaluate the total cost of the project: the price of the home plus the cost of all renovation work. The resulting amount should then be compared with the market value of similar housing after the renovations are completed.
For example, a buyer purchases a home for $400,000, but another $200,000 must be invested to bring it to proper condition. The total expenses will amount to $600,000.
If similar renovated homes in the area sell for about $500,000, such a purchase is unlikely to be profitable in terms of later resale.
The specialist points out that construction work has become significantly more expensive in recent years. Therefore, even substantial investments in a property do not guarantee that the money spent can be recovered upon sale.
2. How much will the renovations really cost?
Before signing the contract, a thorough inspection of the property must be carried out. In some cases, a standard inspection is not enough — a more detailed examination of the home’s technical condition will be required.
It is especially important to find out exactly what work is needed, how extensive it is, and what additional problems may be discovered once the renovations begin.
To do this, it is recommended to invite a general contractor to the site, who can assess the scope of the upcoming work and prepare a preliminary estimate.
Nathalie Bégin also reminds buyers of the legal nuances of the offer to purchase. If a particular defect in the property has already been officially declared by the seller, the buyer may not always be able to withdraw from the deal after the inspection by citing that defect.
Therefore, when preparing the offer, special protective conditions that take into account the specific condition of the home must be provided for in advance.
3. Why is it necessary to have a reserve for unexpected expenses?
Even the most detailed renovation plan does not guarantee that all work will go according to the original estimate.
After the walls are opened up, problems with the electrical wiring, plumbing, foundation, or insulation may be discovered. Sometimes work that initially seems small turns into a much larger project.
APCIQ recommends setting aside an additional reserve of 15–20% of the renovation budget.
For example, if the planned work will cost $80,000, you need to have an additional $12,000 to $16,000.
Thus, the real renovation budget should be no less than $92,000–$96,000.
4. How to organize financing in advance?
Buyers are advised to consult a mortgage broker even before looking for a suitable home and find out what financing options are available for purchasing a property with subsequent renovations.
Mortgage pre-approval will help you better understand your own financial capabilities and make decisions faster when a suitable property appears.
However, there is an important caveat here.
The standard financing condition in an offer to purchase usually applies to the mortgage loan for acquiring the home itself, not to additional funds for renovations.
As a result, a buyer may receive approval for the purchase of the property but face a refusal of financing for the construction work.
Therefore, renovation costs must be discussed with the financial institution in advance and factored into the overall structure of the transaction.
5. Can a home be insured during major renovations?
Insurance is another issue that must be resolved before the purchase.
In the case of major renovations, insurance companies may impose additional requirements on the property. In some cases, an insurer may refuse altogether to issue a policy for a property undergoing large-scale construction work.
The owner then has to look for another insurance company, whose services may turn out to be significantly more expensive.
Therefore, it is important to contact your insurer in advance, describe the planned work in detail, and find out what insurance conditions will apply throughout the renovations.
6. What permits will be required from the municipality?
Not every renovation can be started without approval from local authorities.
Quebec municipalities set their own requirements for construction and renovation work. The rules may vary depending on the area, the type of property, and the nature of the proposed changes.
Before purchasing, you need to check:
- whether a construction or renovation permit is required;
- whether current zoning allows the planned changes;
- whether there are special requirements for buildings in the area;
- whether the proposed work complies with municipal building codes.
Particular care should be taken with homes located in historic districts or areas with special urban planning restrictions.
7. Why is it so important to draw up the offer to purchase correctly?
The last, but no less important, point is the legal side of the transaction.
In Nathalie Bégin’s opinion, the help of a professional real estate broker is especially useful when purchasing a property that requires major renovations.
A properly drawn-up offer to purchase should take into account the condition of the building, inspection results, financing conditions, and other circumstances that could affect the buyer’s decision.
Special clauses make it possible to provide for the option of withdrawing from the deal without legal consequences if the identified problems or the results of inspections do not meet the buyer’s original expectations.
That is precisely why you should not rush to sign documents, even if the price of the home seems exceptionally attractive.
Unique Commentary
The Quebec real estate market offers buyers quite a few homes that require substantial investment. Sometimes such properties become an opportunity to acquire housing in an attractive area where fully renovated homes cost significantly more.
But there is one significant difference between buying an inexpensive home and acquiring a truly advantageous property.
In the first case, the buyer sees an attractive price. In the second, they understand how much the entire project will cost once the work is complete.
It is especially important to remember that renovation in Quebec is not only about building materials and paying contractors. It also involves municipal rules, permits, insurance restrictions, building code requirements, and the specifics of mortgage financing.
Therefore, the main advice for a prospective buyer is simple: do not buy a home at a price you can afford today. Buy it based on the full cost you will be able to sustain tomorrow.
Sometimes the most profitable renovation is the one the buyer walked away from in time.
