The perfect place is out there (and its going to cost you)
Most of my house buying clients, young and old, with families or without look to buy the “perfect place”. Especially early in their searches, they will pass up on perfectly good houses only because they need cosmetic work, minor repairs or some other kinds of updating and upgrading.
Yet, I am of the opinion that there is no such thing as a perfect house. Even if you design and build your own, there will be something that you will forget to add, or put in the wrong place. But that is something many home buyers discover along the way. Most home buyers come to admit that there will be a compromise eventually.
In fact what works for most home buying clients is what I like to call the 80% rule.
If you are 80% happy with the house, then you should consider buying it.
So, the first paragraph says that most people are a little too picky, especially early in their searches. But there are other home shoppers (like me) who actively seek out fixer-uppers and for many good reasons.
Why you shouldn’t focus on buying the perfect place
Perfect places sell at a premium. They sell for more than they are really worth because buyers are paying for the convenience of moving in and not having to do anything. Perfect places also have all of the most modern features and conveniences and as such will attract more buyers. The economic principle of supply and demand means the perfect place’s price will be under a lot of pressure to be high. If you’ve ever said to yourself, “wow it sold for that much”, you were likely talking about a “perfect place”. Prefect places often sell for more that what the comparable market analysis would predict. There are often competing bids.
At the same time, according to industry statistics, houses needing a lot of work sell for well below average market price. If the average home in Kitchener-Waterloo is $500,000 (it’s higher) that means a savings of maybe $40,000 for a place that needs a lot of work. That’s a lot of money for the inconvenience of doing some home renovations and improvements.
On the topic of home renovations and improvements, I’d like to point out that if you live in any home, even a brand new home, for 15 years or more, you will be doing home renovations and updates.
Mortgage plus improvements
Talk to your lender. Better yet, talk to my lender. She’s great! There are programs available to help buyers improve their homes within the first three to six months of moving in and that improvement money will be part of your mortgage. That only gives you “free money” it also allows you to make your new home your own.
Making it your own
Whenever you buy a resale home, and sometimes when you buy a brand new home, as soon as you move in there are things you have to do. Typically you will want to paint a room, or put in a backsplash or maybe some different lighting or door hardware. It is the same when you buy a fixer-upper, or more so. In some cases, (the best cases), everything has got to go and you will be working with a blank slate.
Build value through sweat equity
If you don’t mind getting your hands dirty, your arms speckled with paint or some dust up your nose, by buying a fixer-upper you are giving yourself a chance to build “sweat equity”. Even if you are not handy and the home needs a major repair, you can do the “grunt work” and leave the important stuff to the professionals. Personally I love being as involved as the contractors will allow me to be with the work.
Time is on your side
My first house in Waterloo was a large two storey home that we purchased for the price of a neighbourhood bungalow. It was at least a generation out of date. It was also a blank slate. We did renovations over nine years until the place was near perfect (and then we sold it and moved 600 metres away and started again).
You don’t have to do the updates and improvements all at once. Make a plan and take your time, doing the most important things first before moving to the trivial.
Conclusion: There is a lot of opportunity on the edges
When you are not following the crowd you have a lot more control in the buying process. Also, today with Lowes and Home Depot not to mention an abundance of contractors available, buying a fixer-upper and doing some level of DIY is easier than ever.
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