If all you did was sit around and watch HGTV channel shows all day, it probably wouldn’t take you very long to start lusting over the idea of buying a fixer-upper home and doing a complete renovation to match your unique preferences.
However, while the allure of buying a fixer-upper definitely makes for some inspiring T.V. programs, the purchase and renovation processes aren’t actually as straightforward as those reality shows make it seem. And in actual fact, fixer-uppers usually cause a lot more headaches and heartbreaks than market-ready turn-key homes do, generally speaking.
That being said, there are a few warning signs that house hunters inspired by dreams of owning a fixer-upper can look out for to help them mitigate those headaches and heartbreaks.
So, if you’ve got your eye on a fixer-upper or are open to the idea of buying one in the future, here are five things you should watch out for before investing in one.
1. The Location
The importance of a home’s location is probably among the most talked-about topics when it comes to the conversation of buying a home, but in the case of fixer-uppers, location is all the more important. Realistically speaking, most of a fixer-upper’s value will lay in the home’s location seeing as the home itself is probably in need of some major work.
While fixer-uppers are, of course, meant to be bought and then subsequently updated to add value to the structure itself, it’s still vital you look for a home in a great location to start out with. That’s because at the end of the day, no matter how well your updates and renovations go, what’s really retaining the value of your (potentially problematic) investment is the home’s location itself.
What’s also important to note is that if a fixer-upper is located in a nice neighbourhood, it could be a very shrewd and lucrative investment to buy one of the less desirable properties in the area and then substantially increase its market value through renovations. That way you can get into the desirable neighbourhood at a palatable price and then watch your home’s value appreciate as your complete the renovation.
Do you know what the current market value of your home is? If you’re thinking about selling your present home before buying your next one, find out what you should expect to receive for it by heading over to our What’s Your Home Worth? page here.
2. The Home Inspection
Over the course of a real estate transaction, there should be at least a couple of home inspections completed by an impartial, unbiased third-party professional to ensure the status of a home’s working condition and integrity.
However, in ultra-competitive seller’s markets when buyer demand for homes is heightened, secondary home inspections can often be sacrificed in the terms and conditions of an eager buyer’s offer to allow for an easier, more attractive sale for the seller. Needless to say, this is never advisable when buying a fixer-upper, as oftentimes the first home inspection is facilitated by the seller before the home is listed for sale.
While we aren’t accusing sellers of forging these initial home inspections, we certainly are saying that it’s well worth it in the long run for buyers to get a second opinion on the current condition of a fixer-upper before finalizing a purchase of it.
Essentially since the start of the COVID-19 pandemic, our local Ontario real estate markets have highly favoured sellers, but that doesn’t mean doom and gloom for hopeful buyers. Learn how you can navigate hot seller’s markets as a buyer and which terms and conditions you should never sacrifice when buying here:
3. The Price
Naturally, you’d expect listings branded as fixer-uppers to be accompanied by an attractive asking price, but you’d be surprised home many sellers don’t actually decrease their asking prices for their derelict properties appropriately.
It’s valuable to note that ultimately, sellers are out to receive the most amount of money from their home sale as possible, no matter what the condition of their home currently is. That means that even the most dilapidated of fixer-uppers can be overvalued, especially if the asking price is just slightly below the average cost of move-in-ready homes in the neighbourhood.
For this reason, it’s always a good idea to seek the advice of a knowledgeable Realtor® with expertise in your fixer-upper’s local market. They’ll be able to give you a detailed insight into the average property values of the fixer-upper’s neighbourhood, along with an accurate estimate of the fixer-upper’s true market value.
If your locally-versed Realtor® deems the asking price of the fixer-upper overvalued by the sellers, then you can either try to buy it for less than their initial asking price or set your sights on a different opportunity. Either way, you really should consult the expertise of a local agent.
Receiving the guidance and advice of a seasoned local Realtor® is useful for so much more than just determining accurate property values. Read up on the 5 Reasons Your Agent Should Be A Neighbourhood Expert here to learn more.
4. The Renovation Costs
In addition to helping you determine your fixer-upper’s true market value, a talented local Realtor® will also be able to help provide you with a rough estimate of what the renovation costs would be for you to revitalize your new fixer-upper too.
Whether they have experience facilitating home improvement projects themselves or consult with a reliable and trustworthy contractor, your Realtor® should do everything they can to inform you on what it should cost you to revamp your new home well before you buy it.
Before you even think about your renovation plans for a fixer-upper, you need to know exactly what you’re dealing with and what the ballpark range for expenses is going to be to bring the home back up to safe, properly functioning condition. The last thing you want is to have your gorgeous renovation dreams crushed because you’ve run out of budget repairing the home’s foundation, roof, and furnace first.
Buying a new home — whatever condition it’s in — can be full of shocks and surprises even for buyers with plenty of real estate experience. Learn more about how to spot red flags and safely prepare for your next real estate purchase by reading through our informative buying guides below.
5. The Potential Long-Term Value
Lastly, it’s crucial you also pay close attention to the long-term potential value of a fixer-upper before you purchase it and get started on your renovations.
Of course, the entire idea behind buying a fixer-upper and revitalizing it back to modern standards is to enhance the home’s long-term value. However, that could all count for nothing if the home’s location and local market already don’t have a projected appreciable value.
If the forecast says the home’s location isn’t a great future investment, then putting all of that hard work into bringing the fixer-upper back to life won’t do much good for its long-term value anyway. If you don’t pay attention to the home’s long-term value projections now, you could face the reality of not even breaking even you eventually sell the home years down the road.
For as long as it’s been around, the home evaluation process in Toronto has always raised some similar questions and concerns. Find out more about Toronto Home Evaluations: What They Really Look For here.
