If you have your heart set on buying a fixer upper home, you’ll be joining a demographic of renovation enthusiasts that are keeping the $300 billion renovation industry thriving. But is taking on a fixer upper a smart move? It can be if you’re equipped with effective resources and good information to help you navigate through your renovations.
Welcome to PrimeLending’s “Buying a Fixer Upper Home” three-part blog series, where we’ll share with you facts about this booming industry, information on renovation-specific mortgages, tips on choosing your perfect fixer-upper home and ideas for managing your renovations. In this first blog, “Buying a Fixer Upper Home – Part 1; Fixer Uppers Are Where It’s At, Folks!,” we’re sharing with you some exciting industry facts, interesting renovator habits and financial opportunities for home-rehab enthusiasts.
First Thing’s First – Fixer-Uppers Aren’t Easy!
While reality TV shows like “Fixer Upper” and “Rehab Addict” can charm potential homebuyers into taking on a fixer-upper home of their own, the un-documented reality of renovating a home to reside in, rent or sell can be much more challenging, costly and time-consuming than expected. “Fixer Upper” Co-Hosts Chip and Joanna Gaines make renovating look easy, as they always come in on budget, gracefully deal with unexpected costs and meet fast-paced deadlines. “Rehab Addict’s” thrifty salvager, Nicole Curtis, expertly stretches her dollars, by refurbishing and repurposing original and recycled materials of the homes she rehabs. But the average homebuyer taking on a fixer upper will likely have a harder time than those experts with costs, construction, city permits, costs, design, deadlines and costs. Did we mention costs?
It’s not an impossible feat! Just one that needs a lot of preparation, strategic thought and attention to detail. So set your expectations as such, and be ready for the unplanned.
According to the Joint Center for Housing Studies of Harvard University (JCHS), the U.S. home improvement and repair industry bounced back better and faster than the broader housing market after the Great Recession. In fact, the most recent JCHS study shows that the renovation industry is set to post record-level spending by the end of 2015, exceeding $324 billion in 2007. The JCHS’s study also reports:
- One in three homeowners abandon their redesign projects because they feel overwhelmed.
- Most homeowners dedicate only the first two years of homeownership to renovations before deferring un-finished projects indefinitely.
- Replacement projects, such as those necessary for rehabbing a fixer upper home (i.e., roofs, siding, plumbing, electrical, flooring, walls, etc.), account for 50% of the total industry market share.
- Discretionary projects (i.e., kitchen and bath remodels, room additions, structural alterations, etc.) account for 30% of market share.
- While baby boomers still lead the renovation market, followed closely by gen-Xers, more millennials are entering the market and are expected to help significantly boost home improvement spending.
Did you know that there are renovation-specific mortgages made for homebuyers, like you, who plan to substantially renovate a fixer-upper home? These specialty mortgages, like EZ “C”onventional Repair Escrow, FHA 203K renovation loan and HomeStyle® Renovation, just to name a few, are intended to help homebuyers best manage renovation costs, as well as protect homebuyers from additional financial strain due to unexpected emergency construction costs. Work with your mortgage lending professional to find out which mortgage is best for your fixer upper home.
Deciding to purchase a fixer upper can be both rewarding and daunting, depending on which phase of the home-improvement stage you’re tackling. Watch for our next blog installment, “Buying A Fixer Upper Home – Part 2; Finding Your Fixer Upper,” to get tips on how to choose the perfect home in need of your TLC!
From the PrimeLending blog, by Mandy Jordan