More homebuyers are eyeing fixer-upper houses in the Twin Cities

With house prices shattering records and mortgage rates showing no signs of receding anytime soon, many house hunters can’t afford the kind of HGTV-worthy home that’s become the new standard for a generation of homebuyers.

That’s why more people are on the hunt for an ugly duckling — or what’s commonly known as a “fixer-upper.”

Realtor.com said that during July, the number of page views for searches with “fixer-upper” in the description tripled compared to four years earlier. These days, less-than-perfect houses seem to be growing in popularity as buyers look for ways to boost their purchasing power and avoid what remains a highly competitive real estate market.

With the recent uptick in interest in fixer-uppers, Realtor.com said the median market time for one in July was 53 days. That’s only a couple days longer than a comparable move-in-ready home. But in areas where there are more interested buyers than sellers, even houses in need of TLC have become a hot commodity.

That’s true of Caleb Polson and Jessica Lang, who recently paid slightly more than the $399,000 asking price for a mid-century modern house in Bloomington. The 3,400-square-foot house, built in 1974, had been in the same family for decades. It sits on a heavily forested bluff-top lot with more than than an acre of land overlooking the Minnesota River.

But it needs extensive updates. Here is some advice on how to approach taking on a home renovation project.

This is how Eric Schneider, the agent selling the Bloomington house, described it in the listing:

Polson and Lang, who are moving from North Carolina to the Twin Cities to be closer to family, are those dreamers.

“We fell in love with the house,” Polson said. “We said, ‘If we put some effort into this, it’s going to be a really special place.’”

Lang said because she’s starting a new job, and Polson is beginning grad school, a move-in-ready abode would have been the easier path. But finding one was difficult, and options they liked sold before they could make an offer.

“Having a turn-key house could be a benefit, but we’ve done a lot of renovations [on our previous house],” she said. “We said from the beginning, whether it’s a house that needs work or is turn-key, what we want is value for our dollars.”

Polson and Lang weren’t the only ones willing to take on the project. The couple said there were 10 offers on the house. Schneider said there was similar interest in another fixer-upper he recently listed in south Minneapolis.

One buyer from California was even willing to make an offer sight-unseen. The house ended up selling for more than the list price.

“I’m seeing buyers who are not afraid,” he said. “They know that if they do the work, the value is coming.”

Beauty is in the eye of the beholder, and so is what’s “move-in ready.” The standards of individual sellers and buyers define homes that are immediately livable vs. those that need some work.

Some houses have structural problems or defects that make them uninhabitable or ineligible for a government-backed mortgage. Some agents even list those as “tear-downs.”

Beyond those, there are no hard and fast rules when it comes to what qualifies as a fixer-upper. They can run the gamut from major structural repairs to mint condition time capsules from a bygone era, like dated design echoing TV’s “Brady Bunch” set.

Finding them is easy. Nearly every listing includes agent remarks that highlight a home’s selling points. On listing sites, those remarks typically appear in a field called “about this home” or “property description.” On Zillow, it’s called “what’s special.”

That’s where you’ll find a description of the house that might be a good clue it’s a fixer-upper. Some common ones: “good bones,” “bring your imagination” and “needs some love.”

Those listing sites allow you to narrow your search results by identifying specific attributes that appear in the property description. Realtor.com, for example, lets you do that in a search tab called “more,” which takes you to a section called property features. There, you can enter in certain keywords in a search box.

Same with Zillow. Remember, those keyword search functions are only looking for words and phrases included in the Multiple Listing Service property description, and some of the sites only let you use select keywords.

That depends on many factors, including whether you do the work yourself or hire someone to do it for you. In general, though, sweat equity has the same value no matter your mortgage rate or the price of the home.

According to the StorageCafe analysis, a “regular” house in the Twin Cities priced at about $330,000, while a fixer-upper averaged $204,000. With a potential fixer-upper discount of $125,000, the Twin Cities offered buyers the 15th-highest savings nationwide.

That analysis said on average, a property remodel in the Twin Cities cost $65,000, based on recent home improvement loan data.

Zillow said per a recent analysis that fixer-uppers sell for 7.3% less than other similar homes. That’s the largest such discount in three years.

Kris Lindahl, the broker and founder of Kris Lindahl Real Estate, said while there’s always a subset of house-flippers and bargain hunters looking for a deal, there’s been a societal shift: People put a premium on the value of their time, and that’s why they’re willing to pay more for a turn-key house.

It’s the same idea, he said, as people being willing to pay higher prices and delivery fees to have a meal come to their house.

He said when you factor in the time it takes to plan a remodel and the rising cost of remodeling a house, it might end up costing you as much as a move-in-ready house.

“It could be a trap. Every single house has a million surprises. It really comes down to the level of risk a buyer wants to take,” he said. “It’s a balance between risk, time and money.”

For cash-strapped, first-time buyers, a fixer-upper is off the table if the repairs are expensive and necessary before you can live in the home.

The Federal Housing Administration’s 203(K) program is aimed at people who want to roll your home renovation into your mortgage. It allows you to get a mortgage that includes the cost of your improvements to the pre-fix-up value of the property, within certain limits based on home values in your area. It’s not limited to first-time buyers, but there are some restrictions on the types of improvements you can finance. A new swimming pool, for example, is not an eligible problem, but foundation repairs or a new furnace might be. You can find details of the program and a list of lenders on the HUD website.