Before you buy a fixer-upper
These days, there aren't that many choices when house shopping. The continued housing inventory shortage is driving buyers to consider looking for a property that might need some cosmetic changes and upgrades. "But just because the price is right or the location is fantastic and the backyard is all you ever wanted, doesn't mean it's a good deal", says Greg Hanner, ECAR President. "You definitely need to know a few things before going into a fixer-upper."
On the other hand, your foresight and handyman skills may bring you a healthy return on your investment. You don't need to be a DIY master to make it worthwhile, either. Time and patience may be all you need. First, determine your budget based on the market value of homes in your neighborhood, because you're not going to sell for more. "It doesn't matter how much money you can put into the house," Hanner says. "You're limited by the market value of what nearby houses are selling for."
Then, start evaluating what improvements are needed. Based on data gleaned from the "Remodeling Impact Report" (RIR) from the National Association of REALTORS®', if these three projects are on your fixer-upper's list of must-haves, then you may have found your dream equity-builder:
- New roof: A new roof may not be the remodeling project of your dreams — until you realize it could actually pay you. You'll spend about $7,500 to install it (based on a national average determined by contractors responding to the RIR survey), but when you sell, it could recoup 109% of that or $8,150, according to REALTORS® surveyed.
- Hardwood floors: It costs about $3,000 on average nationally to refinish hardwood floors. The survey indicates you could recoup 100% of that at resale. If you're looking at a fixer-upper (at the right price) that needs the floors redone, that's like getting the floors for free! New hardwood floors are also a good choice at a cost of about $5,500 to install, and could recoup $5,000 of that at resale.
- Insulation: A fixer-upper offers a great opportunity to replace or add insulation. New insulation costs about $2,100 on average nationally, and can recoup $1,600 at resale—as if saving 10% to 50% on your energy bill wasn't compelling enough.
While those three are pretty safe bets—almost any project can be worth it with a fixer-upper if the price is right.
Lastly, while you set out to find the perfect fixer upper, don't forget to evaluate your ability to deal with disruption. If your patience is shorter than your potential home's to-do list, a fixer-upper may not be a good choice. A Realtor® can help you find a fixer upper, but only you know if you have the time, patience, and emotional endurance for it!
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