On a snowy February day we conducted a home inspection for a young couple. The house was built in the 1990’s with a great water view according to the agent. Remember it was snowing, so all I saw was a white expanse. On top of that there was a mortgage helper. What’s not to like?
The house had been lived in and it showed. It was an honest house presentation. The owners were comfortable letting strangers walk through their residence. No staging. No major renovation. No recent fresh paint.
The buyers accompanied us for the duration of the inspection. Any building 25 years old will have some components that have failed, or have been replaced or are in need of replacement. This house was no different. The inspection report should be like a cold shower… a sobering experience that highlights issues that need to be addressed. The buyers can ignore the inspection results or price out the anticipated cost of repairs, renovations or improvements and then consider further if the purchase is right for them.
Park Your Feelings
The inspection report adds a reality check to the emotional part of home buying. From the buyers perspective, the report should sharpen their focus on budget and schedule. Consider the 5 points below to decide if you should be buying that fixer upper.
#1 Contractors Availability Critical
Investigate the availability of contractors. You may be surprised but not in a good way. Currently in the district where this house is located, contractors are very busy. If any of the anticipated work requires cooperation between multiple trades, the buyer may find, for example, the electrical contractor available but the heating contractor completely booked out for months. But heating contractor may be required first!
#2 How Long Can You Live With It?
Buyers need to ask themselves if the work has to be done within months of possession or if they can live with a more relaxed schedule of years. Some buyer can live inside a work-in-progress while others would never consider moving in until the renovation is completed.
#3 Local Architect or Designer
Be realistic. If you are new the area you must educate yourself regarding not only availability of contractors but who would be best suited for the anticipated scope. This is why some buyers are more than willing to hire a local architect or design firm to act as the owner’s representative to put together a renovation. These specialists will not only have the local knowledge of who to use but can always call on personal relationships to get commitments from sub-contractors that the buyer would never have.
#4 DIY Offers Tremendous Savings
Can you do it yourself? If you can source the material, purchase it, deliver and install it, then the overall cost is 30 to 40% of what a qualified contractor could do it for. Another way of stating this… you could mess up the first installation, tear it out and redo it, and still be below the full service cost of a contractor. But do you have the temperament or skill set or willingness to learn about something that you may know nothing about? Contractors provide experience and quality, not to mention the tools, strong backs and callused knees.
#5 Fun With Numbers
Are buyers trustworthy to prepare their own renovation budget? Obviously not likely, as we are human and always expect something for nothing. Get pricing from contractors. Use estimating templates and worksheets. Look at multiple on-line resources. Tabulate your costs then add a confidence percentage factor plus percentage contingency. Maybe then, will you be close to a number that can be believed. Remember that construction estimating is a skill set. The buyers may be brilliant at their careers but not so much in residential construction cost estimating.
Final Thoughts on Buyer Options
So where does this post leave our young couple who are considering purchasing their ideal fixer-upper? There is a spectrum of options in between the two extremes, those being…
Risk takers – go for it! This may be the opportunity of a lifetime. In the years to come you will look back with pride on your accomplishment.
Cautious and cash constrained – walk away from it! It may be a lot smarter to pay more for a finished home that needs no immediate cash infusion.
Our buyers will have to decide what’s best for them. Just be realistic. Be prepared for the usual outcome. It will cost more than you can afford. It will take more time than you expected. It takes tremendous effort to bring a project to completion on time and within budget. Most ‘civilians’ just do not have those skills to make it happen. That’s why you hire project managers.