KANSAS CITY, Mo. — As the housing market remains competitive for buyers, so-called "fixer upper" homes are becoming a more attractive option, especially in the Kansas City area.
A Clever Real Estate survey found that 71% of millennials would be willing to purchase a fixer upper, meaning a home that needs some upgrades or renovations.
Laura Markey and Ryan Rambusch didn't originally intend to buy a fixer upper when they started searching for their first home last fall in Kansas City.
In November 2020, they put in their first offer, but they were beat out by someone else.
So they put in another offer, then another, then another. Each time, their offers were rejected.
"It was really easy to just imagine ourselves in a house, and then suddenly, we have to throw that whole dream away and then find a new place to imagine ourselves in," Markey said. "So it's disappointing."
The buyers they were going up against were able to offer some attractive options to sellers, like all-cash offers, appraisal and inspection waivers and thousands of dollars over asking price –all things Markey and Rambusch couldn't or wouldn't offer.
That trend of rejection is one that a lot of potential home buyers are feeling right now.
Kathleen Spiking, a realtor with the Rob Ellerman team at ReeceNichols, said the Kansas City area has been a seller's market for several years because of a few different factors.
One, interest rates have been historically low over the past year, as the Federal Reserve dropped the federal funds rate in response to the COVID-19 pandemic.
Two, more millennials are entering the housing market after delaying home ownership longer than any other generation.
And three, the pandemic created a demand for more space.
"People wanted to get out of their apartments, they wanted more space," Spiking said. "And so we've seen more people entering the buyer's market."
All of these factors have led to intense competition.
Homes in Kansas and Missouri are selling within 16 to 30 days, a record low since the housing market's recovery in 2012, according to the National Association of Realtors.
That competition has forced people to be more flexible in the home-search process.
For Markey and Rambusch, it took until February before one of their offers was finally accepted.
The four-bedroom home in Hyde Park has plenty of space and a good foundation, but it needs several upgrades. The couple already ripped up carpet in several rooms and had the wooden floors refinished. They'll also have to fix the detached garage, which is leaning backwards, and fix the wiring throughout the home. Then there are more cosmetic upgrades, like re-painting several rooms and adding a patio and fence.
"Right now, it's still a project. So we're in the midst of it," Markey said. "So it's harder to get enthusiastic about it. But ultimately, it's going to feel like it's our home that we've made ourselves."
While the work of a fixer upper can seem daunting, there are several benefits, including the possibility of saving money. Fixer upper homes in Kansas City, Mo., are selling for an average of 55% less than move-in ready homes, according to Redfin Real Estate.
"If you can put some elbow grease into something, you're building equity in your housing investment," Spiking said. "And you're not necessarily competing with a lot of people."
Spiking said she often sees move-in ready homes get 10 or more offers right away. A fixer upper may get five or fewer, increasing the buyer's chances of having their offer accepted.
Another advantage: The money saved can be used to put one's own touches on the home.
"It's going to feel like we've really put the work into knowing all the nooks and crannies of the house," Markey said. "It'll feel like ours more officially than if we just walked in and put our furniture in."
For those considering buying a fixer upper, there are a few things to keep in mind.
Spiking said she discourages clients from skipping the inspections to avoid finding any unpleasant surprises after purchasing.
Buyers should also make a list of everything that will need upgrading and calculate how much it will cost. Then, add 20% to that total for any unexpected costs. Work with a realtor to make sure the cost of renovations would not exceed the value they add to the home.
Finally, look into options for loans that could help cover the costs of renovations, including conventional loans, FHA loans or VA loans.
Spiking also said she encourages potential home buyers to stay patient. More homes are hitting the market every month, according to Spiking, and she expects a surge during the summer.
"Last year in April, compared to April this year, we've seen an increase of 45% in listings," she said. "It's not all doom and gloom."