Americans collectively spend over $300 billion on remodeling and repairing their homes every year. However, diving into demolition is one thing when you’ll get to enjoy those shiny granite counters and new soak tub for years down the road. The question of “Should I renovate my house before selling?” requires more calculated thinking purely based on ROI and the marketability of your home in its current condition.
“I know that most of the time, you’re going to get back 65% to 70% of what you’re going to spend, assuming that it’s something generic enough in nature to where the next buyer is going to appreciate it,” said Robert Ryczek, a top-selling Gainesville, Florida, real estate agent with 41 years of experience.
“Is it just a touch-up scenario, or a major rehab situation? I’ve seen examples of both, where people have spent things on the right issues and gotten a pretty good return, and then spent money that, in my estimation, didn’t attract many buyers.”
Let’s break down all the factors that help you weigh what you can afford, which types of projects have the best bang for your buck, and when you’re better off lowering the price of your home versus making big changes.
When does selling your home “as is” make sense?
Sellers who need to max as much money out of their property as possible—perhaps to purchase a larger home or apply toward their retirement—will be more motivated to take on renovations than homeowners who are short on time, Ryczek said.
But it’s not unusual for a homeowner to get a job transfer out of state that starts within weeks, leaving no time to renovate, Ryczek said. “In that particular case, we’d always want to say, ‘Well, gee, if there are some basic things we can do just by pressure washing the outside or doing a few things like that.’ But in lieu of doing all these possible updates for the buyer, let’s just reduce the price drastically to compensate for those numbers and get it sold.”
Selling the home as is also works for people who can’t afford to renovate, Shipley added.
“I typically give them an option,” he said. “I can get you $200,000 as it sits, or I can get you $215,000 if you’ll go in and spend this much money. 9 out of 10 times, they don’t have the money to spend or the desire to spend it.”
In those cases, the seller and his or her real estate agent offer an allowance to compensate for the worn floors, countertops, and anything else that isn’t a must-fix under the home inspection. “That tends to make a buyer consider it more closely,” Shipley said.
Another option is to sell your house “as is” to an investor. You’ve heard of these companies that have for decades shown up on billboards and in your mailbox with promotions promising to buy your house for cash instantly. The catch has always been that you’d have to sell your house for a steep discount to get this type of offer, but what you may not realize is that today’s direct-buy investor market has been stirred up by the entry of new competition.
There are flip-and-fixers who will buy your house to turn it around for a profit, buy-and-hold investors that scoop up rental properties, and a new generation of investors called iBuyers that have entered the picture offering different terms and pricing for properties in varying condition.
One thing is sure: If you decide to sell your house for cash, HomeLight will gather offers from our network of buyers and introduce you to the highest bidder. Visit our Simple Sale platform to learn more.
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Word of caution: Many major home remodels have a low return on investment
The average amount recouped for home remodeling projects has dropped significantly in recent years. A 2018 Remodeling magazine survey of real estate professionals found that the average return on 21 popular remodeling projects was 56%, down from 64% in 2017 and 62% in 2016.
That said, some upgrades—not major overhauls—do carry a fairly high return on investment, such as replacing street-facing vinyl siding with stone veneer, touching up exterior paint, and installing a steel entry door, and you also have to account for how certain projects make your home more marketable and attractive to potential buyers.
A few examples for comparison’s sake: A kitchen upgrade costs an estimated $35,000 and recovers about 57% of the cost, according to NAR’s Remodeling Impact Report. That said, 23% of the Realtors surveyed in this report said that such a project recently helped result in a closed sale.
Compare that to refinishing hardwood flooring to upgrade worn-out surfaces and the overall finish and materials. The Remodeling Impact Report estimates this costs about $3,000, but homeowners can recover 100% of the project’s cost. Of the Realtors surveyed in this report, 6% said that such a project recently helped clinch a deal.
However, not every upgrade will impress the buyers you want. You might spend a lot of time and money deciding on just the right color for the family room, only to have a buyer want to paint it a different color, noted Ryczek.
He does recommend neutralizing any colors and décor that’s unusual. “Kids’ bedrooms where they’re pink, purple, or red or black—I’ve seen a lot of black bedrooms for some reason. Things of that nature, you’d certainly want to get rid of those wacky colors.”
Although redoing the attic insulation might not be glamorous, functional types of projects such as this that cost $5,000 or less tend to rank high in terms of costs recouped, statistics show.
Some buyers also are impressed with what seem like basic features. According to a 2017 study from the National Association of Home Builders (NAHB) in Washington, D.C., the top home feature that buyers wanted, regardless of income level, was a laundry room.
Do buyers want homes that are move-in ready?
The Home Improvement Research Institute (HIRI) of Indianapolis, Ind., said in its 2017 Recent Home Buyer Study that 51% of the people who had purchased a home within the past year had planned to buy a home with no major renovations.
That doesn’t mean that buyers won’t roll up their sleeves and start working after they’ve gotten settled in a new home. The HIRI also notes that the majority of home buyers (80%) did home improvement projects within the first year of purchase and spent a median of $4,000.
There’s also a segment of buyers, typically younger couples, who enjoy remodeling, Ryczek added. “They’re happy they’re going into a 25- or 30-year-old home … knowing they’re going to more than likely have to make a lot of changes,” he said. “They see a house where they like the floor plan, but there are some things that are going to have to be updated. If they can get a fairly decent reduction in sale price, that kind of sits hand in hand with what they want to do.”
The HIRI said that about 18% of home buyers seek out a fixer-upper—and some of them get one whether they intended to or not. 25% of buyers planned to purchase a home that was move-in ready and ended up with one that needed quite a bit of work.
Which low- to mid-scale renovations are best for sellers to tackle?
If you have the time and wherewithal, aim for low- to midscale renovations that can weather market changes and a variety of personal tastes. Shipley and his wife, Kim, also a real estate agent, aren’t yet ready to sell the house they bought about two years ago, but they’ve already seen the benefits of painting the kitchen cabinets and adding granite countertops, a backsplash, new flooring, and a kitchen island. Their house, which originally cost $225,000, recently appraised at $375,000, he said.
“Kitchens and bathrooms sell houses,” Shipley said. “Countertops in the kitchen are, in my opinion, a great investment for a seller … spending a couple thousand dollars, if that’s something they can do.”
Replacing the vanity tops in the bathroom and the kitchen and bathroom fixtures also provides a good value for the investment, he said.
Ryczek said he finds that landscaping, or curb appeal, is 90% of what piques a buyer’s interest.
“Most people when they step into a house, assuming that the layout is good, they know they can change the paint colors, the draperies, and the carpet colors, that kind of stuff. But if they pull up to the house and the landscaping’s overgrown, the yard’s got big holes in it, the trees are hanging over the top of the roof, it hasn’t been painted for 20 years, these are things where it’s gonna be hard to get people out of the car, even though the inside might be really nice.”
A 2018 NAR survey notes that 17% of Realtors said that a landscape maintenance project recently resulted in a sale—and some landscape revamps don’t break the bank. “You can add some mulch, trim the trees, and maybe plant some flowers in the front, do a pressure wash, that kind of stuff, for really not a lot of money,” Ryczek said.
Don’t overlook necessary repairs and the power of deep cleaning
It may go without saying, but don’t get wrapped up in renovations when obvious repairs are needed. “You walk into the bathroom, and there’s flaking Sheetrock [or drywall]. You’ve got a popcorn ceiling in the bathroom, and half of it’s gone because of moisture and humidity. Those are all little repairs that can be done relatively cheaply and are necessary, because it creates in the buyer’s mind that there’s a problem,” Shipley said.
Cleaning every nook and cranny also makes a strong impact, especially around light switches and doorknobs. “Sometimes you see houses where around the doorknobs are just filthy black. In some cases, just bleach will clean that stuff up,” Ryczek said. “[That way] someone walking into the house is not afraid to touch the door handles because they look so grungy.”
We all understand the impulse to make a good impression on whoever visits our home, especially when we’re trying to sell it. But if you don’t have the time or the money for some higher end renovations, know that there are some small-scale upgrades that boost your home’s value—as well as adjustments you can make so your home remains attractive to buyers.
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