Is Buying a Fixer-Upper Worth It?

Are you thinking about buying a home soon? You’re not alone – low inventory, high demand has buyers purchasing homes that need a lot of work with a hefty price tag. To some, buying an older home is a craft. They love putting in the time and effort to recreate its former glory. To some, watching home improvement shows has given them a false sense of DIY. Before you take the plunge, let’s dive into the reality of buying a fixer-upper and how to determine if it’s the right fit for you. 

Home’s Market Value –

Let’s say you found the one – you’re ready to make an offer. In real estate, it’s essential to hire a knowledgeable realtor to guide you through the whole buying process. There are so many in’s and out’s to a transaction that could cost you thousands if you don’t know what you’re doing. Next, making an offer can have an art to it. First, add up the cost to complete the renovation. This estimate should include time and the cost of labor. Next, subtract that from the home’s potential market value after renovation. To get the closest home estimate, your realtor can then pull comparable pricing in that specific neighborhood. 

Don’t Skip Inspection!

Inspection clauses are crucial for high-return investments. In a worst-case scenario, it can help you back out of the deal. The inspectors’ findings can also help negotiate the sale price downward. Most real estate experts could recommend avoiding it altogether if significant structural improvements are needed. Not sure what is considered a significant improvement – your realtor should point you in the right direction. 

Money – Cash is King!

Buying a fixer-upper and lining up the proper funds can be one of the most challenging aspects. Most people don’t have the extra funds lying around after paying the downpayment and closing costs. So what do they do? For most, renovation loans make the most sense. These types of loans are through a home equity line of credit or a mortgage. Home equity loans give homeowners the option to convert the equity they have built up in their home into cash. The hopes of renovating will increase the overall value of the home. However, be mindful that you are putting your home on the line- if real estate values decrease, you could end up owing more than your home is worth. For small projects, a credit card is a great option, but cash will always be king! 

Diamonds in the rough

The best fixer-uppers are homes that require only minor cosmetic updating rather than major structural repairs, such as:

• Fresh interior and exterior paint
• New carpets and flooring
• New Trimwork
• Replacing hardware and Resurfacing kitchen cabinets 
• Upgrading appliances
• Cleaning up the landscaping
• Removing outdated fixtures

Bottom Line – 

Buying a dirt-cheap home and spending some money to renovate it can seem like a great idea, but many people are unaware of the time and effort projects like that take. Weigh up the pros and cons of buying a fixer-upper and present them to your realtor to find you the best home in your budget. 

Let’s get you in the real estate market today! Call us at 720.897.8100 or email Andrew.Arevalo@compass.com for all your real estate needs.