A couple currently on the market to buy a home are looking at two different types of properties: turnkey condos, in which the home is basically move-in ready, and then what these clients affectionately refer to as “Great Grandma’s place” – or homes that have not been touched in decades and need a gut renovation. The wife is an architect and decorator, and she is hungry to take on a project.
A turnkey property allows the couple to purchase a home at the top of their budget. Alternatively, a fixer-upper that needs work on just about everything – often referred to in the real estate industry as “estate condition” – will require them to factor the projected cost of the renovation into their budget when assessing the contract price.
When purchasing a home, condition is one of the five most important factors to consider, along with price, location, size or layout and wow factor – or lack thereof. Because a turnkey property has already undergone its renovation, if you plan to finance the purchase you’re essentially financing the cost of making the home move-in ready as well. For a property in estate condition, however, financing the cost of a renovation can be harder, and you may be paying cash for the work.
Most buyers who plan to take on a renovation hope that after all the blood, sweat and tears – and sawdust– they’ll have a home that is customized to their own standards and taste, and ultimately spend a net total of less than the price of an equivalent move-in ready home.
Properties that need work generally trade for significantly less than their renovated counterparts. Two homes on the market with similar square footage and layout, location and architectural style will generally sell for very different numbers if one has been renovated to today’s standards and the other has not been updated in decades. This means that there can be a great opportunity if a buyer is willing to take on a project, understanding what this entails.
The scope of work required is something any homebuyer should take into consideration when searching for a new property. No matter what, you’ll likely have to paint, but renovating a kitchen and bathrooms, rewiring and moving walls are another ball of wax. Depending on a buyer’s bandwidth, connections, budget and timing, buying a fixer-upper and taking on a renovation can be a great option to save money in the purchase price and, in the process, create a customized space that can be a real source of pride. Here are a few reasons why buying a fixer-upper might (or might not) be the best option for you.
Before deciding to buy a fixer-upper home, ask yourself these four questions:
- Do you have the bandwidth?
- Do you have the architect or contractor connections?
- Do you have another place to live temporarily?
- Do you have the vision?
1. Do You Have the Bandwidth?
2. Do You Have the Connections?
3. Do You Have Another Place to Live?
4. Do You Have the Vision?
Originally published here.