Video Transcript: Can Fixer-Uppers Work for First-Timers?
VOICE OVER: Are fixer-uppers a good idea for someone who's new to home buying and homeownership? Let's find out, on "What Works Now"
VOICE OVER: AOL and Bank of America Home Loans, helping you find out what works now.
VOICE OVER: Buying a home is a complex process. Fortunately, in today's market, there are ways to find a home that you can comfortably afford. One common way that buyers often find good value is by buying a fixer-upper, which is basically an existing home that needs some work to increase its appeal and livability to an owner.
STACEY: A seller will usually price such a properties lower than comparable homes in the neighborhood, allowing a potential buyer to save money right off the bat.
VOICE OVER: Besides paying a lower price fort the home, there are some additional benefits to buying a fixer-upper. Buyers have the opportunity to renovate the property to match their own taste and style. And choosing smart renovation projects with high resale value, like bath and kitchen remodels could result in financial benefits when its time to sell the home.
STACEY: With fixer uppers, although the buyer knows some work is needed, it's a good idea to get a professional involved to assess the situation. That's where the expert comes in.
PAUL: Hi, my name is Paul Mignone, I'm from Sound Shore Construction. I've been a contractor in this area for 12 years.
STACEY: I was just hoping to find out what kind of work this home needs.
PAUL: Actually, I see some things right away that might need some attention. The first thing I see that requires some attention is this beam. It looks way too small to carry this load. It looks to me like it's sloping down, and it would appear to be unsafe at this point
STACEY: OK, if I do want to fix this, how much am I looking at?
PAUL: Well I would say we'd get an engineer to come in and design something for you that cost you $800 to $1000. Another next thing I notice is the stairs. There's no spindles from the handrail to the bottom od the stairs – very unsafe. It looks like the stairs are very steep.
STACEY: But it shouldn't be very expensive to fix just this [points to stairs]
PAUL: No, absolutely not. If you just wanted to make it safe, put spindles in, that'd be a $600 repair. But if you wanted to totally reconfigure the stairs, you know maybe close the wall in so you gain a little more room in your kitchen, you could be spending $10,000 or so.
STACEY: Wow, you're telling me that just in this room, I could be spending about $13,000?
PAUL: That's just what I see so far. There are a lot of hidden little things you need to think about.
[Climbing the stairs]
PAUL: Don't hold on to this too tight, be careful [shaking the banister]. This is going to change our handrail repair. We're probably talking a couple thousand dollars.
STACEY: OK, let me get this straight. If my math is right, my repairs are now around 20,000. Now as a first-time owner, I'm not going to have any equity in the house. So I imagine a buyer will have to think about how they're going to come up with the money for these repairs out of their own pocket.
PAUL: That's correct. You buy the house, you're going to have a mortgage, you may not have an equity line. I think if you don't have the cash to lay out, you need to come in and prioritize and fix the items that are safety issues the ones that absolutely have to be done, and the rest will get repaired over time.
VOICE OVER: As you can see, renovations can quickly add up, but there are projects that u can choose that will quickly add value to your home, and pay for themselves down the line.
PAUL: What we have here is a galley-style kitchen; you have a bathroom in your kitchen. You're probably talking $40,000 minimum, and let your tastes take the price up from there.
STACEY: OK, I think I can see why people start to prioritize what they need to do first. Would this kitchen be the top of your list?
PAUL: Yes, and I know any work you put into this kitchen will definitely get you money back and then some when you resell your house.
STACEY: One final thing to consider is that home renovation projects can be stressful, and often take longer to complete than many first time homeowners anticipate.
VOICE OVER: [Slideshow of construction workers] Imagine this guy, and this guy, and that guy, working on your home making noises like this [shrill drilling noise] for weeks on end. So, to fix or not to fix? Fixer-uppers can be a good choice for first-time homebuyers, but remodeling a home is not a project to be taken lightly
STACEY: If the repairs turn out to be too costly, it may be better to go with a move-in ready home, and save the fixer-upper for a future purchase.
STACEY: [Staring at the banister] Yeah, I may need to brush up on my carpentry skills.
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