Considerations When Buying a Fixer Upper

Urban living is expensive for most everyone. For Millennials trying to buy their first home, the prospect is even more daunting as the rising price of housing is outpacing their ability to save for a down payment, and home sales are falling so there’s a smaller and more competitive market. The prices of homes for sale in Chicago are predicted to climb about 1.95 percent in 2017, on average. But, that is relatively good news compared to the projected national average uptick of 3.9%. And, economists in the real estate field predict that the Chicago housing market will be among the 100 weakest of the largest metropolitan US areas during 2017, which could turn out to be good news for homebuyers. 

Millennials on a budget – well, really any homebuyer on a budget – might want to consider a fixer upper for their first home as one way to afford urban-based property on a budget. But beware the renovation romanticism of shows like HGTV’s “Fixer Upper,” “Flip or Flop,” “Property Brothers” or “Love It or List It,” where homes are transformed in 30 to 60 minutes (with commercial breaks) through the magic of television editing. It is doubtful that Chip and Joanna Gaines are not going to show up on your doorstep to paint the walls or add a dormer window. Consider the following issues before you commit to a fixer upper, so you’re doing so with eyes wide open and a practical – and livable – plan in place.

Know the difference between cosmetic and structural fixes

You can live in a home if it needs fresh paint on the walls. That’s a cosmetic fix. You cannot live there if the walls are in danger of falling down. That’s a structural issue with safety concerns. Have a licensed home inspector do a thorough review of the property before negotiating on the price, or deciding to make an offer. A home inspector won’t advise you if the structure is up to local codes, but they will advise you on the safety and usability issues of the home and provide you with a detailed report. You can use this to factor all the costs related to fixing up the property. Then either negotiate on the purchase price accordingly, or walk away if the structural problems are excessive.

Determine the Budgets for Money and Time

You may save money on the purchase price for a fixer upper compared to a newer or less needy home in your target neighborhood. But then you may have to put that savings right back into fixing, replacing or remodeling the structure to suit your needs. And, whether you tackle the fixes yourself, hire a professional, or do a little of both, you’ll have to have patience to cope with the stress and time it takes to make it the home you want for your family. Some planning tips to consider when house hunting:

• Figure you will have to spend at least 10% to 20% additional to the purchase price for any problems you may or may not discover during the inspection and negotiations.
• Invite a contractor to give you a written estimate on their labor and materials costs for all necessary work. Then price the supplies on projects you can reasonably do yourself. Do a cost comparison and develop a renovation budget with reasonable expectations of what you, or a professional, are going to address.
• Have a plan in place for alternate housing if there might be times you can’t inhabit the home during renovation. If you don’t have friends or relatives nearby that you can impose on, then you’ll need to factor temporary shelter into your renovation budget.
• Make sure your grand ideas for fixing up the joint are in line with local building codes. Following code enforcement and securing permitting is something that can add to both your money and time budget, and get very frustrating even with the best laid plans.

DIY, or Hire a Professional?

Admit it. You’ve sat on the couch on a Sunday afternoon binge watching home renovation shows, and you’re convinced you’ve learned enough to be as repair savvy as Bob Vila (shout out to the Boomers and older) or have an eye for knocking out a wall like Christina El Moussa (that’s for you Gen X and Millennials). Before tackling unfamiliar projects yourself, check out your local Lowes or Home Depot, for how-tos, buying guides, in-store classes, and project calculators.

But you just may not have the extra time to do the work yourself. And, some projects can be dangerous, like replacing electrical wires. Know your limits for creativity, manual labor, and affordability, and leave the “heavy lifting” to the professional contractors.

Local Tip: Looking for homes for sale in Chicago, and want to focus on “hot” up and coming neighborhoods that have appreciation potential? We hear the Bridgeport/Brighton Park and Humboldt/Garfield Park areas may be a couple places to start your search.