If you’re about to list a house that needs work, here’s how to decide between fixing the house and fixing the price.
“Should I fix up my house or sell it as is?”
This is one of the most common questions sellers have about their house.
If your house needs some major TLC, you probably want to make some renovations before putting your house on the market. However, not all improvements are going to raise the value of your home all that much.
So how do you know what’s worth it and what’s not?
Here are some things we think you should consider.
Return on Investment
First, you’ll want to get a sense of how much your home is currently worth. Many realtors can get you a free home evaluation. Decide if this is a price you’re comfortable with and, if it’s not, consider the ROI of potential renovations.
It may sound obvious, but this important tip is often overlooked. If you’re going to put money into a house, you want to make sure you are getting at least that much money back.
How can you do this?
“I calculate their return on investment. The calculated increase in home value must outweigh the cost of the improvement, including holding costs,” says our RealtorⓇ Tom Zahalka.
To do this, estimate how much the project is going to cost you. Don’t forget to include the extra time into your considerations. This home repair calculator is a great tool to use for cost estimations.
Then, subtract this from the amount your home will increase in value. To estimate the increased value, compare your house to properties with similar amenities. You can also ask your realtor or designer for help.
If your added value after improvement costs is negative, the renovation is not worth the work. Generally speaking, a positive value will mean that the investment will be worth it. Most projects, however, will depend specifically on the type of improvement you are making.
When It’s Worth It
While the increased value comes on a case-by-case basis, there are certain renovations that are almost always a good idea.
Major structural fixes: If your home has some major issues, such as a leaky roof or a broken air conditioning system, you’ll most likely want to fix these before selling your house. Typical home buyers will be turned off by necessary big-ticket renovations. When they have a major down payment to worry about, buyers don’t want any more upfront costs.
Houses that need major improvements will only attract fixer-uppers, who are more than likely looking for a deal so they can flip the house and make a profit. Unless you are willing to drastically lower your price, you need to fix the major issues.
Minor issues: When potential buyers come to view your house, they will be looking for even the smallest cracks and rips. Any signs of neglect could be a signal for even bigger issues, so you want to make sure that your t’s are crossed and your i’s are dotted.
This doesn’t mean you need to update all of your appliances and paint your walls immediately. Don’t fix what isn’t broken. Mainly, you’ll want to focus on problems such as a ripped screen, cracked tile, or chipping paint. Also, consider refinishing your scratched wood floors to entice more buyers. Doing this will ensure that your buyers won’t reject your home based on a minor detail.
When It’s Not Worth It
Appliances: In general, replacing your outdated appliances won’t get you a return on your investment. Buyers may have a different taste than you, so your choice in the fridge may not be what they have in mind anyway.
However, outdated appliances can distract buyers from what may be a perfectly good kitchen otherwise. Be sure to give your appliances a deep cleaning before any showings so buyers see that the appliances are well taken care of. If your kitchen needs an extra boost, consider getting stick-on panels or appliance paint to enhance the overall look.
General cosmetics: You and your potential buyers will most likely have different tastes. Completely repainting rooms and updating old light fixtures may beneficial, but your buyer may end up redoing it anyways. It’s best to leave design-related improvements to the buyer.
That being said, there are some instances where it may be best to make some cosmetic updates. Our RealtorⓇ John Nelson advises, “I only recommend putting some money into a house if it will…make it easier to sell.” If your house features some wacky colors, it may be wise to paint those walls a more natural and modern color. Neutralize any distracting colors to ensure that your potential buyers are focusing on more important features.
The decision to renovate or sell as is will be up to you. In general, both extremely major and extremely minor improvements will pay off. However, most design-based improvements can be left to the buyer’s discretion. Ask your realtor if you need advice, but go with what you feel comfortable with in the end.