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Some people get giddy at the thought of rolling up their sleeves and improving a home for profit, but do they really know the savings of a typical fixer-upper home in their market?
According to a new Zillow Digs analysis, national trends show home listings that require serious improvement might not be financially worth it for homebuyers.
Compared to the market value, fixer-upper homes — which, for this purpose, have keywords like “good bones,” “TLC” and “fixer-upper” in their listing description — list for 7.6 percent less. For the median priced fixer-upper, that’s a savings of $11,000.
While $11,000 is a serious chunk of change, it wouldn’t cover major renovations like a kitchen over-haul or projects that cover a home’s structural integrity. And, naturally, the savings are hugely dependent on a home’s location.
Zillow studied nearly 70,000 listings throughout the nation, comparing their estimated values based on whether the home is considered to be a fixer-upper or a move-in ready home.
San Francisco homebuyers willing to put in some hard work may get the highest value of a home, the report shows. The median fixer-upper will save buyers 9.5 percent, giving them $54,000 in renovation costs to get to the breakeven point. Fixer-upper homes make up 2 percent of the entire stock of housing in San Francisco.
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On the other end of the spectrum, residents of Phoenix may stray away from the idea of purchasing a fixer-upper home, which cost just 0.4 percent less than the local market value, according to Zillow data. This leaves homebuyers with just $1,000 for renovations. Of all the listings in Phoenix, just 0.9 percent are fixer-uppers.
Where it’s worth the work
Chicago residents looking to buy a fixer-upper home can get a pretty good discount compared with the market value.
Zillow reports Chicago fixer-upper homes to be 13.8 percent below market value, giving buyers about $19,000 to work with for renovations. Of all listings in Chicago, fixer-uppers comprise 1.7 percent of the pool, the report says.
Baltimore is another good place for fixer-upper buyers, who can find this type of home for 16.6 percent less than the market value. That gives buyers $23,000 to spend on renovations to breakeven.
Cincinnati, Cleveland, Pittsburgh, St. Louis and Philadelphia are also good options for buyers looking to fix up a place, Zillow says.
“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,” said Svenja Gudell, Zillow chief economist.
Where buying a move-in-ready home makes sense
In big cities like Los Angeles, New York City, Washington D.C. and Miami-Fort Lauderdale, the discount on a fixer-upper home isn’t really worth the cost and headache of renovating and remodeling, the report shows. These cities have reported fixer-upper discounts of 2.7 percent, 4.4 percent, 5.9 percent and 2.9 percent, respectively.
In both NYC and L.A., residents will end up with about $12,000 in order to breakeven with the market value. D.C. residents can get a bit more, at $15,000.
Miami residents won’t make much off a fixer-upper home, saving just about $4,000.
