In LA’s hot property market, many buyers are looking to fixer-uppers to be able to afford a home in the neighborhoods they want to live. It can certainly be a good strategy for getting the home of your dreams on a tight budget, but you need to be aware of all of the issues that come up when purchasing a home that needs work. If you are a devotee of HGTV, you may feel more confident after watching hours of Flip or flop, but as with all reality TV shows, the reality part is primarily faked and you are only being shown the bare bones of what’s involved.
So, what exactly is a fixer-upper? a fixer-upper is a property that will require repair (redecoration, reconstruction, or redesign), though it often can be lived in or used as it is. A fixer-upper is a pretty subjective term. A house that needs a complete gut and new foundation is far different from a house that just needs a coat of paint and the removal of the carpet. So, before you start looking seriously at fixer-uppers, you need to ask yourself a few questions.
The first question to ask yourself is “Can I live for a while in this house as is?” The answer to that will be different for different people. A house that needs new paint and maybe the floors refinished and an eventual update to kitchens & baths may be the perfect scenario for you. Other folks would not even move in until the kitchen has stainless steel appliances and the 1980’s bathrooms are gutted & replaced. If you fall into the latter category, your first home should not be a fixer because the cost and time required will be more than you can probably handle.
My own home needed updating when we bought it; ugly wallpaper, popcorn ceilings, shag carpet throughout, kitchens & baths that had not been updated for at least 20 years. We had lived in much worse places and were prepared to handle most of the work ourselves so we bought the house and began to improve. Flash forward almost 20 years and it’s now pretty close to the condition we imagined when we bought it, but the kids were already out of college before the kitchen & baths got their needed updates.
Another question you need to ask yourself is “Do I have the time to actually hire and oversee the contractors?”. I was recently working with a buyer who travels a great deal for her business. She was looking a fixer-upper and I had to ask how she would be able to handle the work involved in selecting, negotiating and overseeing the contractors required to make the property into what she imagined. Even working from home does not mean you can do your job and handle the work on the house while living there. Renovations require a lot of decisions on the part of the homeowner. Parts of the house are unlivable during construction. If you are planning on doing some of the work yourself add even more time to your expectations.
Do you know any contractors? Unless you have a contractor in the family, chances are you are going to struggle to get the right professionals on the job. Contractors in Los Angeles are very busy right now and have been for years. It will cost more and the schedule will be longer than you can imagine. Even just evaluating the property prior to purchase requires willing and able contractors who can drop what they are doing to provide an estimate before your inspection period is over. I can certainly help make recommendations but you should have a relationship with a general contractor before you make an offer on a fixer-upper.
How much will the renovations cost? This is a tough question that you will need to answer first & fast. Without a contractor its impossible to get accurate quotes. As an agent, I can help you determine the price differential between a property in need of work versus a fully renovated home, but will that amount be enough to make the purchase worthwhile? I recently had a buyer for one of my fixer-upper listings try to pull together costs after the inspection and he struggled and ultimately failed to accurately determine costs. Again, a paint job and new cabinets may be relatively easy to estimate, but add in new plumbing, electrical and structural changes and it’s close to impossible to come up with accurate costs before the inspection period is up.
Do I have enough money to handle a fixer-upper? If you have cash in excess of the required down payment, then you are in a better position than most to handle the renovation. Chances are though you don’t, and there are a number of ways to get financing for renovations. But these products add complications to the lending process that need to be factored into your decision making.
There is one last question you need to ask yourself… Do I have a real estate agent who can help me navigate the complexities of purchasing a fixer-upper? If you are working with LAAndy May then the answer is YES!