Buyers Can Overcome High Home Repair Costs By Planning Ahead

By ERIN FLYNN JAY

Home repair costs continue to increase nationwide, but buyers can budget for that by working with lenders who build renovation costs into a mortgage.

According to the Q1 2024 Verisk Remodel Index, the cost of home repairs and remodeling in the first quarter rose by just over 4% from the same time last year. Costs set new highs for the past decade, rising over 61% from the first quarter of 2014.

The index tracks costs for 31 different categories of home repairs, comprising over 10,000-line items ranging from appliances to windows. Data are compiled monthly in over 430 local market areas across the country.

Of the six largest categories of expenditures, framing was the only one where prices declined this past year. Cabinets, siding, paint, wood-look flooring, and plumbing costs rose from 2.5% to 5.5%.

Greg Pyne, vice president of pricing for Verisk Property Estimating Solutions, said in a statement that despite the fact that repair costs are up in every category, there is a bright side. The rate of price increases is slowing down.

“Labor costs appear to be coming down slightly as well, which has an impact on the overall cost of home repairs,” Pyne said.

The costs of common remodeling and repair projects undertaken by homeowners – kitchen and bathroom remodels and roof replacement – in cities vary.

According to Verisk, an average quality kitchen remodel for an L-shaped setup with an island or peninsula in Atlanta, GA, is $46,800 to $72,100. In Charlotte, NC, it’s $46,200 to $71,000, and in Los Angeles, CA, it’s $49,600 to $76,300.

An average quality bathroom remodel of a primary bath in Columbus, OH, is $23,500 to $35,900. In Houston, TX, it’s $23,700 to $36,200, and in Philadelphia, PA, it’s $27,600 to $42,000.

A high-quality complete roof replacement with laminated composition shingles (25 square) in Atlanta, GA, runs $13,900 to $16,800. In Philadelphia, PA, it’s $16,700 to $20,100, and in Phoenix, AZ, it’s $13,600 to $16,500.

Homebuyers can figure these repair costs into their mortgage loan.

Jim Ragan, renovation department manager with Advisors Mortgage Group, said lenders can take repair costs into account for buyers.

“We take the sum of sales price plus repair costs, and an occupying home buyer can borrow up to 96.5% of that number,” Ragan said. “An investor can borrow up to 85%.”

He explained that at closing the seller is paid while the repair money goes into an escrow account to pay a contractor to do the work.

Figuring out the costs and coming up with a budget takes a couple of steps. Ragan said initially they look for a simple estimate from a reliable source. Then during the loan process, a construction consultant is assigned in most cases to work with the buyer and their contractor to inspect the property and prepare an exact repair plan.

“When our loan officers have an interested client, they schedule a call for their client with one of our renovation loan experts,” said Ragan. “We review the program details and the process steps important to get to the closing on time, get their house repaired, and enjoy homeownership.”

Buyers can ask for information about renovation loans during the preapproval process and if they are interested in fixer-uppers, they should find a realtor who understands that market as well as a local contractor with a good track record, Ragan said.

“Then, just in case they find a house they love with a kitchen they hate they can be prepared with a plan,” said Ragan.

He said it is natural for buyers to be concerned about the process but properties that need some work are always offered at a lower price and by taking the extra steps during the loan process, they can improve the property right away and live comfortably while they build equity through home price appreciation.

According to the National Association of Home Builders, owner-occupied housing stock is aging rapidly. They cite the 2022 American Community Survey, which estimates the median age of owner-occupied homes at 40 years.

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