Should I Fix Up My Home or Try to Sell As Is?
Question: Should I Fix Up My Home or Try to Sell As Is?
A reader asks: I've spent a lot of time and money doing exterior remodeling of my home, plus a sizeable remodel of the master bath. However, the rest of my 22-year-old home needs attention inside. The bath upstairs has dry rot and is dated. The kitchen, likewise, is so 1980s. We have fairly new appliances, but the counters and cabinets probably need replacing. Should I fix up my home or try to sell it as is?
Answer: This is one of those questions where the answer depends on variables such as condition of competing inventory, whether it's a hot, cold or neutral real estate market and the likelihood of return on investment.
In my experience, many sellers put way too much money into fixing up their homes for sale. They make repairs a buyer may never notice or will not pay extra for. Talk to your agent before making any repairs and please make sure your agent is experienced and qualified enough to provide cohesive answers on which you can rely.
Selling a Home in As Is Condition
For example, a few years ago, a past client called to say her next-door neighbors needed to immediately sell their home. To say it needed work was an understatement.
The home appeared inhabitable. It had holes in the walls all the way to the exterior and urine-soaked wood floors; most of the electrical didn't work and the bathroom tub had fallen through the joists.
All the faucets leaked and, in one bedroom, I found a pile of dead rats swept into a pile in the center of the floor.
This was not a home that could be easily fixed up. Not even a coat of paint would have helped sell this place. We priced it low enough that it attracted multiple offers and sold with zero days on market.
Only contractors and flippers made offers on this home.
Do Home Buyers Want Fixers or Fixed Up Homes?
Some home buyers want to buy a fixer upper home, but generally these buyers want a home that will require light cosmetic repairs. Buyers who gravitate toward fixers are those who either don't qualify to buy a more expensive home or those who want to make a profit by fixing the home themselves.
I've yet to meet a novice first-time home buyer who says, "Give me a home I can tear down to the studs." Most fixer buyers are willing to do simple repairs such as paint the walls, put in new carpeting or replace light fixtures. They typically don't want to rebuild a foundation or move walls.
Fixer-upper buyers will discount the price of the home to allow for the repairs and, for the inconvenience, a bit more. Say, a home is worth $100,000 fixed up, but it needs a new roof. A new roof might cost $10,000. A buyer most likely will not offer $90,000 for this home. Otherwise, they could buy an identical home with a new roof for $100,000 and not have the hassle.
A buyer for this type of home might offer $75,000, or even less. In this scenario, a seller would be smarter to pay for a new roof and sell the home for $100,000.
Moreover, many buyers will not buy a home that needs a new roof. They will worry the work involved will cost more than what they anticipated. Perhaps replacing the roof would involve tearing off the sheathing and repairing rafters, which could add to the cost. Most buyers want a home that is in move-in condition. By not making repairs, you will limit the number of buyers who may be attracted to your home.
Before Fixing Up Your Home
Smart sellers will weigh the cost of proposed improvements against the home's market value after the repairs or upgrades are completed. If an upgrade won't return the investment, such an improvement might not be warranted. Before you decide to lift the roof and install skylights in the master suite, realize that kitchens and baths carry the highest return.
Before deciding to make specific repairs before resale, take an afternoon off to tour other homes in the neighborhood of sale with your agent.
Note the condition and amenities in those homes. Compare these homes to yours. If, for example, most of the homes on the market have upgraded kitchens, you should concentrate on fixing the kitchen.
This doesn't mean you need to buy designer appliances and tear out the cabinets. But a minor kitchen remodel might be a good investment. Sometimes, simply painting oak cabinets a darker color and installing updated hardware can give your kitchen an all-new look.
Make a list of everything that is defective, broken or worn out. If buyers spot problems or malfunctioning systems, they might wonder what else in the home has been neglected. Buyers to whom I showed a $1.5 million-dollar home in the Fab 40s in Sacramento passed on that home due to the sellers' slight oversight. The entry way rug had a big rip down the center of its seam, and it was ragged. That rug made a bad impression on the buyers to such an extent that they were convinced the sellers didn't care about selling their home.
Here are 10 minimum improvements to make before selling your home:
- Patch holes and cracks in walls and ceilings.
- Fix all broken appliances and HVAC systems.
- Repair leaky faucets.
- Replace worn or stained carpeting.
- Repaint dark or marred walls with neutral paint (not white).
- Replace broken window glass.
- Repair the roof.
- Change out any dated light fixtures / ceiling fans.
- Replace old drapes and window coverings.
- Fix code violations.
If your real estate market is extremely hot -- a seller's market -- you can get away with fewer fix-ups before selling; however, a home that needs repairs will still deliver a lower price. In slow markets -- a buyer's market -- buyers might not even look at a home that needs work, unless it's an REO. Ask your agent for advice.
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.