Are Fixer-Uppers Worth The Work?

Are Fixer-Uppers Worth The Work?

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Our agent, John O’Hagan, dishes on buying fixer-uppers in this Arizona Republic article.

Link to article: https://www.azcentral.com/business/realestate/articles/20140301worth-workfixer-uppers-can-real-deal-watch-out-red-flags.html

Are Fixer-Uppers Worth The Work?

By Kara G. Morrison The Republic | azcentral.com Fri Feb 28, 2014 4:48 PM

Real-estate agents say many buyers have trouble seeing the potential in a fixer-upper.

Those who can see the possibilities in a home that needs to be updated can fall in love with its potentially lower price tag. But buyers should make sure they know exactly what they’re getting into before buying a fixer-upper.

It may not be as simple as adding fresh paint or glossy new countertops.

John O’Hagan, a Phoenix real-estate agent, says he typically sits down with clients before touring homes to talk about easy fixes vs. things that could be prohibitively expensive or unsafe.

“I think setting expectations with your clients is the most important relationship builder,” he says, adding he also uses that meeting to determine how much work the buyers are willing to do.

For O’Hagan, things like ugly paint, dirty carpet, drywall damage, general cleanliness and ugly landscaping are all fairly easy fixes. He’s also not afraid of homes that smell like cat urine, for example.

“For first-time homebuyers eager to save wherever they can, it’s almost better that it smells bad,” says O’Hagan, adding that ripping out smelly carpeting isn’t expensive in the long run and can mean a better price.

However, O’Hagan says, a strong sewer smell permeating the house is probably a bad sign. That could indicate a sewer-line break under the foundation, which could be a major expense.

O’Hagan says other red-flags in fixer-uppers are signs of major water damage, exposed active wiring, or sizable cracks in the foundation or walls.

“The rule of thumb is … if you can stick your thumb in it, it’s probably a good idea to walk away,” he says.

Jeff Euriech, a Peoria-based home inspector, says he’s given classes to first-time Phoenix homebuyers and tries to help all clients — from real-estate investors to senior citizens — understand what kind of expenses they might incur with any home.

“I don’t think people realize what it costs to replace or repair some of these things. When you’re talking about replacing a roof or an air-conditioning unit, that can add up really fast,” says Euriech, who owns Arizona Prime Property Inspection.

Euriech says he focuses on a home’s major components and always discusses the life expectancy of the home’s roofing, air-conditioning and heating system, electrical system, plumbing and water heater.

Euriech says water heaters typically last only eight to 10 years in the Valley; air-conditioners 12 to 14 years, and heat pumps 10 to 12 years.

“You’re looking at $4,000 to $8,000 to replace (a central air-conditioning system) as a rule of thumb,” he says. “On a tile roof, the tar paper only lasts 16-20 years. Now you’re talking $15,000 to $30,000 to replace the underlayment on the tile roof … a lot of the cost is related to the labor.”

Potential buyers should always know the year the house was built and whether it was updated. Euriech says even houses built in the 1960s and ’70s could have potential electrical problems if the homes contain solid-aluminum wiring.

“My suggestion to anybody is you want to know the age of all the major components in the house and (get) any documentation” on them, he says.

Euriech also tries to ascertain whether any addition or conversion (carport to garage or patio to Arizona room) has been done to code. Most of the time, he says, the answer is no.

Gilbert home inspector Kevin Shroyer says another big problem he tries to rule out for clients is whether there could be any structural issues with the house.

“The most frustrating is when you find a structural issue like a cracked foundation,” says Shroyer, owner of Prime Spec Consulting. “You don’t want to see cracks that start small and get bigger up the wall. A lot of times you’ll see the tiles will be popping loose, which is a sign that the floor underneath (has settled).”

Shroyer says when he sees several signs there could be structural issues, he recommends buyers contact a structural engineer for further testing, which he says starts at $300 to $600. Shroyer says he’s seen buyers walk away because it can be expensive simply to diagnose the cause of a structural problem, much less start to fix it.

Shroyer also spends a lot of time looking for water stains that could signal plumbing leaks or roofing problems, and Euriech says he often finds DIY electrical work done incorrectly.

O’Hagan says a good home inspection is an important way for buyers to protect themselves from finding expensive hidden problems with a fixer-upper.

Home inspections generally start around $300 and rise based on a home’s square footage.

“A quality home inspection is absolutely crutial for buying a fixer upper,” says O’Hagan, with Twins & Co. Realty.

Euriech says he charges $286 for a small home up to 1,400 square feet, and more if the home is 50 years old or older. Shroyer says his inspections start at $275 for a small home, and he charges more if the home is more than 25 years old or if there are detached structures, such as a guest house.

Buyers should always find out what’s included in a home inspection. Euriech, for instance, includes pool inspections in his base price; Shroyer includes automatic lawn sprinking or irrigation systems. Often, those inspections can cost extra. Both men provide written reports to their clients detailing potential expenses they may run into with the home.

Euriech insists a home inspection can save buyers a lot in the long run.

“Usually, it’s really cost effective to do a home inspection,” he says. “Quite often, buyers are able to save $4,000 to $5,000 in repairs.”

That’s because buyers can ask the seller to repair problems they’ve uncovered or give them a credit toward those repairs, he says.