With inventory low and demand high across much of the East End – YOY inventory was down 61 percent in the last quarter of 2020, according a Douglas Elliman market report – many potential buyers are giving up on nabbing a move in-ready property and are instead bidding on so-called fixer-uppers, or homes that need a significant amount of repair.
While the notion of reconfiguring an existing home to your exact standards can be enticing, not all fixer-uppers are the same. This means you need to choose a property that will retain value in the years to come and won’t cause too many renovation-related headaches.
Before accessing the state of the home you’re interested in, you’ll want to examine things you can’t change, or things that will be very expensive to alter. These include location and layout. Buying a fixer upper in an undesirable spot such as a busy intersection or road, near train tracks or a dump, or even near a school means you may have a difficult time reselling or recouping your investment when it comes time to sell.
The same goes for layout. If you buy a fixer-upper with a configuration that needs major altering, there is a chance the money you put into the home won’t translate into a profit when you put it back on the market.
Local agents say the overall condition of the home is key when deciding to purchase with the intention of fixing it up.
“A general rule of thumb,” said Sheri Winter Parker, licensed associate real estate broker, Corcoran, “is to look for solid basics such as framing, a dry cellar, and any signs of leaking.”
Identify easy fixes since they will be the least expensive and time-consuming, allowing you to quickly move into the home. These include painting, refinishing floor or replacing carpet or tile, installing new fixtures and lighting, re-facing or painting kitchen and bath cabinets, adding a deck and painting the exterior.
“Turn it into a habitable space first,” Parker says. “Get the basics done first and stick to that budget.”
Potentially costly and time-consuming fixes include replacing HVAC systems, reroofing, kitchen and bath remodels, replacing plumbing and electrical wires, solidifying foundations, pouring concrete for driveways and any additions.
Then, of course, there’s scope-creep.
“Once you get into a renovation project, you will always find more things you want to do or need to do in order to complete the task, says Thomas McCloskey, licensed associate real estate broker, Douglas Elliman. “Anticipate twenty to thirty percent of add-ons once you get started.”
Keep in mind also that in this market, materials are at a premium, and interior designers, architects and general contractors are in high-demand. Lumber prices are up 188 percent since the beginning of the pandemic, adding $24,000 to the cost of a new, single-family home. Since many of us are taking a fresh look at our interiors, furniture orders are being delivered upward of nine months after orders are placed.
“Architects are definitely swamped,” said McCloskey, “and access to materials and appliances are causing delays.”