Markets & Economy

What buyers should know before choosing a fixer-upper

Here's the sitch with permit costs and wait times
  • Kitchen and bathroom (37 percent), other interior remodels (23 percent) and additions (21 percent) were the most popular renovations homeowners took on this year.
  • Fifty-two percent of first-time applicants knew they needed a permit, while five percent of first-time applicants had never heard of a permit.
  • The average permit costs $500 or less and takes two to four weeks to obtain.

Learn the New Luxury Playbook at Luxury Connect | October 18-19 at the Beverly Hills Hotel

Despite being in the midst of an inventory shortage, buyers have been resilient in their quest to become homeowners. For many, that means putting time and money toward transforming fixer-uppers into the dream home they’ve always wanted.

In 2016, first-time buyers spent an average of $33,800 on renovations — about $7,600 more than experienced owners.

While it may be tempting for homeowning newbies (and veterans) to simply tap into their inner HGTV persona and begin knocking down walls, Houzz’s 2017 Renovation and Regulation Study shows it takes much more than nails and drywall to transform a house.

Do I need a permit for that?

Kitchen and bathroom (37 percent), other interior remodels (23 percent) and additions (21 percent) were the most popular renovations homeowners took on this year, which required alteration and construction, or electrical, plumbing or mechanical permits.

The share of first-time applicants (49 percent) and experienced applicants (51 percent) were nearly evenly split. Out of the first-time applicants, 52 percent knew their project needed a permit and 29 percent at least thought to ask about it before beginning a project. Meanwhile, 14 percent of first-time applicants had not thought about needing a permit and five percent had never heard of the process at all.

Creating steady real estate income in a cyclical business
Leverage your energy and maximize your results with lead-gen sprints READ MORE

As expected, experienced applicants were less anxious about the permit process, with their reported levels of anxiety about various aspects of the process being half of first-timers.

First-time applicants’ top three concerns included finding out what it takes to get a permit (45 percent), the permit timeline (41 percent) and how to find out if a permit is required (39 percent). Experienced applicants top three concerns were very similar, except they thought more about the complexity of the process (23 percent).

As a result of these concerns, first-time and experienced applicants either delayed the start of the project (23 and 32 percent, respectively) or hired a pro to help them complete the job (23 and 16 percent, respectively).

Call in the pros

Forty-five percent of first-time applicants — 16 percentage points more than experienced applicants — turned to an online resource, such as their city’s building department website, to research the permit process.

The second and third most used tactics were talking to a building official (35 and 28 percent, respectively) or a building and design pro (28 and 25 percent, respectively).

After doing online research, a fourth of first-time applicants and 16 percent of experienced applicants decided to hire a professional to complete the job rather than going the DIY route.

When choosing a pro, first-time and experienced applicants looked for the same things: good reviews and recommendations, proven experience with obtaining building permits, great personality and design aesthetics.

Wait times

Eighty-seven percent of first-time applicants and 73 percent of experienced applicants were taken aback by permit wait times, permit costs and permit complexity.

When it came to waiting times, 24 percent of applicants received same-day approval while the remaining share of applicants had to wait anywhere from one week to four months.

The most common processing time for first-time applicants was three to four weeks, which is about double the time it takes for their more experienced counterparts.

Over half of first-time (58 percent) and experienced (56 percent) applicants spent $500 or less for a permit, which both groups felt was justified. On the other end, some applicants spent $5,000 or more, which accounted for only 3 percent of respondents.

Although prices were relatively high, about three-fourths of applicants felt the fees were justified.

Despite some bumps along the way, 79 percent of first-time and 90 percent of experienced applicants would repeat the home project again, which is understandable considering the potential ROI.

Houzz Communications Director Julie Noble says real estate agents can use this study and others like it to help buyers work through the decision of choosing a fixer-upper, which is an avenue that more buyers are starting to consider.

“Real estate agents often discuss the potential of prospective homes to be tailored to the needs of their clients,” Noble said. “For example, is there space for an addition? Do they have specific needs for the master bathroom? Can we tear down that wall for an open-concept living area?”

“Not all homes are purchased as turn-key or move-in ready, and the agents may want to reference the information from this report to be more informed and better prepare their clients for the remodeling road ahead,” she added.

Email Marian McPherson.