Every week, we ask a real estate professional for their Short List, a collection of tips and recommendations on an essential topic in real estate. This week, we talked with John A. Riel, a salesperson/design consultant with LandMark Estates Realty, for his tips on buying a fixer-upper home with your buyer clients.
6. It’s Not What You See – When looking for a home, most properties that need some work are overlooked. The beauty of a fixer upper is not about what your clients see; it’s about what they envision it to be. When you find your clients an older home – one in move-in condition that fits all their needs – sometimes the bathroom or kitchen hasn’t changed since 1950. The cost of that renovation project may not be included in the sale price. Odds are your clients can only live with an outdated room for so long, and eventually will want to renovate.
5. The Price of Happiness – Buying a fixer upper can actually mean a few different things when you really think about it:
A) When it comes to purchasing one of these homes, the price is lower then that of a similar house in move-in condition. This can allow for the money saved to be used later in the renovation process.
B) The lower costs associated with a fixer upper means your client will actually get more house for the money, but work needed is always somewhat proportional to decreased costs needed to finish the house.
C) Remember that the appraised value is just estimated. The work truly needed in your project is totally dependent on your client’s vision for the property!
4. With Age Comes Beauty – Depending on the age of the property your client might procure, they may find hidden value in what they could consider trash. During the demolition process, they should take caution and be careful to save as much as possible. The older the home, the more valuable the original building materials may be. Old homes are built with rustic rough lumber, which can be sanded, finished and repurposed. Lumber’s age adds to its character, making it valuable (there is actually a thriving market for such lumber). Those drafty older windows can be sold for restoration projects, and just like the wood, can be salvaged and sold to artists or furniture builders. The value of those recycled materials has become a very lucrative market, so that trash may be someone else’s treasure. Plus, all the extra profits will only benefit your client’s renovation project, whether they sell it or just use it themselves.
3. Highest And Best Use – If the house your client purchases doesn’t fit their needs, or is just beyond repair, always consider the possible land value for its views, location or possible resources, which is always a plus. Depending on your client’s predetermined budget, materials salvaged can be saved or sold, and even just the land itself can be reused. Location matters, even if it’s just close to major roadways for commuters. So, if your client decides to rebuild on that land, a quality location can only add value to the home, and again, salvaged materials might just put some money back in your client’s pocket for other projects.
2. Yours or Mine – When someone builds a house, it’s exactly what they imagined it to be. So in a way, when your client chose to buy a house, its like they are buying someone else’s dream for a house. Of course, there are millions of beautiful houses out there, so having the ability to see the potential in a fixer upper allows your client to find a house they really love, and see it become the home of their dreams.
1. How Could You Benefit – Even a first-time homebuyer could find the potential in looking into fixer upper properties. The price range is not only affordable, but allows owners to use that first home as a solid investment. Fixer uppers are the gems to those who professionally flip houses for profit. So if your client is looking at spending more then two years someplace, the work they do will just add significant value to original purchase. The difference in value is now profit, and could end up becoming a large down payment for your client’s next home.
John A. Riel is a salesperson/design consultant with LandMark Estates Realty.