Tips & Trends for the Flagstaff Real Estate Market:
Past Articles [April 2003]
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The Lure of the Fixer Upper
One persistent myth in real estate is that anyone can make money by buying a fixer-upper or foreclosure property at low cost, do the renovation work themselves, and then resell at a profit.
Many experienced contractors and career renovators do just that, but first-time buyers can get caught in a web of cost overruns, contractor disputes, and resale problems. For many first-time buyers, a fixer is the only option, and sometimes the best option. Follow these basic rules of thumb when you consider buying fixer-uppers, foreclosure properties or other real estate "bargains":
Look for fixer-uppers with only cosmetic problems. Exterior additions or major defect repairs can be costly, and the expense of correcting major structural defects may not add a penny to the market value of the house. Fixers that have only cosmetic problems, such as ancient shag carpeting or bad wallpaper, are ideal for first-time buyers. Cosmetic repairs can be relatively inexpensive, and some fixer-uppers will pay back much more than their cost. Always have a fixer-upper carefully inspected before you buy.
Don't pay too much, especially if you want to resell quickly. If you overpay, you may suffer a loss when you sell. In terms of investment potential, the best time to buy a fixer is when the market has bottomed out and is turning around. The worst time to buy is when the market has peaked and is starting to decline. Estimate the value of the property you want to buy. Research the potential market for the restored fixer-upper, and make sure that your plans for the house don't result in an over-improvement for the neighborhood.
Estimate renovation costs accurately before you buy. If you miscalculate, your profit will dwindle. Ask your contractor for a detailed bid or do your own calculation. Have the property inspected as a condition of the purchase, particularly if you buy it in "as is" condition. You'll reduce the chance of having to fix unanticipated defects.
Evaluate the floor plan. With a good basic layout even the most hideously decorated house is an ideal fixer-upper. On the other hand, a house that seems a maze of rooms may have a defective floor plan that no amount of paint and paper will remedy.
Renovate wisely. In planning your remodel, keep resale value in mind--even if you plan to live in the house for some time. Kitchens, bathrooms and storage spaces are important to today's buyers. Curb appeal sells houses, so concentrate on improving the landscaping and front entry. Also, stick to neutral color schemes.
You may be able to get a seller to pick up all or part of the cost of home improvements if you negotiate for them as repairs required after a home inspection. Many sellers prefer to lower their asking price and sell the property "as is" instead of financing the repairs. This presents fewer problems for the seller, and the buyer can close the transaction more easily.
One other thing you should know. In Flagstaff there is a lot of competition for these types of properties. When a house that fits your criteria comes on the market be prepared to move quickly. Otherwise you may miss out on a good opportunity.
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“Mary Monday made the experience of selling my home a genuine pleasure. It delights me to know there are true professionals left in the world.”—BS |
