You know that moment when you finally sit on the couch after a long day with your bowl of microwave popcorn and turn on HGTV. If you’re lucky, you’ll catch some old episodes of Fixer Upper and next thing you know you’re ten pages deep on Zillow and you’re convinced that you are the next Joanna Gaines in the making.
OK, I get it. Trust me. She’s on my top five of people I’d like to meet and I love a good fixer upper. But, HGTV is just that, TV. They take the process of buying a home and fixing it up and squeeze it into a 30-minute episode (5 minutes of which is Chip Gaines body slamming through walls and Joanna having enough time at the end of the day to milk her cows and pick fresh flowers from her garden).
So, if you’re in the market for a place to call home, here are some real-life pros and cons that you may not have thought about if you’re contemplating a move in ready vs. a fixer upper.
In theory, fixer uppers are great. Buy a cheap house, pick out the designs, execute said designs, and live in a home that you love and sell it for lots more money than you bought it for down the line. Sure, this can be done. I’ve seen it first hand with the home we purchased, renovated, and sold for double what we paid for it. However, all good things come with trade-offs.
1. Under Budget:
Generally speaking, if you’re looking at both move-in ready and Fixer Uppers, the fixer upper is going to be significantly less expensive than a move-in ready home. Now, this is a very general statement if you’re comparing apples to apples (if the fixer upper you’re looking at is in the nicest part of town, then it may be comparable in price to a move in ready home in a not as desirable area). Also, not everyone’s budget can afford ‘move-in ready’ and your budget may only lend itself to fixer uppers. If that’s you, then great! The decision has already been made!
A lower sale price on a home also will lend itself to a lower down payment (as it’s a percentage of the sale price), lower property taxes (if the city appraisal lines up with what it’s being sold for), and overall a lower mortgage payment every month. This savings will add up over time! If you’re paying less per month on a home that your max budget allows, it will free up cash to do renovations in the future or save that money for future expenses, travel, etc.
2. More Equity
Again, generally speaking, if you’re purchasing a fixer upper and renovating it, your likelihood of increasing the home’s value is greater. If you’re willing to put in some ‘sweat equity’, then if you plan on selling it in the future, your market value of the home may increase versus buying something that was already renovated.
When you’re designing the house, you get to make all of the decisions! How great is that! Why pay a premium (aka, a higher sale price) for a home that someone else designed, when you can pay a little less, and design it for your family. I always joke with my husband that a home is never ‘move in ready’ for us because although it may be beautiful, there are probably things I may (okay, definitely) want to change!
1. Hidden Costs
I think it’s human nature to want to be optimistic. But, sometimes the optimism can bite us when it comes to money! It’s very rare that renovating a home will stay on schedule or on budget. If you’re given a quote for a project, always estimate 20-25% more than what you are told for both time and money. If you don’t have that extra money to spare, give it some more time to save! There will be hidden problems once the renovation starts, like faulty electrical, rotted boards, etc. and it will never be fun spending your money on things you won’t be able to see.
2. Time Consuming
This is what the HGTV shows don’t show you. Renovating a home takes a lot of time, and usually never stays on schedule. If you’re handy and plan on doing the work yourself, it will save you the cost in labor, but will take a lot longer. If you’re juggling kids, family, full-time jobs, etc., the last thing you may want to be doing is spending your nights and weekends putting up drywall and laying new floors.
If you plan on hiring out the work, it’s still time consuming! If you’re trying to save money, you will be acting as a General Contractor. Lining up bids, negotiating quotes, researching materials, coordinating several contractor’s timelines with one another, etc. The list is endless. The hours you spend coordinating contractors can add up to a part-time job! If your schedule is already full, this can be a really stressful part of buying a fixer upper!
MOVE IN READY
We’ve all seen it. That PERFECT house that pops up on Zillow. Perfect location, amazing updates, and clean! Sure, the price tag is right at the top of our budget (or maybe a little more), but, what could go wrong? It’s perfect! We can just move our things in and be done! Well, here are a few arguments for BOTH sides.
1. Easy Process
Now, I’m not referring to the actual purchasing of the home (see, #1 of cons below). But once you’ve closed on your dream home, the process should be fairly easy. Take the weekend to move in your things, hang some décor on the walls, fill those kitchen cupboards, and you’re pretty much done. This is the ‘American Dream’ right? The beautiful home with the white picket fence while you wave your 'two men and a truck' movers bye after the seamless move.
2. Newer ‘bones’
This is assuming that your ‘move in ready’ home is newer built, or, if it’s a flip, that the investor did it correctly. If you’re moving in to a true ‘move in ready’ home, you should have up to date appliances and mechanicals. Some big-ticket items that buyers don’t like to budget for include a/c, furnace, roof, kitchen appliances, and washer/dryer. If you’re buying a move in ready home, most of these items should of recently been updated or replaced. These may come up as an expense later down the road, but for now, they should have a lot of life left. The home should be more energy efficient if the windows and insulation are newer, which will save you money on your heating/cooling bill.
1. May Over Pay
That shiny house on Zillow that you loved and sent to all of your friends and family? Guess what? So did hundreds of other buyers just like you. It should be no surprise that move in ready homes fly off the market quicker than fixer uppers. They appeal to more buyers, which in turn, creates demand. Basic Economics 101 lesson is that if there is demand, the price goes up. You will always pay a premium for a move in ready home. In today’s market, you also may overpay. Move in ready homes are usually selling within 24 hours of being on the market for over asking price (and usually cash offers as well).
2. Higher Mortgage & Closing Costs
If you’re buying a home at the top of your budget, your mortgage, property taxes, down payment and closing costs will affect that. Many of the costs you encounter when purchasing a home is related to a percentage of the sales price. The higher the sales price, the higher the costs. Although you may not need to do any work to the property, you’re costs are generally higher month to month due to the higher price.
3. Hidden Defects
Remember number #1 where I talk about demand? Well, investors are savvy people and realize that it’s a great place to put there money where the demand is. Because ‘flippers’ know homes go fast and for top dollar, some of them will cut corners. Ever heard the saying ‘a wolf in sheep’s clothing’? Well, some move in ready homes are actually problem houses with a pretty kitchen and neutral paint. Make sure you’re working with an agent (hi!) who can help spot these issues as well as always getting a home inspection, no matter how ‘new’ or nice the house appears.
The decision between fixer upper and move-in ready isn't very black & white, and sometimes the decision may be made for you based on your life events and budget. Each buyer is different and so are the motivations for purchasing a home. Did you buy a fixer upper or a move in ready home? Why? Would you make the same decision again if you had to go back in time?
If you are thinking about buying a home, let's chat about which of these two options work best for you, or maybe, something in between the two!