In this highly competitive seller’s real estate market, many first time and experienced buyers are purchasing homes in need of renovation.
According to Realtor.com, in 2021, homes in need of renovation sold at a faster pace than the two prior years. Fixer-upper sales jumped 13.4%, while the dollar volume of those deals surged 40.8% from 2019 to 2021.
Real estate agents say more prospective buyers than ever are waiving home inspections to make their offers more attractive to owners. However, without an inspection, buyers risk spending hundreds of thousands of dollars or more on a home that could have major defects. They are betting that the effort and cost of fixing up a home will be a better investment in the long run, and it may well be.
Here are some questions to keep in mind when pursuing a home that needs remodeling:
Does the house merit the scope of work? This depends on the original purchase price, potential equity, and also future return. Most kitchen and bath renovations are very profitable from a resale standpoint. Talk with your contractor on what “makes sense”.
Does the house have a laundry list of repairs that are visible and/or non-visible? Most of the time there is an inspection required. When the report is disclosed/received, review carefully and pay attention to details, i.e., age of equipment, water heaters, condition of foundation, etc. While the house can have the cosmetic appearance of being great, some of these can be big ticket items which may need to be addressed first.
What makes the most sense to do now? We always tell clients scope of the project is very personal and budget specific. We guide our clients to take on projects that make the most sense, have the best return, and should be done pre-move in. For example, a full kitchen or master bath, best done pre-move in; wood floors and full interior painting also better pre-move. In today’s environment because of the high cost of materials, products and shipping delays, it is advisable to have alternative choices so the project can stay on your timeline.
Can we do the work in phases? The work can always be done in phases. We recommend taking on the needs and the must-haves first, then move to the wants. Always plan to address items that require immediate attention, such as a new HVAC system and items that make sense to do before occupying the home, such as refinishing of flooring.
While there is no perfect formula for pre-purchase and pre-move projects, careful planning and discussion can be beneficial. Key elements are asking the right questions and finding the right contractor. Of course, time is always an issue, but rushing it can be costly. We always suggest working through the details to achieve the best possible results.