Blog posted On November 29, 2018
Existing home sales make up the majority of real estate transaction, especially for Millennials and first-time home buyers. The National Association of Realtors (NAR) reported 9 out of 10 Millennials bought a property that was previously owned. The 2018 Chase housing sentiment survey showed almost 70% of those home buyers expected to spend at least $20,000 on renovation projects.
In a crowded housing market, buying a home that requires repair or renovation is a reality for many home buyers. When you can’t get exactly what you want, you’ll have to plan ahead for renovation projects. HGTV personalities, and hosts of the Property Brothers, Drew and Jonathan Scott, compiled a list of the most common renovation mistakes they see, and how you can avoid them.
Cutting Costs on Materials
When you’re on a home renovation budget, you need to cut costs somewhere to make your project a reality. However, cutting costs on some materials can end up costing you more over time. Jonathan Scott pointed out, “a good example is [cheap] flooring. It will wear out faster and you’ll have to replace it again – you actually end up spending more money.” If you can’t afford hardwood floors, consider some single-board laminate alternatives that are built to last and almost indistinguishable from real wood.
Obsessing Over Details
Buying a home, especially your first home, is an emotional experience. You might be distracted by the “shiny new thing” versus what your home actually needs. Drew Scott commented, “function and flow is the big thing that people forget all the time, especially a lot of first-time home buyers.” Upgrading a boxed-in kitchen’s features won’t make it any more accessible. New products in a bad layout don’t add any value, despite how good they might look.
Going Over Budget
The most important part of any home renovation is financing it. Jonathon Scott explained, “Being smart in real estate is not just about renovating the home so it's worth more money so you have equity in your pocket, it's about being smart on the financing.” In some cases, the renovation may be extensive enough to need a renovation loan. In other cases, reducing the down payment amount could free up some funds for initial repairs. Meeting with a mortgage professional and reviewing your goals before you buy can help you set a budget and determine what type of home financing will help you get there.
Buying a home that requires renovation or repair is increasingly common in a busy housing market. Planning your home financing ahead of time, investing in the right kind of repair, and working with the right real estate team ensures you get the most return on investment for your renovation project.