Can’t afford the perfect, brand new house in your favorite neighborhood? The pro move is to find a fixer-upper with a discount price tag, renovate it, and get the home you’ve always dreamed of for a bargain.
Except…the math doesn’t always support that venerable tactic. In a recently released report from real-estate site Zillow a survey of 70,000 homes nationwide found that the average price of a fixer-upper is usually just 8 percent less than its estimated market value.
In DC, that average discount drops to only 5.9 percent off the home’s market value, or roughly $15,000* And while $15K might sound like a nice up-front savings, any experienced contractor or remodeler can tell you that amount will barely get you updated light fixtures and a new coat of paint. According to HomeAdvisor.com, the average multiple room renovation in DC costs around $36,000. (And that doesn’t include the investment of personal energy and time required to find a contractor, develop and review plans, and get permits, which can be a very time-consuming process.)
“There is an extremely wide range of what fixer-upper means,” says Leslie White, a native Washingtonian and longtime real estate agent who currently works for Redfin. “Is a total gut needed, or updating a kitchen, or removing dated wallpaper and adding fresh paint? They are very different animals and the buyer needs to be realistic with themselves about what they are willing to take on and the costs associated.”
Being realistic can be tough in a city where some homes fly off the market for cash offers within hours of being listed. DC’s extremely low inventory is largely to blame: Nationally, the inventory of houses for sale is down almost 5 percent from last year, but in Washington, it’s down 13.8 percent.
Still, says White, buyers shouldn’t let the high-pressure market get in the way of sound judgement: “Some buyers need a reality check when they initially think they want a fixer-upper. Maybe what they really want is a house that needs cosmetic updates.”
For those determined to fulfill their remodeling ambitions, Washington’s neighbor to the north may prove to be more fertile ground. The average estimated discount off of the market price for a house that needs work in Baltimore is a generous 16.6 percent, which breaks down to about $23,000 in savings. When the home rings in around $143,750, the budget price tag can feel like a steal–even with months of renovations between you and your dream digs.
*Zillow estimated this number by taking the costs of homes listed with certain keywords indicating work needed to be done (DIY, fixer-upper, good bones, renovation, etc) and comparing that price to what the market estimate would be for the same house move-in ready. The difference came to 15k or a 5.9% discount off of the move in price for DC.