Maybe it’s your first house. Maybe it’s a rental property. To you, it’s a fixer upper. But to your neighbors? Homely might be a charitable term. Distressed? In need of repairs? Priced to sell? Those may be a little bit more accurate.
But if your neighbors think your house is an eyesore, what would a potential buyer think?
According to data from Redfin, the average house in Utah sat on the market for approximately 72 days in 2019 prior to being sold. And for many of you, that can certainly be an agreeable amount of time. But there’s that tricky little adjective—average. And a fixer upper house is anything but average. It needs love. It needs attention. And it needs time to look presentable. An expensive amount of time.
You may be asking yourself what you should be doing with your for sale by owner fixer upper house. Here’s a few tips to keep in mind.
Who Is In The Market For A Fixer Upper House?
The average buyer of a fixer upper house isn’t your typical buyer. They’re likely to be first time home buyers with limited credit who are looking to purchase a home as quickly and as cheaply as possible—and a fixer upper house which is for sale by owner can be a perfect solution for all parties.
Lenders will obviously be less apt to loan higher capital to buyers with limited credit. Buyers are less discerning about the overall condition of a home. And sellers can sometimes have the opportunity to set the conditions of a mortgage on their own terms.
Does it sound ideal? It might. But the reality of selling a fixer upper house can be much more difficult than you think.
Do Fixer Upper Houses Actually Sell?
It’s fairly common to find fixer upper houses for sale by their owners as a result of the threat of foreclosure. Most homeowners selling distressed properties do so at a loss as a last resort prior to going through the pre-foreclosure process; and assuming the sale can meet the remainder of a mortgage balance. Many banks find it a preferable solution compared to the estimated 120 days it takes for the foreclosure process in Utah to go into effect.
Some buyers may choose to take out a 203(k) loan (also known as rehab mortgage insurance) which allows them to start work immediately with contractors on restoring the fair market value of a fixer upper home. However, qualifying for a 203(k) is contingent on a number of factors many Utah buyers aren’t always able or willing to meet, including:
- Renovation costs of at least $5,000.
- Property values falling within Federal Housing Authority mortgage limits for a specific region.
- Household income qualifications.
- Lender approval.
How Much Does It Cost To Renovate A Fixer Upper House?
The costs of renovating a distressed property will vary depending on the condition of the house.
It’s been estimated that the average national purchase price for a fixer upper home hovers at around $175,000; and in our experience, that’s roughly equivalent to what we’ve seen in Utah over the past few years. But here’s an interesting question: just what qualifies as a fixer upper house?
Personally, we’ve seen properties listed as distressed which are anything but. They’re not dilapidated shacks and they’re far from a health hazard. They might stand to use a fresh coat of paint and some minor cosmetic repair, but they’re hardly the money pits you might hear about second hand. So why are they being advertised as fixer uppers?
Because it can actually be a selling point, believe it or not. Home makeover programs are hot right now, and everyone wants in on the trend. Not that we can blame them. Transforming a $175,000 property into a spacious home you can sell for almost double the value three years down the road isn’t just a source of pride. It’s a sound investment. There’s just one catch that reality programs don’t tell viewers.
It can cost almost as much to renovate a fixer upper house as it does to purchase it. Sometimes even more. The average renovation budget has been reported as being in excess of $111,000 nationally. In fact, Home Advisor estimates that the minimum cost of renovation per room in Salt Lake City is roughly $18,000. Again, that’s per room.
What About Repairing A Fixer Upper Prior To Selling?
The average cost for home repairs can sometimes be as high as $75,000. And that’s just for simple repairs, not for total renovation.
The average cost of a home in Utah was reportedly $325,000 in 2019. If you take the average sale of a distressed home as being being $175,000, that’s a loss of $125,000. Even with simple repairs, you’re really only seeing a $50,000 profit. And that’s assuming you find a reputable contractor who won’t stretch a six month rehab into a two year money pit!
Selling Your Fixer Upper As A For Sale By Owner House: A Game Of Chance?
There’s definitely a market for fixer upper houses, even if many realtors may choose to shy away from selling them. Their loss can be your gain. But it takes marketing to sell them. It takes know how. It takes business savvy. And above all, it can take time. If it seems like a question of finding the right buyer at the right time, that’s because it is. And there’s no guarantee you’re going to have an excess of either.
That’s not the case with us. We’ve been in the business of purchasing both fixer upper, distressed properties and undervalued homes throughout Utah for over a decade now. At Gary Buys Houses, we’ll purchase your home as is; at a price that’s fair and in as little as 3 – 5 business days.
If neither time nor the right buyer seem to be on your side, it’s not a question of when to sell your fixer upper house. It can be a question of when not to.