By Seth Murphy
The New York Times published an article in 2017 with a profile of today’s first-time home buyer. Here’s that person’s census rundown: 32, white, earning $72,000, and married without kids. The median price of the home he paid for was $182,500, and his down-payment was probably 6 percent. That 6 percent stat is interesting. Generally, it’s advised that buyers pay more upfront to convince banks that they’re invested in a long-term mortgage. Going 6 percent implies that this first-timer can’t come up with the cash for the usual 20 percent, or he may have decided to buy a fixer-upper, which generally comes with a lower price tag. If that’s the case, here are some tips for first-time home buyers considering a fixer-upper.
The Buying Process
Searching for fixer-upper properties in your area is as easy as searching Google, scrolling through sites like Zillow or Trulia for foreclosed homes, or contacting a trusted realtor. You’ll also want to hire a few more pros, too. These might include an inspector, an appraiser, or a contractor. They’ll be able to tell you what’s the damage, how much it’ll cost to fix it, and how much the house is worth. Generally, prices vary depending on location. Homes for sale in Federal Way, Washington, for instance, have a median listing price of $398,000 – which is almost double the median home value in the U.S.
Repair & Design Projects
Okay, now that you found your dream home, what projects do you need to tackle? First, it’s important to distinguish between two main types of repairs: structural and cosmetic. Structural means fixing the foundation; cosmetic means repainting the walls. And the rub is that when you sell your home, buyers expect the roof to be snug and dry, which costs more to fix than installing appliances, which people swoon over. The repairs that you do first will depend on your budget and your long-term plan. If you’re trying to flip the house for quick cash, add a deck, replace the doors, and reface the cabinets. If you want to turn it into your forever home, though, consider paying for more weighty investments like a new HVAC or repaving the driveway.
Now, if you’re handy, there are a number of projects you can take on to touch up the joint. Pile together some lumber left over from all these repair and design projects. All you need is a jigsaw to cut the boards, a sander to make them smooth, and a drill to fix them in the wall. Voilà – a swanky new headboard above your bed. (Which you could also fashion out of shutters, old doors, or fence slats.)
Should I Stay or Should I Sell?
At first glance, that question may seem purely financial. And, in many ways, it is. So ask your realtor buddy to run the comps on your neighborhood. Then, crunch the numbers on your own house. Say you bought it for $200,000, put $50,000 into it, and now it’s appraised at $350,000. You, my friend, stand to make out with a cool $100,000 (assuming it’s paid down). Want the cash? Pull the trigger. But keep in mind, decisions and challenges like these are nuanced because of what’s going on in your life, not what a market formula dictates you do. Your plan could have been to turn a quick profit. Yet, what if this little fixer-upper somehow became your family hearth? Then stay, and be grateful for this one spot of earth that you call yours.
Image via Unsplash
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