Don’t be afraid to buy a fixer-upper in 2017

Even if you get a move-in ready home, you’ll likely want to make your mark on it.

A house in need of renovations isn’t always appealing to home buyers, but it might be a smart choice as home prices rise and fewer homes are on the market.

The majority of home buyers (80%) did home improvement projects within the first year of their purchase and spent a median of $4,000, according to the Home Improvement Research Institute (HIRI), an Indianapolis-based nonprofit members association of manufacturers, retailers and wholesalers. Especially for first-time home buyers, who are expected to drive 2017 existing-home sales and may not have enough money saved for a down payment, opting for a place that needs some touch-ups may be the right move financially, even if it isn’t what they initially wanted.

Few people actually intend to purchase a fixer-upper, said Pam Heidel, project director at HIRI. Some 51% of home buyers planned to buy a home with no major renovations and succeeded, while 25% said they intended to buy a move-in ready home and ended up with a fixer-upper. Only 18% planned for the fixer-upper they bought. People renovate their homes because they want to beautify them or make their mark. Sometimes, it’s because they want to add value to the home or because it needs freshening or repairs. After all, the average American house in 2015 was 39 years old, according to the 2015 American Housing Survey.

Some Americans are even choosing to remodel their homes instead of looking for a new house. And remodeling projects, at least those that cost up to about $5,000, pay off should you choose to eventually sell.

For people yearning to be first-time homeowners, the fixer-upper may be the only way they can achieve their goal. Home prices are staying near all-time highs and are expected to remain this way, partly because of more demand and fewer homes for sale. It’s getting harder for people without high credit scores to purchase a home, as lenders are expecting more from potential borrowers. In some cases, it’s been so difficult that people have had to continue renting because they’ve been shut out of the housing market, making saving for a down payment a challenge.

But a fixer-upper, or any home in need of at least some renovations, isn’t necessarily a bad thing, said Dale Contant, president of Atlanta Design & Build and president of the National Association of the Remodeling Industry, a Des Plaines, Ill.-based member organization for remodelers. It lets home buyers make the place their own.

Still, it isn’t always seamless, whether you are a do-it-yourselfer or hire professionals. Home improvement projects you tackle yourself are never as easy as home improvement shows make them seem, and all tasks involve energy, time and “sweat equity,” Contant said. Some renovations — like painting and creating a backsplash in the kitchen — are easier than others, such as knocking down a wall or installing a kitchen counter. But those aren’t the projects that give the home its greatest value — projects far more difficult than the average layman can conquer, such as fiberglass insulation and stone veneer siding, show the greatest returns, Remodeling Magazine shows in its annual predictions study for 2016. Even hiring a contractor takes work, as you have to go through the selection process and manage the relationship and progress of the professionals, Fortune said.

Home buyers who renovate tend to use cash, which means they have to choose which projects they can afford to do first, experts said, but there’s another option, too: a 203(k) rehabilitation mortgage insurance loan from the federal government, which allows home buyers and owners to borrow up to $35,000 in their mortgage for renovations, repairs and upgrades. There’s a lot of paperwork involved to keep track of the progress, said Tom Fortune, director of marketing at Chesapeake, Va.-based home loan refinancing firm OVM Financial, but is a “great program for those willing to put in a little extra work and jump through a few extra hoops.”

If you’re attempting to do some finishing touches yourself, Contant suggests starting with small projects, such as doorknobs and painting, and searching Google, watching home improvement videos on YouTube and getting ideas or tips from Pinterest or home design site Houzz. “If they’re willing to get their hands dirty, it is very rewarding,” Contant said.