The age old question when selling a house: Should I renovate/update before listing the house? Or, should I just sell the house for less money. The answer is not that easy. First you have to figure out a few things:
- How much longer will you live in the house?
- How much would you anticipate spending on upgrades?
- How much Return On Investment can you anticipate?
Of course, the best choice would be to renovate and update as you go along. That way, you are living in the house and over the years, you get to enjoy the work you’ve done. What could be worse than spending tens of thousands of dollars on a new kitchen, and then selling and never getting the chance to enjoy it? It also helps to spread the costs out over many years. Plus, you are cost-averaging the work, as materials and labor tend to increase in price year over year.
Unless the house couldn’t live without the update, or it was done years before, it is hard to imaging 100% return on your money. For example, the average kitchen update will realize 60 to 70% return. Meaning if you spent $50,000 on a new kitchen, you may be able to generate an additional $30,000 to $35,000 on the sales price. The biggest problem, however, is that these days Buyers “expect” certain things. Granite counters, and an updated bathroom is expected. The lack of it is called the “ka-ching factor”. Going through the Buyers’ minds are “how much will it cost me to bring this home up to today’s standards?” Ka-ching! Dollars and cents. Deduct that number from the offer I’m going to make.
Now, the easy way out, of course, is just to price the house “as is”. If the home is worth $300,000 as is, then price it at $300,000. If updating the kitchen costs $40,000 and you’re putting the house on the market right away, don’t think you can automatically list your home for $340,000. Why? Because, the updated Kitchen is not adding “extra” value – it’s, like we’ve said - already expected. Now will the updated kitchen add to the appeal, make it more attractive in the marketing, get more potential Buyers into the house to see it? Absolutely! But is it worth it, if at the end of the day you couldn’t recoup what was spent on it? Maybe, if you are lucky, the sale price you realize will be slightly higher than if you didn’t do the work – but is it worth the effort and inconvenience of doing the work? Maybe it is, maybe it isn’t.
Bottom line: every situation is different. Some easy fixes and updates are inexpensive and add to the appeal of the house. Painting the walls, ripping up old carpet, polishing hardwood floors – things like that. When Buyers walk through a house and have an overall good experience, it helps rationalize the asking price. But these things are not necessarily “expected”. Many Buyers assume they will have to come into a house and paint, etc. But they don’t assume they will have to update a kitchen. If the house is clean as a button and does not need any paint, etc. Buyers can rationalize the price as “move-in” condition. But even if the Kitchen is neat and clean, but it has formica counters and old cabinets, the “ka-ching factor” kicks in, and the Buyer will anticipate the time, work and cost involved – thus lowering the sales price, in their minds.
What’s best for you? Let’s us take a look and discuss alternate options and scenarios.