In this crazy seller’s market, where multiple offers and escalating prices have become the norm, one strategy that many buyers consider is focusing their sights on a fixer-upper. The idea is that homes in less than great condition will garner less interest and, in turn, hopefully a more reasonable selling price. And of course there is also the prospect of eventually reselling with a tidy profit from all the improvements that you have made. But before jumping into a huge project, which a fixer-upper will inevitably be, it is important to think things through on a couple of different levels. The first thing to ask yourself is “Am I a good candidate for taking on a fixer-upper project?” and secondly, “Is the house I have my sights on a good fixer-upper prospect?”
First things first -Are you personally a good fit for taking on a fixer-upper project? You must honestly sit back and evaluate your ability to deal with a disrupted home environment for an extended period of time and you must also, of course, consider everyone else who lives with you. Can they live with the disruptions that a remodel entails? This disruption may be in the form of living with dust, bad smells and dysfunctional systems and appliances for months on end, or perhaps even living somewhere else for the length of the renovation period. Is this a real possibility for you? Time is another personal consideration. If you are planning on doing some or all of the work yourself, do you really have the time for the project? And even if you are handing it over to the pros, do you have the time to allocate to interacting with and overseeing the people you hire? And finally, do you have the financial backing needed to complete a renovation project beyond the finances required to purchase the house itself?
If you’ve searched your (and your families) soul and decided that ‘Yes! I can do this!’ then it’s time to get down to the real practicalities in evaluating the potential success of the fixer-upper that you are targeting. First, have a Realtor evaluate the asking price to make sure it is actually a fixer-upper price and also find out what similar homes in the neighborhood have sold for. Next, you will need to determine your renovation budget. For maximum resale value, remodeling investments should not increase the value of your house more than 10 to 15 percent above the median sale price of other comparable houses in your area. If you are creating your dream home and want to totally deck out the place regardless of what others in the neighborhood are doing, then go for it. Just be aware that you are not likely to recoup the investments you make that are above and beyond what is in line for similar homes in the neighborhood. Have a professional inspection done to evaluate what structural and whole house system improvements are needed. The ideal fixer-uppers are ones that will require mostly cosmetic improvements such as painting, drywall repairs and floor refinishing, as they have a high ROI (return on investment). However, some larger projects such as kitchen, bath and basement remodels, new roofs and siding, and hardwood flooring installation can also significantly increase market value and are projects that can pay off in the long run. After determining the scope of the project, do the math. Factor in your contractor’s or your own estimates against the price of the potential fixer, remembering that there will always be extra expenses no matter how carefully you plan. If the numbers look promising, and again, you feel you and your family are a good fit for a renovation project, then you may have found a winner. A fixer-upper can be a lucrative and satisfying project, but just be sure you have thought is all through before taking the leap!