Some cash-strapped home buyers think they can save money on a house by getting a discount on a fixer-upper and using the savings for renovations.
However, the savings on a fixer-upper may not cover the cost of updating a home that needs significant renovations or repairs. A new analysis by Zillow shows that a typical fixer-upper is listed for just 8 percent less than other homes for sale, saving buyers an average of $11,000.
While that’s a significant amount of money, it’s only about half the average cost of remodeling a kitchen and is enough to cover just one project like remodeling a bathroom or installing new siding, without much left over for other projects, according to price estimates from Home Advisor.
“Fixer-uppers can be a great deal, and they allow buyers to incorporate their personal style into a home while renovating, but it’s still a good idea to do the math before making the leap,” Zillow chief economist Svenja Gudell said in a statement.
Given the dearth of housing inventory around the country, the market may be pushing up the price of homes that need work because buyers are being outbid on move-in ready properties. That’s good news for sellers who may not want to invest in costly repairs or renovations before listing their property, but it’s one more factor pushing up the price of homeownership for potential buyers, especially first-timers.
The Zillow report defined fixer-uppers as homes with descriptions that signaled the need for updates or renovations, such as “TLC needed” or “good bones.” It showed that the fixer-upper discount varied widely by city, with homebuyers in Phoenix getting the smallest savings ($1,000) and those in San Francisco getting the largest ($54,000).