Are fixer-uppers a good deal in today’s market?

Rapid price-appreciation may be a red flag

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There was a time when no one wanted to buy a dilapidated "money pit." That was before the days of high appreciation rates and low inventories of homes for sale. Now fixers are almost as popular as homes that are in move-in condition. For example, a couple of years ago, a home that was in such bad shape that it wasn't livable sold with nine offers. It sold for over $200,000 more than the asking price. The home was located in the desirable Crocker Highlands neighborhood of Oakland, Calif. It was easy to see that it could be a lovely home with about $250,000 of improvements. But at the $900,000 purchase price, it was hard to imagine how the buyers could turn the house for a quick profit. In fact, the buyers didn't fix up the house for immediate resale. They fixed it up for themselves and lived in it for a couple of years. When they sold, they did recoup their investment, but only because home prices appreciated more than 20 percent the year before they sold. However, they did not sell f...