Fixer-uppers may serve as charming fodder for home makeover shows, but in real life, no one’s buying … at least not until someone else fixes them up first.
A new report by Zillow found that listings with “fixer-upper” in their description sell for 7.3% less than similar homes. That adds up to about a $28,000 markdown on a typical property, the biggest discount in three years.
Although it makes sense that homes requiring renovations might be less desirable and lower priced, this wasn’t always the case. Pre-pandemic, Zillow listings that mentioned “fixer,” “TLC,” or “needs work” were actually more likely to sell than properties without these descriptions.
What changed? Fixer-uppers have lost their cachet because “buyers who are already stretching their budget to afford a home in today’s market may not be willing or able to spend more on renovations or repairs,” explains Zillow’s home trends expert Amanda Pendleton. “A remodeled home may come with a higher price tag, but a buyer would get to spread that additional cost over the course of a 30-year mortgage versus paying cash up front to make similar upgrades themselves.”
Why this spells opportunity for investors
This is actually good news if you’re willing to roll up your sleeves and restore these run-down duds to their former glory. Zillow analysts found that listings with “remodeled” in their description get 26% more daily saves, 30% more shares, and fetch 3.7% more on the market.
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“Fixer-upper investments, when executed with precision, can yield exceptional returns while transforming underutilized properties into high-performing assets,” says Sief Khafagi, founder at Techvestor. “One lesson is the importance of rigorous due diligence, not only in assessing the state of a building but in predicting the scope and cost of renovations.”
In other words, as Tom Hanks once learned the hard way, make sure the ugly duckling you’re eyeing doesn’t scream “money pit.”
With fixer-uppers, “Always be ready for surprises. Renovations almost always uncover hidden issues, and you must have budget for it,” says Keith Sant, founder of Kind House Buyers. “Last year, I bought a fixer-upper for $147,000 in Lakewood, Washington. At first it felt like a great deal, but within days we discovered many hidden issues that needed to be fixed.”
It took the company eight months to get the house in shape. “The renovation cost was $50,000,” Sant says. “Quite low compared to our other projects because two of my partners did some basic work that didn’t need a professional.”
In December, Sant’s company sold the house for $280,000. “The profit was amazing, and we took a lot of pride in what we accomplished,” he says. His top advice: “Don’t be afraid to roll up your sleeves and do some of the work yourself! It’s a great way to save money and feel personally connected to the project.”