“Should I renovate before I sell?” Yes, presentation is everything and buyers will always pay top dollar for a healthy dose of instant gratification.
Before you get the sledge hammer out and start building that alfresco ensuite, you need to consider when you want to have your home sold, because when it comes to renovating, upgrading and redecorating homes, nothing goes as planned and the most difficult property to sell is always the half-finished project.
20 years of real estate and over a thousand house sales has convinced me that half-finished homes just don’t seem to achieve the value they would have achieved had the renovations not been started in the first place.
So make sure you have the time and the money to finish any project you start, and remember, what you see is the end product and what the buyer sees is a pile of building materials that represent nothing more than a headache.
You should also consider whether the work you are proposing to do will require consents from the local council or other authorities. Cost blowouts can be crippling where consents are required and renovation work requiring consents typically demands highly skilled trades people as the work is of a more complex nature. The margins between the costs of consented work and sale prices are significantly reduced by the levies and fees charged by councils and other authorities. Furthermore, you simply cannot rely on working to reasonable time frames where bureaucracy is involved, so make sure before you start the project, you understand the full extent of the job.
“The final and most important consideration is also the most difficult to answer. Every homeowner would love to know that if they spent $50,000 dollars on renovations, they would get back $100,000 when they sold?”
This question takes us into the realm of the crystal ball gazing, it’s entirely subjective and there is no right or wrong however market evidence supports the view that presentation of a property is the key to achieving the best price, accordingly it must be reasonable to conclude that everything you do that makes your property look and feel better adds value and it’s my experience that the added value far exceeds the actual cost.
Home sellers have also asked me over the years “Should I focus on any particular aspect of the property before selling?” Real estate agents’ go-to-answer is pretty much kitchens and bathrooms. The reality is however that you will not sell to purchasers that do not get out of their car and walk through the door. This may seem silly and obvious however it’s an essential consideration when selling your home.
When a potential purchaser approaches your property from the street, they are making a first impression assessment of the property. You can have the most spectacular kitchen and bathroom however if they decide they don’t want to get out of their car because it looks uninviting, then expensive kitchens and bathrooms don’t change the fact that they didn’t get out of their car and walk the last 20 meters to the front door. If you do nothing else, consider some work on your home’s street appeal.
When it comes to “what work should we do and what work should we leave?” Focus your energy on aspects of the property which, if left untouched may give purchasers cause to think there are larger underlying issues requiring money and time to remedy in the short term. For example if you have a 1960s home and it has some cracks in the stucco, more often such cracks in stucco (of that era) are not terminal and it’s actually a pretty inexpensive fix eliminating the obvious concerns buyers may otherwise have. Ask your relatives (mother-in-laws are best) to call around and cast a critical eye over your property, it’s very easy to become immune to the shortcomings of your own property.
The reasons people sell their homes are varied and that determines the extent of work which they commit to renovating or upgrading prior to selling. There’s no point setting yourself up for failure and disappointment by committing to renovating your home when you need to be at your new job at the other end of the country in six weeks’ time. Under those types of circumstances, you are better to ensure that your home is decluttered, light, bright and breezy, deal with any unpleasant odors, tidy the garden up and get the presentation looking really good.
Realistically there is so much more that needs to be considered when making a decision to renovate than whether or not there’s some extra value that can be extracted from the property, so if you’re still undecided about whether or not to sell your house as is, it may help to consider this list of pros and cons.
The pros of selling your house without undertaking renovations become most apparent when considering financing the proposed renovations. Homeowners are often surprised to find that their lenders are not overly keen on advancing them money for renovations.
Lenders are justified in their caution, there has been many a home handyman that has run out of steam motivation and family goodwill before the renovation is complete, and we find ourselves back at the start. The hardest house to sell is a half-finished project. Banks are very aware of the realities of renovation, for example, the standard cost of a basic kitchen renovation ranges somewhere between $5,000 to $10,000. This looks affordable on the surface however the costs soon add up especially when you consider the kitchen componentry is only one cost of renovating a kitchen.
Kitchens need appliances, sinks, tap ware, electricians to set up the appropriate wirings for the ovens, plumbers to install drains and establish water lines…the list goes on. In older style homes, it’s also best practice to remove the original wall linings, insulate, gib, plaster and paint prior to installing the new componentry. Not only can the cost of such renovations balloon, the time that these jobs take in a market which is experiencing massive labor shortages become a barrier for many people.
Potential buyers always factor in the cost of the work and repairs that they believe will be required. The real challenge with this process is buyers tend to round everything up and then add 50% for good luck, I couldn’t count the amount of times I’ve stood in house and I’ve been told “we’ll need to spend at least $10,000 the carpet in the lounge only to receive the quote for $3500!”
The problem with buyers overestimating the cost of works is that they all do it which serves to drive your price down. If you’re selling your property with poor presentation, sharpen up your bargaining skills, because here come the bargain hunters!
The other hidden cost of selling a doer upper is that it chases away good buyers ready to pay a premium to be able to shift the family straight in and start enjoying. The buyers you attract are not buying with emotional ties, they’re mostly driven by an opportunity to make money, and this is often at the expense of a vendor’s unwillingness to do the work themselves. There’s also the factor that some lenders won’t approve buyers for a mortgage on a doer upper, so overall your pool of potential buyers will be limited and where there are less buyers, there’s less competition which invariably impacts the sale process.
At the end of the day, it all comes down to cash value. Sometimes selling a doer upper just makes more financial sense than to spend on home improvements to boost value. Earning a few thousand bucks after you’ve fixed issues may be worth the trouble to some and to others, it’s just not.
There’s actually two costs incurred when renovating a home, the first cost is the financial cost. Well-organized homeowners can mitigate their exposure to financial blowout and loss. The second cost is the emotional cost, renovating a home is often a roller-coaster ride and there’s no point making an extra $30,000 only to pay on to lawyers in order to settle your property relationship negotiations!
Whatever you do, eyes wide open. Knowledge is power and gaining knowledge takes work, effort, and commitment.
