What Are The Advantages And Disadvantages Of Buying A Home That Needs Renovation?
If you’re looking to purchase a home, you may have heard what a great deal a fixer-upper could be. By purchasing a home that needs some work, you save in the total cost by putting in your own sweat equity.
On the other hand, there are plenty of disaster stories about buyers that get a fixer-upper at a discount, only to lose that money on repairs that spiral out of control. So, is it a good decision to choose a home that needs some TLC?
Read on to learn about the pros and cons of fixer-upper houses that you should weigh before committing to a new property.
Advantages of a Fixer-Upper
The following are the main advantages of purchasing a fixer-upper:
- Lower purchase price
- Less competition
- Easier to customize
Lower Purchase Price
The most attractive feature of a fixer-upper property is the cost. Most fixer-uppers are priced lower than comparable properties in the surrounding area. In exchange for a home that has cosmetic and/or structural flaws, you save on costs that the seller usually itemizes beforehand. This means that you will pay less for a down payment - a potential stumbling block for many homeowners.
You’ll have more room to negotiate, especially during the walk through or by hiring a professional home inspector to take a look at it. Most sellers understand that classifying their home as a “fixer-upper” or an “as-is” property means that their home’s value will be lower due to the potential repairs that need to be performed on the property.
Less Competition
In general, fixer-uppers are not the most popular homes due to the work that’s required. Many prospective homeowners want a ready-made problem-free home that’s ready to move into. Having to deal with a broken home turns off these types of buyers, so you will have less offers to compete with overall.
Of course, there will be some competition from flippers and cash-buyers looking to turn a profit, but the pool of potential applicants will be smaller. Sellers may also be more likely to choose a person that intends to live in a property rather than have it renovated and sold again at a later date (like flippers and construction companies do), so that gives buyers an advantage.
Easier to Customize
Depending on the condition of the home, a fixer-upper enables buyers to perform a complete renovation to customize the home as they see fit. The cash that is saved in comparison to comparable properties can be funneled into these projects, such as a home addition or completely replacing the AC system.
As most homeowners would agree, it is easier to work on large projects at once rather than smaller, sporadic projects. If you know that a home needs to fix its electrical systems to meet codes, a complete replacement is easier to tailor to your plans than by retrofitting previous systems.
Disadvantages of a Fixer-Upper
The following are the main disadvantages of purchasing a fixer-upper:
- Renovation costs
- Long-term construction period(s)
- Unforeseen issues
- Difficult to budget
Renovation Costs
The cost of materials, time, and labor required to shape up a fixer-upper are all expenses that a homebuyer will eventually incur. If you choose to do the work yourself, you may have a project take much longer than you had initially predicted or require more material than you had anticipated. Depending on the extent of the renovation that you need to perform, you may end up barely breaking even or can even spend more money than you would on a problem-free home.
Long-Term Construction Period(s)
Restoring a home can be a lengthy process depending on how long much work you can perform by yourself, availability of materials, contractor availability, and your own schedule.
Unless you live somewhere else while you’re renovating your fixer-upper, you’ll have to live in a construction zone for months or even years.For those that are using the fixer-upper as their primary residence, this can drastically decrease you and your family’s quality of life.
Unforeseen Issues
Every home has its issues - fixer-uppers just tend to have more obvious ones. Even if you get a professional inspection performed, there are almost always unexpected issues or a potential for problems to be overlooked, especially if the house is older. This reality makes purchasing a fixer-upper a gamble and can cause a domino effect for your finances, free time, and quality of life that would have been avoided by purchasing a home in a better condition.
Difficult to Budget
Coming up with an accurate figure for a home renovation always includes some margin for guesswork. While you can run the numbers and get quotes from contractors beforehand, there’s no guarantee that things will go according to plan. Prices for materials can fluctuate based on supply and demand, leaving you paying for repairs that are well beyond initial estimates
Conclusion: Should You Purchase a Home that Needs Renovations?
As you may know, purchasing a fixer-upper home depends on your unique situation. A fixer-upper house may be a great option for one house shopper and a terrible idea for another. Consider the advantages and disadvantages carefully to determine if a fixer-upper is right for your needs.