Picture it, we pull up to a perfectly sized house on a large lot in your dream neighborhood and the list price is well below other houses in the neighborhood. The only catch is that the property needs a lot of TLC. The option of purchasing a fixer-upper just entered your home buying decision making process. If buying a fixer-upper wasn’t part of your buying strategy how do you know if it is a viable option to explore? This month, I cover several of the pros and cons associated with buying a home that needs some TLC.
The three most common pros for buying a fixer-upper are: a reduced purchase price, an opportunity to customize and less purchase competition.
Purchase Price | A Zillow Digs report recently indicated that fixer-uppers can list, on average, up to 8 percent below market value. The lower purchase price of a fixer-upper may make a home more affordable that would otherwise be financially out of reach. In addition, the lower purchase price will help you save money on property taxes each year.
Customize | One of the most attractive reasons for going the fixer-upper route is the chance to customize a house to your liking and preferences. The best fixer-uppers are those that have limited serious problems and require just cosmetic improvements. If an inspector, prior to the closing, does find a serious problem with the home you are considering, you can assess whether or not it warrants walking away from the deal or using it to further reduce the sale price.
Less Purchase Competition | Some surveys indicate that, up to 70% of Americans are looking to purchase a “turn key” home. In highly competitive markets such as ours (where houses get snapped up quickly and have multiple offers) a fixer-upper is less likely to have purchase competition. This can dramatically increase your chances of being able to purchase the home without getting into bidding wars.
All these pros may have you convinced that a fixer-upper is the way to go. There can, however, be draw backs that deserve evaluation before you take the plunge. The three main cons to be aware of when looking at purchasing a fixer upper are: extensive projects, hard to estimate project budgets and unforeseen issues.
Extensive projects | Knowing the extent of projects to fix the home up can be next to impossible especially if the home was subject to extensive deferred maintenance from previous owners.
Difficult to Estimate Project Cost | Not knowing the extent of the projects can make accurate cost estimating a real challenge. Experts recommend that extensive project cost research and hiring a general contractor you trust are ways to help increase the accuracy of your budgeting for fixer-upper projects.
Unforeseen issues | Some projects in a fixer-upper can, and will be, more expensive than originally anticipated. To stay on budget, it is recommended to pad a project’s budget to account for unknown issues.
If you have an eye for design, patience and extra money to set aside for projects, purchasing a fixer upper maybe the best way to get the home of your dreams without having to build it from the ground up. However, if you want to move in immediately and are on a firmly fixed budget then it’s probably not the best option for you. In either case, I have helped a number of my clients decide the best home ownership route to take. Give me a call as I am happy to answer any questions you might have and can help you make dreams of owning a home a reality.