Professor's House

Should I Renovate before Selling my House?

Considering selling? Planning to sell a house you own? If so it will probably have occurred to you – or even have hit you squarely in the gut with some urgency – that you should do whatever possible to maximize not only the profit from the sale, but whatever possible to ensure you experience the quickest possible sale, the smoothest possible transaction, and all with the fewest possible pitfalls or weakness of position.

You do all of the above by having something someone else wants really badly, and being able to offer them a great price.

Sounds easy, right? Well the closer you look the sooner you realize the trick: spending your time and money efficiently and effectively in the process. So you ask yourself,

Should I renovate before selling my house?

1/1,000 = 0.01%

It can be illustrative to consider extremes. If you were to pay $200 per gallon for gold-flaked purple high-gloss paint and smatter it throughout the living and dining rooms, out of one thousand prospects you just might find one who will move heaven and earth to buy your house.

This brings up one of the most important maxims I have learned in my time as a real estate broker:

  • Assume prospects have no imagination, whatsoever.

How many home and garden channel reality television shows have you watched where the client remarks about how ugly the paint is or the landscaping, while they walk right past the swimming pool or an open view of the water? Did you imagine the real estate agent smacking them in the head, too?

As a buyer of real estate, to make the most of your time and money, you must distinguish what you can change, what you can’t, and hope somebody up there grants you the power to know the difference! But as a seller you must assume the buyers do not have this facility, because a very large percent of the broad public – at least those who go and look at houses – seem to not. No insult, just a fact.

999/1,000 = 99.9%

So, rather than gold-flaked purple, if you divided the walls into two tones of taupe with crown molding and a chair-rail, you now inspire nine-hundred and ninety-nine of those one thousand to buy, rather than just one. It’s called universal appeal, and it changes all the time. Reality television, a savvy real estate agent, and most of all a full-time professional home-stager, decorator, or designer will be able to keep you up on what’s hot and what’s not.
Add to that basic economics of buy low, sell high, and we can answer the question posed by this article: Should I renovate before I sell my house? It will depend on

(a) Universal appeal
(b) Profitability

And there is data on what renovations do the most. Before we list statistics, consider the following:

  • CURB APPEAL FIRST. If the outside looks bad, they may never come see the inside!
  • FIX THINGS THEY DON’T WANT TO FIX. Buyers might be happy to roll their sleeves up and landscape, but less excited about switching out toilets or a sink.
  • WHEN IN DOUBT, GIFT IT OUT. While not my first recommendation, if you’re in a pinch for time you can always offer a home supply store gift card rather than make renovations, but be sure to announce this loudly and clearly before they see the trouble-spot of the home the credit is intended to fix, whether in pictures or in person.

Specifics

From cheapest to most expensive:

  • CLEAN. Ever have anyone tell you about a used car that was really, really clean? Cleanliness is a virtue. Clean and organized alone can accomplish a lot of the above with extremely little cost, but you might be surprised at the effort involved! House cleaners really earn their pay, and would be a worthwhile investment if you’re selling your home. Besides, nothing will scare someone off like dirty!
  • PAINT. Especially if you do it yourself (DIY!), painting can be one of the most cost-effective improvements you can make as it’s relatively cheap and can take years off of a home while making it appear clean as well. Bright, subdued yellows give impressive results. Choose colors very carefully, though! Even a thorough consultation with the paint guy at your home supply store is well worth the time if you don’t consult a real estate agent or designer.
  • REPLACE OBSOLETE MAJOR COMPONENTS BUT DON’T OVER-IMPROVE. If the roof, kitchen, bathrooms, air-conditioning or windows are bad, a renovation could make your life easier and ultimately richer, but proceed with caution.
    Rather than give you a list of universally applicable specifics such as replacing siding or building a deck, it is much, much more effective to give priority to problem areas of the home for potential renovation. The roof, for example, could be sagging and leaking (worst) or simply old and dull (bad), and in either case take precedence over renovating an otherwise acceptable bathroom, for instance.

I have seen sellers make the big mistake of upgrading a kitchen and leaving a bad roof! There are some improvements that generally pay better than others, but it will be based on your home’s condition. The formula is below.

Major Renos

Try to get wholesale rates on the work. The very best way to accomplish this is by asking for a dozen bids – yes, a dozen. In all likelihood, half of them won’t show, two will be ridiculous, two will be moderate, and two will lowball. Don’t necessarily go with the lowball offers!

By then end of the bidding war – and let them know you’re getting multiple bids, by all means! – you will be talking like a pro and with this quick education be able to make a decision you yourself trust.

The Formula

But here’s the real gem of advice on this subject: ask a real estate agent, or ask several, and do not just ask if you should make renovations, ask them to work out this formula:

“What is my probable current home value range now, and if I invest $10,000 in a new roof, what will the value range be then?”

If the answer is at least $10,000 more and the roof was bad to begin with, make the improvement. Don’t just make improvements to make them. Make them first to fix problem areas of the home. Liabilities then become assets and you get the most possible bang for your buck.

If you are shopping for real estate agents this is an excellent hands-on interview question. Get several opinions. It would be worth paying an appraiser $50 just for an opinion like the above, before making such an investment.
The above basic list also lists by how obvious each should be. Cleaning and painting should be a given, for example, and the more major a renovation the more careful consideration you should take.

Major, Major Renos

In fact with regard to major renovations such as a room addition, you must now consider the values in the neighborhood. Bringing a three-bedroom home up to a four bedroom will likely not pay off if your home is located in a neighborhood of other three bedroom homes. In a neighborhood of four-bedroom homes it just might. In a sentence, this means

  • Avoid over-improvements.

Your neighborhood is the limiting factor. If you do over-improve it can back-fire, big time. Why would anyone spend $600,000 for a home in a $500,000 neighborhood, especially when they can spend their money in a $600,000 neighborhood? Over-improved homes take longer to sell and are harder to get appraised and loaned on.

In addition to (a) Universal appeal and (b) Profitability, there is a (c), which would be sort of the intangible benefit of an investment in the house that might not reap as much or more money from a sale as you put into it, but is likely to increase the appeal of the house and thereby speed the sale up.

When the appeal is high the transaction can be thought inevitably to go smoother. In fact here are a few other little maxims, just as a bonus:

  • People buy on emotions.
  • Women buy houses.
  • Men pay for houses for women.

Maybe that’s old fashioned, chivalrous, or even sexist, so can call me all of those things right up until you receive your proceeds at closing (smile).

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