Once upon a Portland real estate market, fixer properties were hot commodities. They were easy to finance and the market allowed a lot, if not too much, forgiveness for what might be considered sub par remodels. Appreciation allowed for some leeway if the buyer was planning on holding the property as well. Today’s market doesn’t allow for easy access to financing for properties in need of lots of work. That’s just one of the reason we see fewer buyers planning on putting in sweat equity into their homes, not because they don’t want to but they can’t fund it. We did just have a buyer close on a property financed with a Wells Fargo Purchase and Renovate rehab loan though so it is possible, just not as easy as in the past.
I’ve looked at a couple of hundred-plus year old properties this week that between the purchase cost and remodel cost would not allow a buyer, nevertheless a flipper, to have any chance of breaking even at the end of the project- even if they were discounted 10-15% from their current asking prices. I this case, break even is what two independent appraisals before and after the remodel would show. I figure after participating in a few higher-end remodels I’ve got a pretty good feel of what it is going to take and cost to do something that doesn’t qualify as a Home Depot remodel (no knock on Home Depot, it’s that they aren’t known for selling premium hardware).
An overpriced rehab project frustrates me more than overpriced “late model” homes as these properties while not historic by most standards are important to save what makes Portland Portland. The market has changed for these properties- there are fewer potential buyers, they are harder to finance and they are harder to price. How do you price a rehab project? I don’t know how these properties were priced but if it were me, it would have to include a careful analysis of remodel costs and finished value vis-a-vis the “done” houses in the area.