When the market is hot, everything is hot, and oddly enough it's almost more so for "fixers" or homes that need work. Many buyers still want a "deal" and they think they can buy the less attractive home at a discount, and earn "sweat equity" by fixing it up.
In reality most non-contractors under estimate the cost and time of repairs. Plus, the competition for the fixer ends up driving the price up. Even in today's more realistic market, you still have a LOT of interest in fixer uppers, so here are a few tips to make sure the deal you find, really is a deal.
1. Know your exit strategy - are you buying to sell for a profit down the road, or buying because you want to create your ideal home, and profit is not the goal. Don't try to do both, because if profit is your goal, you MUST be frugal in all aspects of the fix and skip the more expensive but "ideal" choices like top of the line appliances. Buy the best value ones. Also, don't over-improve for the neighborhood or the condo complex. You are better off being the least expensive home in the neighborhood rather than the most expensive. Bring the home up to the standard of the neighborhood, and not much more. Comparison shop for all products and services.
2. Set your maximum offer price, and be willing to walk away if other buyers bid it up. If you pay too much for a fixer, then you might as well just buy a newer home and save your time and energy if you won't get a monetary gain for all your effort.
3. Make your offer contingent on inspections, and then bring in contractors for estimates on bigger repairs so you know the "true" cost when buying. If you discover you made a mistake, either cancel the contract subject to your Inspection contingency, or ask for a price reduction in the amount of the repairs you had not expected. You can buy a home with foundation damage, severe mold, or roof problems that scare other buyers away if you know from a contractor how long it will take to repair, and how much, and when added on top of your purchase price it really is a deal.
4. Pre-plan your profit and make it high enough compared to the value of your time and effort. If you're only going to save $20,000 and it's going to take you 6 months of time and frustration, is it really worth it? That's a decision only you can make and will be situational for each buyer and property.
5. Consider the neighborhood - if it's a bad neigbhorhood and isn't likely to improve by the time you sell, you're going to want a bigger discount since better neighborhoods maintain their value and sell easier.