FIXER UPPER FACTS AND MYTHS FOR BEFORE YOU BUY

Before deciding whether or not a fixer upper is right for you, do some homework on what to expect
when purchasing these types of homes. Fixer-uppers can often be a good deal, but there is normally a
lot of money and hard work to make it fit your wants and needs. Here are some myths and facts that a
homebuyer should know before making an offer.

Myth 1.
I can save a lot of money by buying a run-down home under market value and fix it up to make it my
dream home.
Fact 1.
The asking price for a “fixer upper” is normally equal to the amount of money needed to complete
necessary renovations – not upgrades. Homeowners who are selling a fixer upper will price their home
according to costs and repairs that need to be done, which can give the illusion of a great deal. Since this
price does not include the cost of updating the look of the home, buyers should be careful not to spend
so much money on renovations that you are unable to recover your investment.

Myth 2.
If I’m buying a fixer upper, I don’t need to do a home inspection, because I am already aware the house
is run-down.
Fact 2.
A home inspection should always be included in an Offer to Purchase and Sale Agreement. It should be
high priority when looking for a home – even a fixer upper. Home inspectors can tell you about
structural damage that is hard to see for the average buyer. Structural problems are costly and can
quickly chew up your budget, a home inspector can give you an idea of what is wrong with the property,
but also how to fix the problem!

Myth 3.
It’s better to buy a fixer upper in an undesirable area to lower costs, than to buy a more expensive fixer
upper in a desirable area.
Fact 3.
Location is very important to consider when fixing up a house. While you can have a beautiful high-end
property, if its in a dangerous area you will have a hard time finding a buyer that will pay the price you
want in that neighborhood. There’s a high chance your home will sit on the market for months and
months costing you thousands. The return on buying a property in a desirable or up-and-coming
neighborhood is much higher.

Myth 4.
Once I fix a house, I will sell it and make twice what I spent.
Fact 4.
You can’t sell a house for more than it’s worth. There are many factors that contribute to this number,
the location, neighborhood, and surroundings all factor in to price as well. The neighborhood the home
is in can determine which type of buyer you will attract, and almost always predetermines the range of
price for the property. Look into the cost of other homes in the area. Take into consideration property
size, condition, and any special features that would increase the homes’ value in the home itself or
surrounding areas.

Myth 5.
I can make a lot more money if I turn a single-family home into a multi-family home.
Fact 5.
While you can add value to a single-family residence by making it a multi-family unit, but it might not be
possible or legal. Zoning laws dictate the maximum occupancy per household per lot, and can also
dictate the size and design of any new home additions to an existing structure.
There are many variables you have to take into consideration when buying a fixer upper. It’s
good to break down the costs and have an idea of profit either in the future or when flipping the home.
Here’s an example of factors to consider when buying a fixer upper:

  1. List Price of fixer upper
  2. Average recent sales of homes in your area
  3. Estimate cost of repairs
  4. Buffer Amount (for unexpected repair costs)
  5. Selling Expenses
  6. Amount of Profit

If you’re looking to live in the house for a couple of years before selling, the long-term profit could
potentially be much higher than the short term profit.

HOW TO SET YOUR ASKING PRICE

To understand how much to list your home for, it’s important to know how sellers price their homes.
Here are 4 pricing strategies you can discuss with your agent:

  1. Very Overpriced
    Everyone wants to get the most amount of money they can for their home, and your real estate agent
    knows this, but overpricing your property could cost you when listing. Some sellers pick their agent
    based on who will list their house for the highest price, which is an easy way for them to gain your
    business, but bad for your bottom line. Far too often homes are priced 10 – 20% over market value and
    this is not in your best interests! Because of this, if you over price, agents and buyers will make low
    offers after your property has sat on the market for months. Another draw back of overpricing your
    home is having to keep it in “showing” condition for longer than necessary. Instead of pricing your home
    competitively for a relatively quick sale, there could be months and months of showings with no offers,
    leaving you frustrated and impatient.
  2. Somewhat Overpriced
    The homes that sit on the market are always overpriced homes. About 75% of homes on the market are
    overpriced by 5-10%. If you are overpricing to leave room for negotiations, or truly believe your house is
    worth the additional 5-10%, it will end up costing more days on the market and a lower price received.
    It’s best to discuss pricing with your agent, they have experience pricing houses and will help you figure
    out what is a fair market price for your home.
  3. Priced Correctly at Market Value
    Real estate is all about supply and demand. If you have a home that is sitting on a sellers market, there
    must be something wrong. Pricing your home correctly at market value will help your home sell within a
    reasonable time-frame and very close to the asking price. Not to mention if the property is in good
    condition with upgrades, bidding wars are entirely possible!
  4. Priced Below Market Value
    Pricing your house below market value is a good strategy when you need a quick sale. These listings
    normally attract multiple offers and sell very quickly at or above the listing price. Ensure that pricing
    your home below market value is the best strategy for you – not for your agent. If a quick sale is
    necessary financially or otherwise, pricing it below market value might be right for you!

SAVE THOUSANDS WHEN BUYING

Buyers typically have two considerations when they start looking for a home; a place that perfectly
meets their needs and desires and stay within or under budget. To get your dream home, here are some
tips on how to negotiate price before even submitting an offer.

Know what you want!
Home buyers should have a good idea of their needs and wants before they go home shopping. The goal
is to find one home that meets both your wants and needs, but it doesn’t always happen. When you are
shopping for a place to live, there are actually two homes competing for your attention; the one that
meets your needs and the other that meets your desires. In this case, you have to decide which is more
important. Far too often people buy a home for the wrong reasons and then regret their decision when
it doesn’t meet their needs.

Satisfy Your Needs
Why spend all this time and money on a house that doesn’t fulfill your needs? If you’re lucky you’ll find a
home that also fulfills your desires, but the important thing is to understand the difference. The
excitement of house hunting can take over us all, but taking care of your house needs should be put
above the unnecessary wants.


Does Your Agent Offer a “House Hunting” Service?

A “Buyer Profile System” or “House Hunting” service can make finding the right property quick and
painless. This program will cross-match all available homes on the market and supply you with
continuous information. Programs like these can help buyers be realistic and affordably move into their
new home!

To help you develop your buying-strategy try listing 5 things you absolutely need in your next home and
5 things you would love in your next home! Ready to start your home hunt? Fill out your information on the right of this page.