Deciding If “Fixer-upper” Is The Right Deal For You

You know them when you see them—especially when going through the home-for-sale listings, where their photos probably lack quite the allure of the others. You can also spot them by some cautiously-phrased tip-off language. They are “handyman specials” that are offered “as-is” or that “need attention” or “TLC”. A perplexingly low asking price is a dead giveaway, too. Most often, if, considering the features listed, the number is too good to be true, you’re looking at a fixer-upper.

If you are house hunting, are they worth looking into? Or if you own one, should you do the fixing-up? How do you make a rational decision?

First, about whether to get to work before you offer your own fixer-upper to the world:

It’s true that a fixer-upper can be a serious magnet for prospective buyers, particularly when those buyers aren’t averse to putting in some old-fashioned elbow grease. If you are able to accept the kind of low sales price that will make yours a standout from competitors, it’s bound to attract a lot of interest from budget-minded householders—as well as professional house-flippers and contractors who work on their own account.

The rule of thumb for owners readying a property for sale is to investigate whether smaller replacement projects—the kind that add curb appeal and/or kitchen glamor—are likely to boost the home’s value above the cost of the undertaking. Most reports on the subject find that large-scale projects seldom return even 80% of their cost, although when chosen strategically, per the NAR^® “…they can improve the market position of the property in relation to the competition.” (Translation: move it out of the ‘fixer-upper’ category).

From a non-professional buyer’s point of view, though, the question is whether the fixer-upper route is a better choice than the costlier home buying options. If you have little interest in extensive DIY projects or decorating overhauls, you already know the answer: skip the fixer-uppers. You have to be enthusiastic to make one of those worth the undertaking. You needn’t bother with any of the super bargains with listings that admit “needs some TLC.”

If you are on the fence, the answer may well lie in a careful appraisal of what will be needed to bring the candidate up to neighborhood standards. If you are an experienced DIYer, there are software packages available that can help you estimate expenses. If not, our contractors will be able to provide an itemized ballpark estimate for such a project. If the combined cost of purchase and upgrades still create an attractive package—and you are prepared for some dislocation as major work is being done—a fixer-upper is worth serious consideration.

This fall, the local market has offerings with real value in every category. Always remember that every home that is listed on the market has a story or history that can’t be  gleaned from perusing the home’s marketing description… Call me at (513) 659-2284 to get the complete low-down on any and all homes that pique your interest!       

Stock Market in Turbulent Contrast to Serene Real Estate

Last week was a head-swiveling version of a follow-the-dots puzzle for those who keep tabs on national news related to local real estate. Children like following the numbered dots to reveal a picture. You can’t be sure what it will turn out to look like until the end. The week was a lot like that:

 Monday led off with the release of housing-builder sentiment: its best reading in 10 years! It was given credit for reversing an early-day 100+ point stock market drop. When the Dow closed up 68 points for the day, real estate performance got the kudos.

Monday’s dot connected to the next one, which appeared as USA Today’s early Tuesday dispatch pointing out that the previous day’s market rescue was hardly a flash in the pan. The Money section’s lead story, “Housing Provides Much-Needed Lift to Wall Street” drew a broader picture. In a ho-hum year for the broader stock market, housing-related stocks were uniformly “among the best-performing shares.” The S&P 500 may have been up less than 2% for the year, but homebuilders’ shares were up 13%; home-improvement retailers, 11.1%; home furnishings stocks, a blistering 26.1%! The reason was “the power of the resurgent real estate market to generate positive action in the stock market.”

Then, on Wednesday, CoreLogic provided the next dot with its release of the August MarketPulse roundup, pointing to a 6.5% increase in its national home price index. This was the logical next dot—one that was hardly unexpected. The predicted continuation of price increases was again explained by lean inventories, continuing low mortgage rates, and consumer confidence rated “the most optimistic in eight years.”

Thursday’s dots had been anticipated, too: the morning announcement of July existing-home sales marked the 41^st consecutive month of year-over-year price gains. Volume was up, too, as sales topped an annual level of 5.5 million for the first time since early 2007. The Street took that as “just the latest confirmation that the housing nightmare is mostly over.”

By Friday, the last dots appeared in calm contrast to the frenetic news from Wall Street, which completed its worst week in five years. Even the real estate industry stocks which had rescued the day on Monday couldn’t buck the outrushing tide of equity losses. But the last dot for local real estate watchers was found in the analysts’ post mortems after the market’s close, as speculation increased that the carnage on Wall Street might well be sufficient to nudge Federal Reserve decision makers away from raising interest rates in September. Real estate trackers were able to put their pencils down and relax for the weekend.

So, what was the picture the follow-the-dots puzzle revealed? The real estate industry dots seemed to trace a simple circle…with a curved line near the bottom that looked a lot like a smile.

Whether or not local real estate offerings continue to benefit from historically low mortgage interest rates (they dropped again last week!), there are definitely great opportunities for buyers and sellers. Give me a call whenever you feel the time is right to take advantage of today’s market!