Whether you are buying your first home or are seeking a place to retire, this question often comes to mind.
Move-in ready vs. fixer-upper?
Potential homeowners commonly search for properties that are “move-in” ready. These buyers seek to buy homes that require no projects nor the expenditure of energy or money for improvements. All they hope to do is unpack their belongings and get on with it. Others may wonder if buying a “fixer-upper,” a property in need of renovation, is a better idea, especially when a search goes sour trying to find an ideal home at their desired location. There are pros and cons of each, and a realtor can help walk you through the decision-making process. But, before even considering a fixer-upper, there are some basic things to think about first.
Is buying a fixer-upper a wise money decision?
That depends. Per UpNest, fixer-uppers sell for an average of 8% less than market value. While you can get a deal, getting financing can be more difficult if the home needs extensive repairs. If you’re planning to take out personal loans in addition to the mortgage, interest rates may be high. It’s important to determine if you are financially prepared to make the payments or have the resources to make improvements without a loan. It’s equally vital to determine what work needs to be done and the cost.
Do most fixer-upper projects come in at budget?
Per a 2020 Houzz & Home study, about 36% of homeowners hit their remodeling budget in the prior year, roughly 31% ran over budget, and 29% did not create a budget. The remainder, at just about 3%, came in under budget. Consider that one in three renovations go over budget. Be prepared to run over in cost due to the encountering of unexpected problems, such as the surprise discovery of termites, mold, bad wiring, asbestos, radon, or more during construction. Spending money on home renovations can be risky for those who are on a tight retirement budget. If you are unsure of what you can reasonably afford, seek advice from your accountant or personal financial advisor.
What are some average costs to renovate a fixer-upper?
Per Home Advisor, a full home renovation per 2020 numbers is about $150,000 on the higher end and $15,000 on the low end. Average gut prices range from $2,500 to $7,000, with most remodeling costs running between $19,800 to $73,200. These numbers are continually subject to change.
What might influence the cost of renovations?
Current events, such as supply and demand, and the economic woes due to Covid-19, can influence renovation costs. Like the current President’s decision to halt America’s energy independence, government overspending, and forced shutdowns stemming from COVID-19, other factors have affected the economy and made products and materials more expensive and harder to come by. An increase in container prices and shipping delays due to material and workforce shortages have been increasing costs and slowing down the progress of home renovations.
Does inflation matter?
Inflation drives up home prices. Per a September analysis as shared by Forbes, food, shelter, and gasoline indexes were key drivers of inflation growth last month. And rising inflation leads to higher housing prices. In 2010, the average home price was roughly $272,900. This year, in 2021, the average sales price of a new home is a whopping $408,800, which is a significant jump from last year’s numbers, too.
Are there other factors that are negatively affecting the costs of home improvements?
When materials are scarcer, and labor is, too, the expenses of remodeling may skyrocket. As Fortune explains, the shortage of wood products prompted the price of lumber to climb 300% above its pre-pandemic price this spring, with some recovery now underway after buyers walked away. That shockingly huge increase negatively influenced some homeowners’ abilities to make home improvements or build new homes. Many have been forced to put renovation plans on hold.
What are some key points to consider for DIY fixer-upper projects?
Those who are trained in architecture, construction, or skills such as woodworking, roofing, plumbing, or electrical, can likely and safely take on some house projects themselves. However, mistakes cost money. Even if you consider yourself handy, it’s important not to get in over your head. Thus, knowing your limits and hiring the right project manager and a competent construction crew are keys to success. Also, check with your town’s building office to understand what permits are needed.
What if I’m using several contractors?
For large remodeling jobs that involve several contractors, CBS News recommends that homeowners protect themselves from liens against the home, should the primary contractor fail to pay subcontractors or suppliers. It’s important to have contracts written and signed to protect the homeowner and guard them against releasing payments too soon. CBS News shares that down payments should not be more than one-third of the total contract price.
Any surprises to expect?
During renovations, it’s uplifting when things go well. However, do expect a few bumps in the road. Dealing with contractors and subcontractors and inspectors, and local building authorities can be challenging. Remember that the latter two groups are particularly fixated on safety rules and building regulations. Never move ahead without getting their stamp of approval as required.
What is the fixer-upper experience like?
Fixing up a home can be rewarding. However, there is an emotional component beyond physical demands, as your time, money, energy, hopes, and dreams are geared towards the project. When something goes wrong or costs go up, it can feel strenuous. Sometimes you may be forced to scale back plans. Also, expect some temporary changes to your lifestyle. If you are living on-site, expect to rise early to the sound of construction. If you like to cook, understand how long your kitchen might be out of commission. Expect interruptions to your electric, water, or sewer. And learn to roll with it. Most people report that the product is well worth the temporary sacrifices.
Is it safe to live in a fixer-upper under construction?
Personal safety is a most obvious concern, with many factors to consider. It’s vital to assess whether you can function safely in a home that is under renovation. This is especially important for senior citizens, those who care for children, elderly family members, and/or pets, and those who work from home. Regarding work, noise factors and work interruptions may come into play. And, when caring for others, it’s important to know whether their needs can be safely met in that environment.
Overview
Understanding multiple factors, including what work needs to be done, what costs are involved, how long it will take, and more, can help you decide whether purchasing a fixer-upper is for you. Bonuses of buying a fixer include the ability to establish a home in a target neighborhood that may otherwise be unaffordable, gaining the ability to put your personal touch on your home, and saving money. These are just some of the many great reasons to consider the fixer-upper option. Overall, it’s best to look at the big picture, including financing and the economy, and consider your knowledge, safety, patience, and stress level. For those who are undecided about taking on a fixer-upper, ask friends and family who have lived through renovations for advice and tap into the resources of your trusted realtor.
