Dilapidated homes selling for ‘unthinkable’ prices and you should take note of this 'cautionary tale'

Rundown homes are being snapped up by property buyers worried about missing out before prices surge even further, according to a real estate expert.

Just last month, a “dilapidated” property in Annandale with no kitchen or bathroom sold for a whopping $1.32 million at auction, after initially being valued at $850,000.

The two-bedroom semi-detached was advertised as an “exciting renovation project”, with the real estate agent telling Yahoo Finance the buyer intended to move into the home after it was fixed up.

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The Reserve Bank is widely expected to cut interest rates later this year, leading many buyers to want to enter the market sooner rather than later, before a potential price upswing.

George Cherchian from James Chase Buyer’s Advocacy said this fear of missing out was a key factor driving up demand for fixer-uppers.

“People were holding out and waiting for the market to dip but that hasn’t really eventuated,” Cherchian told Yahoo Finance.

“As we’re talking to more and more people, we’re finding less and less people are wanting to wait. As long as they are in a position to, they are taking a more aggressive or proactive approach to get on the ladder.”

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Cherchian said buyers were now snapping up properties in bad shape for prices that would have been “unthinkable” a year ago, particularly in suburbs close to the CBD.

“There’s obviously discounts for those properties that are fixer-uppers and that’s where they are seeing the most opportune type of property for them to enter the market,” he said.

Cherchian expects this trend will continue for quite some time, as supply issues continue, and it could ultimately “push up the price for these types of properties as well”.

The latest CoreLogic data found home values had increased 0.6 per cent in February, with the average Australian property now costing $756,762, on average.

Buyer beware

While fixer-uppers can come with a lower price, Cherchian said the reality of a renovation could often be a “rude awakening” with costs escalating quickly.

“The cautionary tale is to do the due diligence and not bite off more than you can chew,” Cherchian told Yahoo Finance.

“When you are talking about properties that require a new bathroom or a new kitchen, it’s important to manage your financial risks and make sure you’ve got enough budgeted and not put yourself in financial strain.

“Know the types of service providers that you’re going to be engaging with so you are getting competitive pricing and you're getting your project finished in a fairly decent timeframe as well.”

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