Challenged to find a suitable home for sale, an increasing number of buyers are looking instead towards more rundown abodes with “good bones” that could potentially be given a lick of paint and a new lease of life.
Buyers today are struggling to find good homes for sale. According to the most recent data from the National Association of Realtors, home inventories are at record lows and continue to fall. In April, home inventory was down 10.4% from one year before.
At the same time, construction of new homes has also declined as builders face challenges around supplies and labor and lot shortages.
As such, some real estate professionals are taking advantage by marketing their listings as renovation opportunities or as teardowns, The Wall Street Journal reported.
Last year, Lauren Ravitz, a real estate pro with Berkshire Hathaway HomeServices in Los Angeles, marketed a $6.595 million 1949 colonial home as “a rare opportunity to restore/remodel a timeless classic from a bygone era or to build a magnificent estate in one of the west side’s most coveted locations.” The home sold for $6.795 million. The buyer intends to tear down the home.
Buyers interested in either a massive remodel or teardown are considering the price carefully. “Whether you completely rebuild or remodel, the finished home should be worth no more than three to five times whatever you paid to acquire the teardown,” Ken H. Johnson, a real estate economist at Florida Atlantic University in Boca Raton, Fla., told The Wall Street Journal. “Otherwise, you might develop way too much home for the neighborhood.”
The cost of a remodel can escalate and, if a home is in poor condition or outdated, the update may not make financial sense, agents say.
Agents advise that buyers considering a teardown or renovation should have a home inspection. Even homes for a teardown should be inspected because older homes may have been built with hazardous materials, such as asbestos or lead paint, which could significantly increase demolition costs.