What are the benefits of a fixer upper vs a turn key property? First let me explain what each term means. A property described as a fixer upper is one that needs work. A turn key property is one that you love everything about, just turn the key and move right in.
A benefit of a fixer upper is that you will pay less for the property. Depending on the amount of work that needs to be completed or the amount of unfinished square feet compared to other properties in the neighborhood, the asking price will be less than that of a turn key property. Cosmetic upgrades are not included. But any major repairs, exterior, or foundation work, or having to bring the property up to code, will lower the price. You just need to ask yourself if you are willing to take on such a major project.
A benefit to a turn-key property is just that, it is move in ready. Minus some paint or maybe some new carpet or countertops, and maybe some yardwork, the property is perfect. If you are not looking at your home as an short term investment but as a home your family can enjoy without having the interference of contractors and laborers. Or you would rather not experience the inconvenience to rent for a short time while your house is contracted out, then a turn key home is for you.
I wanted to include information about whether neighborhood stability is important in this segment as well because this will also affect the asking/purchase price of a home. Houses are priced based on what other houses are selling for in the neighborhood, typically around the same or comparable 'per square foot' dollar amount. If there are a number of foreclosures or short sales in your neighborhood or in the neighborhood you are looking to buy into, the price amount is determined by what banks are negotiating the houses for and the ultimate closing purchase price. This is not based on comparables of finished square feet, number of rooms, or house amenities. It is simply negotiating the highest price in the shortest amount of time and this often leaves a neighborhood short changed for what owners can receive as their closing purchase price, even when the bank is out of the picture and the house is not in negotiation. Good for buyers if the buyer can find a house in a neighborhood that has been affected by foreclosures, lowering the asking price. But buyers will want a house that still has an owner that owns the house free and clear, or is still current on payments. Otherwise, the buying process/negotiation period can take 2-6 months longer than it should.
Another point to consider is there is no predetermined amount of time for the foreclosures/short sales to expire-- to not flood the market. If you do find a home in a neigborhood of foreclosures/short sales, there could be more hitting the market after your purchase. Because of supply and demand, your home value could further decline. There is no way of knowing when and if your neighborhood will be hit, how hard and for how long. A way a realtor could help you, is to look at purchase year and purchase price of the house you are interested in, as well the surrounding houses that are on the market or have recently closed. Also property tax records can tell you when houses were purchased. We know houses were most inflated during 2005-2007. Having that information could help you determine whether you think that neighborhood is at risk or not and if you are willing to take that chance.
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