How can I tell the difference between a renovation project house and a tear-down?

Tuesday, July 10, 2018

Two factors come into play when you consider buying a bargain house in rough shape. One, obviously, is the condition of the house and the cost of renovation. A good home inspector will help you see where the house sits on the scale from “pretty bad” to “just about hopeless.” Then a building contractor can help you compute the cost of the necessary work. But the second factor is the potential for an increase in the value of the home when your work is completed. For that, you need to consult a realtor or appraiser.

    Here’s four examples of variables that can kick the house either way:

1) Occasionally, we come across a house with so many big problems, that renovation does not make financial sense. We recently inspected a riverfront house with flood damage to the first floor, an outdated floor plan, structural termite damage nudging a sagging beam supporting the second floor to the edge of failure, with a corresponding sag in the roof above. Layers of dangerous amateur wiring added to the problems. Plus, the house was surrounded by other properties in poor condition and was located back from the river’s edge with only a distant view of the water.  Not a good bet for renovation.
    Further down the same river, we inspected a house two years ago with many of the same problems, but one stunning asset: it was built directly on the edge of the water on a bluff over a sweeping bend. When you stood on the porch it felt like you were actually on the river. You can’t duplicate that today because of newer zoning setback codes, so renovation made great sense, and that’s what the buyer did. 
The photo below was taken to show the inadequate dimensions of the railing at the river but, obviously, what a view.

2) The popular realtor’s mantra of “highest and best use” might dictate extensive enlargement and upgrades to a house along with the renovation, to make it comparable with the neighbors. Tear down can also make sense if bringing the existing home to a higher standard will cost as much—or more—than rebuilding on the site. 


3) At the other end of the spectrum, we occasionally see a renovated house that surpasses the condition and amenities of nearby homes. The homeowners’ “labor of love” renovation went too far and appraised below what they had invested in the property when it was time to sell. The very best house in a not-so-wonderful neighborhood is rarely a good investment.

4) A designated historic property sometimes cannot be torn down and renovation is the only option.

    So home inspectors like us can provide you with the key, first part of what you need to evaluate a potential renovation project; but you need additional advisors for the complete financial analysis necessary for a good decision.

    Also see our blog posts Should I buy a fixer-upper? and What do I need to know about buying a foreclosure?

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  To learn more strategies for getting the best possible home inspection, here’s a few of our other blog posts:

How can I make sure I don't get screwed on my home inspection? 

How thorough is a home inspector required to be when inspecting a house?

Should I trust the Seller's Property Disclosure Statement?

Can I do my own home inspection?

How can homebuyers protect themselves against buying a house over a sinkhole? 

The seller gave me a report from a previous home inspection. Should I use it or get my own inspector? 

    To read about issues related to homes of particular type or one built in a specific decade, visit one of these blog posts:

What are the common problems to look for when buying a 1940s house?

What are the common problems to look for when buying a 1950s house?

What are the common problems to look for when buying a 1960s house?

• What are the common problems to look for when buying a 1970s house?

What are the common problems to look for when buying a 1980s house?

What are the common problems to look for when buying a 1990s house?

What problems should I look for when buying a country house or rural property? 

What problems should I look for when buying a house that has been moved?

What problems should I look for when buying a house that has been vacant or abandoned?

What are the most common problems with older mobile homes?

What do I need to know about a condo inspection?

What are the "Aging In Place" features to look for when buying a retirement home?

   Visit our HOME INSPECTION page for other related blog posts on this subject, or go to the INDEX for a complete listing of all our articles.

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