A fixer-upper, as you likely know, is a house available at a lower price because it needs repairs and/or renovations. Even though you can typically buy a fixer-upper at below market price, it may not be a bargain after all once you’ve paid for materials and labor to make the needed repairs/renovations, especially if there are structural problems. So you have to tread carefully and figure out of it’s really worth it when buying a fixer-upper. Here, then, is how to know if a fixer-upper is worth it when buying Oklahoma City properties.
Do the Cost-Analysis Math
The first step toward determining whether a fixer-upper is worth it when buying Oklahoma City properties is to put pencil to paper and do the cost-analysis math. And it’s a pretty simple equation, really.
Start by carefully and thoroughly examining and assessing the condition of the property. Then tally up all the estimated costs involved in making repairs and renovations. This figure should include both materials and labor, including your own labor.
Next, subtract the total estimated costs from the property’s “likely market value after renovation, drawn from comparable real estate prices in the neighborhood. Then deduct at least another 5 to 10 percent for extras you decide to add, unforeseen problems and mishaps that have to be dealt with, and inflation. What’s left should be your offer.”
A Oklahoma City agent can help you determine the property’s market by performing a comparative market analysis. To find out more or get assistance with, contact an agent by calling (405) 521-1817.
Get an Inspection
The best way to assess the condition of a fixer-upper is to get your own inspection done before making an offer. (And experts recommend that you also include an inspection contingency in the purchase contract.)
“At best, the inspection will assure you that the house is a good investment; at worst, it will help you back out of the deal. Often with fixer-uppers, it’s something in between. The inspector will document a serious problem or two, and you can use the findings to get the seller to pay for repairs or negotiate the sale price downward.”
Industry pros agree that if the inspection reveals significant structural problems, then the properly probably isn’t worth it and should be avoided. “That’s because major repairs – plumbing and electrical system overhauls, foundation upgrades, and extensive roof and wall work – are usually ‘invisible’ and hardly ever raise the value of the house enough to offset the cost of the renovation.”
Factor in Permit Costs
When doing your cost analysis to determine whether a fixer-upper is worth it, you need to make sure to factor in permit costs. Many buyers neglect to do this, and the cost of repairs/renovations runs considerably higher than they anticipated.
Check with local officials to see if the planned work requires a permit, as well as to find out the cost of the permit(s). Doing the work without a permit will save you money, but then you may run into problems when you try to sell the property.
“Decide if you want to get the permits yourself or have the contractor arrange for them. Getting permits can be time-consuming and frustrating. Inspectors may force you to do additional work, or change the way you want to do a project before they give you the permit. Factor the time and aggravation of permits into your plans.”
Determine What You Can DIY
Any of the work a fixer-upper needs that you can do yourself will save you money and will play role in whether the property is worth it. So determine early on what and how much you can DIY.
Keep in mind, though, that DIY projects are seldom as easy and neat as all those TV shows make it seem. “In the real world, attempting a difficult remodeling job that you don’t know how to do will take longer than you think and can lead to less-than-professional results that won’t increase the value of your fixer-upper house.”
Make an objective assessment of what skills you possess and how much time you can devote to the work. “Some tasks, like stripping wallpaper and painting, are relatively easy. Others, like electrical work, can be dangerous when done by amateurs.”
Try to Negotiate a Better Deal
Another thing that plays a role in whether a fixer-upper is worth it is the likelihood of your being able to negotiate a better deal.
Industry pros recommend making “an offer that strikes a balance between a good deal and the cost of necessary repairs.” Then you can work on other aspects that make the deal better and make the property worth it. “With any offer, you should include contingencies, which are exceptions that allow you to back out of a purchase if something comes up. A couple of common contingencies are inspection and appraisal contingencies. If an inspection reveals a major problem or the home appraises for lower than you offered, you can back out.”
Lean on Your Oklahoma City Agent’s Expertise
Ultimately, there remains some risk in buying a fixer-upper. It may turn out to be a bargain, or it could be an enormously costly mistake. But if you work with an experienced Oklahoma City agent, your chances of getting a bargain will be vastly improved. If you’re planning on buying a Oklahoma City fixer-upper, be sure to contact us at (405) 521-1817.