Renovate or Relocate: Taking the Pulse of the 2023 Housing Market – Mpls.St.Paul Magazine
In the current inferno housing market, local pros weigh in on what to buy, where to look, and why you might want to skip a flip. For potential sellers, learn how to get your house ready for market with tips on increasing your list price.
by Natalie Larsen
May 21, 2023
This feature was written by Studio MSP writers. While some of our advertisers were sourced, no advertiser paid to be included.
Photo by Knight Construction
Turn your purchase into a dream home with a remodel.
When we began our research for this story, we expected local realtors—the reigning market experts—to tell us that homes in need of a little TLC (AKA renovation) aren’t worth the buy. With the sometimes-unpredictable nature of remodel costs and timelines, we figured a prebaked home with updated finishes would be a better value. We were surprised—and you might be too!—at what realtors had to say about buying in this hot market.
“The highest percentage of buyers currently want a turnkey property; they’re too busy with work, raising a family, and also their side hustles,” says Jim Slater, realtor with Slater Realty Group. “They’re willing to pay a little more for the right home.” But Slater advises otherwise: “I believe the winners in this market are the buyers that have the ability to purchase a home that needs renovations.”
Buyers renovating a home can choose finishes and details to fit their style and specifications rather than adhering to (or having to redo) updates from the previous owners. Remodeling is also more cost-effective than buying a property that’s already been redone, Slater says; the cost and changes are scalable to your budget, and you get exactly what you want.
“These homes offer a great opportunity to build equity faster—even in this market,” says Francesco Marraffa of Kilt Group. He suggests evaluating a home’s potential using a few questions: Does the floorplan work for your vision? Are mechanicals in places that could help save on budget? (Moving things such as electrical and plumbing is a fast track to racking up dollar signs.) Is the remodel within your capabilities—or is a contractor needed? “If tradespeople are needed, factor in longer-than-normal lead times,” he says.
It’s All About the Money, Money, Money
Realtors agree that a house in need of renovation is a good buy, and every good move comes from a thoughtful plan. “Prior to walking into a home, [the buyers] should have a rough plan, including acquisition price and a budget, for both near-term improvements and improvements that can be done over time,” says Jessica Prudden of Prudden Company. “The worst-case scenario is taking on a large-scale renovation and not factoring in unforeseen, hidden costs.”
While HGTV makes it look easy, it is a calculated risk. “Real life has real issues and real prices with potential on-costs around every corner,” Marraffa says. Seller disclosures can help buyers understand the property’s history and what permits have been pulled previously. Otherwise, Slater says, the city is also a great resource for permit records and any building restrictions to be aware of. “I would bring in a trusted licensed contractor to give a bid on the property,” he says.
Photo by Revision Renovation
At the heart of the home, the kitchen remains an all-important aspect of any renovation plan and budget.
There are a lot of price tags to pop eyes at before your dream home comes together. But good news for those looking to remodel: “There are currently several great renovation loans that are beneficial for the buyer,” Slater says. “They can purchase the home as is and get a loan for the total renovation cost, so they will not need to pay out of pocket for renovations.” There’s also an option, says Gary Knight of Knight Construction Design, to finance renovation projects with the new mortgage, if the buyer is financing. Knight recommends creating a budget up front for various projects to eliminate surprises down the line.
“Renovating homes is not like a cable channel. Real life has real issues and real prices with potential on-costs around every corner.”
Francesco Marraffa / Kilt Group
“How long you intend to stay in your newly purchased home is a significant detail to keep in mind,” says Stuart Herrick of Wayzata-based builder Stonewood and Revision Renovation. “Another consideration in the time department is how long the project may take to complete. What will the living arrangements be during this time?”
After the hellfire market of 2021 and early 2022, buyers and sellers hit pause last fall and winter. Prudden Company saw larger-footprint homes in need of cosmetic updates but with more negotiating room in the list price. Despite waves of offers forgoing inspections and easily overshooting asking prices, Prudden’s team was not advising their buyers to overpay or skip inspections on properties that needed substantial updating because of the potential pitfalls. “This same concern has begun to present itself, dating back to late January,” she says. She warns frantic buyers against “rushing into an emotional decision driven by the fear of missing out. Although inventory remains low and will be an issue for the foreseeable future, patience is a virtue, and the right property always presents itself.”
“I believe the winners in this market are the buyers that have the ability to purchase a home that needs renovations.”
—Jim Slater / Slater Realty Group
The Eyes of the Buy-holder
“Buyers want glam with everything done in today’s modern styles,” Slater says. Suburbs and open spaces continue to top the trends for hot properties, and buyers typically crave functional outdoor spaces. “They are willing to do some lighter projects,” he notes. “But for the most part, today’s buyers are looking for eye candy, turnkey, and move-in ready.”
Photo by Revision Renovation
Don’t skip your outdoor spaces! Many buyers are looking for potential to expand living space with a patios, decks, porches, and yards.
As hybrid work becomes the new norm, so does interest in properties farther away from the Cities. “Buyers are not as hesitant to take on a 30-minute commute, knowing it will only be a few times a week,” Prudden says.
The Flipping Problem
Given that buyers want that fresh paint aroma and sparkly surfaces, a home that’s recently undergone serious renovation (usually called “flipped homes”) can be enticing eye candy. “Buying flipped homes can also be a nightmare,” Marraffa says. “Flippers will not pull permits and [will] cover up a world of issues.”
The pros to buying a flipped home include that it’s done—no elbow grease needed. And it has all the aesthetic pops typical buyers crave, Slater says. However, the cons include a tendency toward cheaper updates and materials—and frugality with workmanship—because of the profit percentage flippers are looking to make. “In my opinion, a flip home isn’t a great investment,” Slater says, “but it is a fine investment for someone that wants everything done…and doesn’t want to wait for a new home to be built.”
Prudden agrees, saying: “In my opinion, home flippers are trying to provide the perception of a brand-new home, but in reality, they are likely cutting corners to keep their margins intact…. On the surface, it may look enticing, but doing the proper due diligence is key.”
“Home flippers are trying to provide the perception of a brand-new home, but in reality, they are likely cutting corners to keep their margins intact.”
—Jessica Prudden / Prudden Company
For those looking to sell their homes in this competitive market, timing is everything—with ever-changing interest rates creating a seesaw of market volatility. “Most homeowners believe that investing in maintenance items, like home mechanicals, will help with resale,” Prudden says. “However, most buyers are attracted to the glitz and glam of an updated kitchen, bathroom, lighting, incredible staging, wallpaper.” If a full makeover isn’t within your time frame or budget, “just freshening up paint goes a long way,” she says.
Beyond decluttering and staging your home, Slater says, “you want your buyers to instantly fall in love with the home and not have to worry about what needs to be fixed.” He suggests updating light fixtures and hardware. “Even turning the garage into an immaculate space matters.”
However, redoing your home just to sell can be a tightrope walk. “We always struggle with this because why would you renovate your home to your tastes before selling to someone who may not like your style?” says Knight. Instead, he advocates for bolstering the bones: updating mechanicals, such as furnace, air-conditioning, and plumbing fixtures; putting on a fresh coat of paint; refinishing floors; and going Monica Geller–level clean. Herrick suggests updates like curb appeal and organization to boost the overall appearance of your home.
If your budget allows for more intensive renovation, Herrick suggests tackling the kitchen or bathrooms—arguably the most important spaces to buyers. “A fresh kitchen will flow well and have adequate workspace, lighting, storage, and perhaps new appliances,” he says. “More than any other room in the home, an attractive kitchen is sure to grab the attention of buyers.” The crucial bathroom remodel should focus on layout and amenities: fresh paint, hardware, and light fixtures.
For any updates in the home, keep in mind the price point of the neighborhood and the home itself. “Don’t go inexpensive if the property calls for nicer finishes,” Knight says. “You’re probably not going to appeal to 100 percent of buyers, but you should be able to impress most potential buyers.”
From spicy suburbs to hidden gems in the city, these pockets are the place to be—and sellers are getting top dollar.
Landschute, Excelsior, landschute.com
Phantom Screens, Golden Valley, minnesotascreens.com
Twist Interior Design, Minneapolis, twistinterior.com
Natalie Larsen is the associate editor for Studio MSP.
May 21, 2023
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