Renovation costs must be factored into a house's asking price these days, writes Alanna Gallagher
THE TRADITIONAL fixer-upper, a property that may have hidden value but needs work, is proving more difficult to sell as banks continue to tighten up on lending. “If they’re not priced right, ‘fixer-uppers’ can be harder to sell,” admits Iris Keating, partner in Douglas Newman Good, who has several refurbishment projects on her books.
There is now a marked difference between the price of a refurbished house and one that is not, Keating explains: “Six years ago, a house that was worth say €500,000 renovated was worth €400,000 unrenovated.” Now that same unrenovated house is worth about 10 per cent less again, she estimates. That difference, down from 80 per cent to 70 per cent of the renovated prices, is to allow for what she calls “the hassle factor”.
Christopher Bradley, manager of the Ranelagh branch of Sherry FitzGerald is selling fixer-uppers, but says that refurbishment costs are now very much part of the discussion in the lead-up to buying. “In Ranelagh a 150-year-old period house will need new windows, wiring, damp proofing and perhaps a new roof. In my book ‘needs complete refurbishment’ means work that costs €200,000 or more, ‘needs refurbishment’ is work that costs in the region of €100,000.”
People borrowing money to purchase a house are not getting that top-up for extra works after the sale, admits John O’Sullivan, director at Lisney.
Building costs may have come down, but not by enough to encourage people to rush into a renovation job. The Society of Chartered Surveyors’ annual report points out that rebuild costs are down around 11 per cent in the last three years. It cites the example of a 70sq m (807sq ft), two-bedroom terraced Dublin house costing €1,932 per sq m (€179 per sq ft) to rebuild in 2010, down from a 2007 high of €2,161 per sq m (€200 per sq ft).
Most lenders are only offering househunters a maximum of 80 per cent funding, says Gerry Kinahan of Kinahan Mortgages and president of the Independent Mortgage Advisors Federation (IMAF). “A bank will have an independent valuer to value the price of the property in its present state and determine its value when the work is complete. Most will not pay for that top-up until work is complete, which means that some builders won’t touch the job.”
In terms of refurbishment most buyers are happy to take on superficial work such as a paint job, or sanding floors, says John O’Sullivan. “But there is now a generation of buyers who are finding it difficult to accept and understand that to buy they have to get their hands dirty.”
The savvy house-hunter is prepared to move into the house because it’s in the location they want and live in it with its existing layout and decor, says Iris Keating.
“They’re saving up to build the extension or replace the kitchen and/or bathrooms. A 10-year-old kitchen is just that and if it functions it is perfectly fine.”
According to Iris Keating the only buyers who have an appetite for lengthy refurbishments are those with cash reserves. “The money they are getting from the bank is generally for the purchase only. If the property they want to buy needs roof work or an extension, then they need to have cash. Buyers with savings are in a great position.”
It’s not that fixer-uppers are more difficult to sell, remarks O’Sullivan. “It’s that the asking price has to have the time and labour required by the would-be buyer to fix it up factored into it. And for the buyer sometimes saying no is better value.”
