Why does the average home buyer consider buying a Fixer Upper? They look at these homes typically because they are less expensive and they offer a great opportunity for a home buyer. These homes can certainly be a great option for many buyers and investors. If it were as easy as it looks on HGTV, however, why doesn’t everyone do it? The market value of the home and how much repairs will cost are critical factors when considering this type of home purchase.
Is this really possible?
When buying any home, buyers need to keep their emotions in check to be sure that they are happy with their decision once the initial excitement has worn off. Keeping this careful mindset is especially important for a Fixer Upper. Here are the important things for Fixer buyers to consider:
Initial home price
Often banks or trusts may own the fixer home and they know exactly what they want to get for the home. They list the home lower than the comps in the area, but still high enough to make a profit. Therefore, if all the needed repairs are factored into the math you do, you should consult your Realtor and see if the repairs that are needed will cause the home to go above the market value. In that case, the buyer has just purchased a home that will be cost more than the other homes on the market causing a deficit.
Cost of repairs
This information is critical for the would-be buyer. As mentioned above, if the cost of repairs are so high that it would cause the value of the home to go above market value then the buyer has purchased a home with negative equity. Your Realtor and/or Contractor friends can help you make a “ball park” evaluation on how much the home repairs would cost. Using this information you then can actually make a clear decision if the home is for you or not.
If you are willing to get your hands dirty then you can save A LOT of money and do the repairs yourself. In addition, if you really love a home and are willing to do the work but the seller will not budge on the price, then you can be happy because the amount of money you spent doesn’t go over the home’s market value.
For the Math/Visual people
A good deal will look like
Listing Price of Fixer + Cost of Repairs = At or below Market Value of the home
A bad deal will look like
Listing Price of Fixer + Cost of Repairs = Above Market Value of the home
If you are thinking about buying or investing in a Fixer Upper it is a great idea to talk with the professionals. Specifically, a Realtor can help you know what the Market Value of the home is. If you would like more information about Fixer Uppers in your area, please contact me to discuss your situation and see if that home is the right one for you or not.
For Further information this article is a great one about Fixer Uppers: https://www.thisoldhouse.com/ideas/should-you-buy-fixer-upper