Buyers often ask themselves if they should think about buying a fixer-upper or a move-in-ready home. There is an appeal to buying a home and fixing it up. A fixer-upper lets your home improvements reflect your individual style. Hard work and elbow grease might be right up your alley when it comes to home improvement.
A fixer-upper can be a great option over a move-in-ready home if you have the funds, skills, and time to invest in your home. If you’re a first-time homebuyer, you may find that you’ll be looking at purchasing a fixer-upper as your first home. That’s ok. By making sure you do your homework and get help where you need it, you’ll be in a position to add sweat equity to your purchase.
Below we will review the pros and cons of buying a fixer-upper versus a move-in-ready home.
Pros of Buying a Fixer-upper
- You could be able to buy a home below market value that needs a little work.
- By having the freedom to choose your own design you’ll end up with a custom home you love.
- There’s an opportunity to build equity through home renovations that add value to the overall property
- You may be in a position to sell the house or “flip” it for a profit
- The satisfaction of your hard work
Cons of buying a fixer-upper
- There’s inherently more risk because you won’t know the true cost of all renovations prior to purchasing the home
- In some cases, you’ll want a team of experts involved before you even put in an offer on the property.
- Home renovation is notorious for project overrun costs and taking longer than you initially planned for
- You may need to make alternate living arrangements depending on the extent of the renovations needed
- For some types of improvements, you may need permits and inspections before you start any projects
What to Expect: Repairs for a Fixer-Upper
If you are thinking of purchasing a fixer-upper the first thing you’ll want to determine is how much work needs to be done. Making sure you have a qualified home inspection done as part of your due diligence is the first step in understanding how much work the property may need.
The home inspector should be able to identify any structural problems with the home and may refer you to an expert if needed. For example, if the house needs a new roof, you may be referred to a roofing expert so you can get an accurate idea of the true costs involved.
In some situations, if your offer has been accepted by the seller and the offer is contingent on the home inspection you may be able to negotiate with the seller if issues were identified during the home inspection process.
Regardless its best to have any inspections completed on the house as part of a contingency. If its determined that the house needs too much work, you will be able to work with your real estate agent to perhaps, choose another property.
You could work with a general contractor to identify all needed repairs and create a budget for the projects. The budget should include all permits, inspection, labor, and material costs. Make sure you have a true picture of what the improvements will cost for your fixer-upper.
Do you have the time and motivation for to buy a fixer-upper?
Be honest with yourself about the amount of time you can dedicate to working on your fixer-upper? Do you work full-time? Is the time required reasonable for you to accomplish? Being honest with yourself is one of the most important things to do when considering renovating your own home.
Other considerations are, do you have the skill to complete most of the work yourself? If you’ve answered no, then it may be beneficial to consider buying a move-in-ready home. If you need to pay contractors to do everything then it might not make financial sense to move forward.
Know the Statistics
According to Porch.com, using data from the National Association of REALTORS, the average purchase price of a fixer-upper was $199,819. Compared to the average purchase price of a move-in-ready home of $250,496. It seems as if the math works in favor of buying a fixer-upper, except the average homeowner who went over budget did so by spending $75,922 on home repairs.
The over budget total spend was $275,741 compared to the $250,496 that the turn-key or move-in ready homeowners spent in total. That means the fixer-upper buyers spent more than $25,000 more than the move-in ready buyer.
The interesting part is that when surveyed the top answer for why the buyer had chosen a fixer-upper over a move-in-ready home was to save money.
Final Thoughts
There’s far more risk and work involved when buying a fixer-upper. That said if you’re the type of person that loves hard work and a project. Or if you have a great vision of what your home could look like then buying a fixer-upper might be right for you. Be sure to have all the necessary inspections. Don’t skip making a budget. The budget will help you decide if the money you plan to spend on renovations is affordable and also if it’s a wise investment. Don’t be afraid to ask for professional assessments on your plans. Make sure you have a backup plan in case of project overruns. Most of all, make sure whichever home you choose a fixer-upper or a move-in-ready home is right for you.
Learn more about buying a fixer-upper my contacting me today.
