Last week, I had a meeting with a couple who are looking to buy a home in Los Altos. Specifically, they’d like to buy a fixer-upper property.
Fixer-uppers, if priced right, are popular in Los Altos and Los Altos Hills. It allows the buyers to remodel the place exactly the way they want it. Many also believe the lower asking prices mean better deals.
Well, are "fixers" as good a deal as they sound?
Possibly. But you'd need to do your research and punch the numbers properly in order to know for sure. Also be prepared for the amount of work involved, and know what you’re getting into.
In Los Altos and Los Altos Hills, where entry-level homes are , buyers easily get excited whenever they see something asking for less than the market average. But before getting carried away, you should step back and run some numbers first.
First, ask your realtor to provide you some recent sales data. Obviously, a remodeled, move-in-ready home is going to ask for more. But being less expensive doesn’t necessary mean it’s a bargain. Only after you add to the total the remodeling costs will you be able to compare objectively.
Most people tend to underestimate the cost of remodeling. To avoid making the same mistake, you should bring in a contractor to give you a quote before committing. Chances are the estimate may still be lower than the actual cost, but at least you will be a little bit closer to reality.
Also, don’t forget to factor in the time it takes to remodel, especially if you plan to obtain a mortgage.
After all the numbers are in, you’ll get a clearer picture of how much you actually are paying for the house, and if it is worth it.
It is not uncommon to have fixer-upper homes being strategically priced way below market. I have also seen buyers pay more than they should, as they were trying to outbid other buyers. If you have run the numbers, you are in a better position to determine the fair price to pay.
Of course, price is not the only factor. If you really want the opportunity to build or to fix up a home to your expectations, or the home is in a very sought-after location, you may have different considerations.
There are other tangible or intangible costs to be considered that are associated with the purchase of a fixer-upper. For example, if you buy a more expensive, but move-in-ready home, a huge percentage of the price premium can be financed. With a fixer, you most likely have to bring in additional cash to pay for the remodeling. Fixing up a home requires not only money but time and effort. It can be a very overwhelming experience, especially if it is your first time.
Even if the price is right, you should think twice if it is, indeed, the right option for you.
Don’t get me wrong, I’m not trying to discourage people from buying fixer-uppers. There are indeed numerous advantages to do so: being able to have a brand-new, remodeled home to your taste; the ability to pay less upfront; and the probable savings in property taxes. They would be good enough reasons to engage in a major project if the price is right—and if you are fully prepared for the extent of work involved.
Winnie Yip Fong, a Los Altos resident and a local realtor, writes a monthly column to provide advice and her insights into the local real estate market. Email her to firstname.lastname@example.org for any suggestions or comments. Or follow her on www.twitter.com/SVHomes for more real estate updates.