With the recent announcement of the final season of HGTV’s Fixer Upper, it seems appropriate to lend a bit of time on the impact this network has had on KC Metro home buyers….particularly first time buyers.
There is no denying that HGTV has inspired countless home buyers and owners to restore properties…bringing them back to great condition and benefiting their neighborhoods with an increase in both curb appeal and property valuation. The before and after photos of some of these properties is simply stunning.
As a Realtor, I love it and hope it continues for as long as possible. Another perspective I get as a real estate professional are the different types of buyers that look to bank-owned, short sales or properties in poor condition where no repairs are being made. Basically, it is these types of homes that are typically the canvas for “HGTVers” to paint on. Having the inspiration is one thing….acquiring the property, however, is very much another.
So what type of buyers are purchasing these “fixer upper” homes?
Buyer #1 — The Investor
Their profile is fairly straightforward. They are buying with cash and they typically have a team they work with on renovation/repairs or have the skills themselves. They might decide to rent the property or resell for a profit. (Click here to see our previous blog posts on purchasing investment properties). This ain’t their first rodeo and they know what they are doing and how to maximize their purchase.
Buyer #2 — Non-investor purchasers (owner occupied) who specifically want a rehab home.
They want to occupy the property and are looking for a value. They don’t mind the hassle of repairs/rehab. They are either purchasing with cash or have a specific type of loan suited for the property condition they are getting into. (ex. Limited FHA 203K…click to go to the FHA site to learn more about loan summary and specifics). These are wonderful products that allow you to acquire the property and the costs of the rehab in a single loan.
The big takeaway for this type of buyer is simple. They are clear on what they want and they have done the legwork to acquire it.
They might find themselves competing for a property with investors, but at least they have the correct loan for the property condition they are going for. In some scenarios, these buyers don’t even need to compete with the investors. If you go to websites such as the HUDHomeStore, you will see that new listings always have an interval where only “owner occupied” buyers can bid. This allows a non-investor a window to get their offer in and under consideration before they have to worry about the investor group.
Buyer #3 — Non investor, owner occupied who are financing the purchase… that sort of back into this space.
In a hot seller’s market, I know that buyers get frustrated having to race around to get a look at a house only to find they are in a multiple offer situation…again. That is simply the reality of our KC Metro market right now. Some of these buyers throw their hands up and begin to look toward what they perceive is a calmer segment of the market….bank owned properties/foreclosures and short sales. Why not, right? The price tag looks attractive, these don’t always fly off the market like a move-in ready home, and they feel somewhat empowered by what they see on some of these shows.
It is perfectly fine to switch gears, but it is this classification of buyer that is about to discover an entirely new process in their home buying journey. If you want to step into this space of rehab and fixer upper, your loan product may very well have to switch gears too depending upon the property condition. Some loans are just not a good fit for a property in need of repairs. Remember that the lender will be sending out an appraiser to assess valuation (purchase price) and condition. A typical FHA 203B loan is getting appraised on what is…not what will be.
Let’s say that you do want to consider a home to renovate/repair. You now know that there are loans that will fit that bill, but not all lenders handle renovation loans. This means that the original lender you received pre approval from (back when you were looking at move-in ready properties) might not be the one that gets you to the closing table. The earlier you can speak with a Realtor or Lender on this topic, the better.
Summary:
As with all topics on this blog, you get the idea that preparation is critical in your home buying journey. We don’t expect you to have this knowledge and know everything about these types of purchases beforehand. We simply encourage you to reach out to us so we can advise you of your many options to get to your goal.
You may very well have a great rehab story to tell one day and we want to do all we can to help you achieve that.
Please don’t hesitate to contact us with any questions you have on this topic.
Take care,
Terry Jackson | Domicile One Realty | www.DomicileOne.com
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