To buy move-in ready or outdated: that is the real estate question
For many consumers, taking the financial step to becoming homeowners is usually the largest purchase of their lives. And typically, when someone makes a serious investment, the item in mind is precisely what they want. Think about it: when you order a meal at a restaurant, you can customize it to your exact liking (extra cheese, medium rare, dressing on the side, you name it). Another good example is buying a car. You likely don't drive your new vehicle off the dealer's lot and immediately take it to the nearest repair shop for new seats and a fresh paint job.
If you are purchasing a brand new home, you may be able to personalize it and add your chosen upgrades (at a higher cost); however, the majority of people do not buy brand new homes. When purchasing a used home, it may not be upgraded, and chances are if it is upgraded, the previous owner did not have the same style or taste as you. So, how important are the upgraded kitchen and bathroom? Sure, when you tour the home, shiny new upgrades look appealing, but typically the listing price is upgraded too.
In real estate jargon, what are upgrades? The term upgrade can embody a wide variety of things. It can mean everything from new hardware on cabinets and doors to an expensive kitchen remodel. There's a lot of gray area.
How much are upgrades worth? It all depends on one's point of view. From the common seller's POV, they feel their upgrades are worth a lot and may want to list their home higher to get their investment back. From the common buyer's POV, they feel that just because the seller added their personal touches on the home, it shouldn't be listed for that much more. This is where appraisers come into the picture as the neutral third party. They will consider upgrades during their evaluation of a home, but typically don't weigh them heavily in determining the fair market value.
In California, homes are sold in "as is" condition. This means sellers are not required to do any upgrades to the home. The lender may require a few fixes to the home - such as double straps on the water heater - however, those types of minor adjustments are to comply with safety regulations, not to overhaul an outdated space.
In today's market, Realtors and prospective home buyers see pictures and preview homes online before determining what is worth viewing in person. So for those that can see an outdated home's potential, there are some great advantages to making it their own:
1. Since many buyers want a move-in-ready home, there may be less competition for homes that need TLC.
2. Often, outdated homes are listed at a lower price compared to upgraded ones. This price may be low enough for the new buyer to hold off on moving in for a few weeks and to pay for upgrades. Not only will they end up getting a move-in-ready home, but it will be designed to their specific style.
3. Purchasing a slightly outdated home at the higher end of a client's budget also has perks: the neighborhood can be more desirable, the kids can go to a better school, the home can be larger and something the family can grow into.
4. Depending on what's needed, many upgrades can be done over time. Many clients will stretch their bank accounts to get into a home, all with the intention to make improvements within a few years and/or once they're a bit more financially comfortable.
Outside of upgrades, there are many points to consider in determining if a home is right for you. From my experience with clients of all types, the important elements are basically the same: location, price point, size (number of bedrooms and bathrooms) and type (detached, town home, single story, etc). Bonus aspects like a brand new kitchen or an open concept living space are important and can sometimes be a deal breaker for certain clients. However, I always like to ask, "If everything else about the home is what you want, is the item in question something that can fixed or modified to suit your needs without going overboard with construction costs?"
For example: say you save $20K by buying a home that's a bit outdated. With that savings, $20K could go a long way to update the home to your unique style. As the old adage goes, it's better to have the worst house on the best block than the best house on the worst block.
If you have lending questions or need real estate advice to purchase or sell a home in San Diego County, email or call Michael Biondo at 619-993-9559 to get started.