Zillow: Fixer-Uppers Might Not Cover Renovation Costs

While a fixer-upper home might have an appealing price tag, the discount might not cover basic renovation costs,” said Zillow Inc., Seattle.

A new Zillow Digs analysis of 70,000 listings for fixer-uppers nationwide showed such homes list for just 8 percent less than market value, which for the median fixer-upper would save buyers only $11,000 for renovations.

Zillow Chief Economist Svenja Gudell said if renovation costs exceed the home’s discount, then it might be more cost-effective to buy a similar home that doesn’t require renovations.

“Fixer-uppers can be a great deal, and they allow buyers to incorporate their personal style into a home while renovating, but it’s still a good idea to do the math before making the leap,” Gudell said. “While an 8 percent discount or $11,000 in upfront savings on a fixer-upper is certainly a good chunk of change, it likely won’t be enough to cover a kitchen remodel, let alone structural updates like a new roof or plumbing, which many of these properties may require.”

Of metros analyzed, fixer-uppers in Phoenix have the smallest cash discount ($1,000 less than market value) and in turn give buyers the least financial leeway for renovations. Fixer-uppers in Atlanta and Miami also list very close to market value, saving buyers minimal cash up front.

The report said buyers are more likely to find large upfront cash savings on fixer-uppers in expensive markets, where just a small percentage discount could yield quite a bit of money to spend on renovations. For example, fixer-uppers in San Francisco are discounted only 10 percent, which is lower than other metros, but still gives buyers $54,000 in upfront savings for renovations on the median home. Other metros with high cash savings include San Jose ($38,000) and Seattle ($24,000).