Seller’s Dilemma: to Renovate or Not to Renovate?
It’s a classic debate every agent and seller have had: whether to spend the time and money to renovate a house or to sell the house in its un-renovated “as-is” condition.
The basic question is one of economics. Here are a few thoughts on when to renovate and when not to:
WHEN TO RENOVATE
Unless your seller lives in an area where buyers are buying houses solely for the value of the land, doing renovations of almost any scale will increase the value of the home. However, the amount by which the value of the home will increase is an open question.
In some cities and neighborhoods, un-renovated homes will not sell anywhere near the market price of renovated homes, simply because all homes in the community are already renovated. In these cases, renovations may be necessary simply to sell the home in a timely fashion — let alone worrying about making more money. Moreover, renovations that are required to make the home livable will almost always recoup their cost and may be necessary.
Aesthetic renovations are another matter. An experienced home inspector, appraiser or contractor who knows the neighborhood are the best resources to turn to when deciding if a renovation would be helpful. But, at the end of the day, if the seller is not going to at least recoup the investment and a fair amount more, selling the house one or two months more quickly is almost always a bad idea.
WHEN NOT TO RENOVATE
Consider a scenario in which it costs $50,000 to renovate a house, it but will take six months to complete the renovation. The seller has already purchased a new home and moved in. The fixed costs of owning the old home come to $2,500 per month. The seller would need to make, at a minimum, $65,000 more than the current sale price of the old home for the renovation to break even— and probably a fair amount more than that to compensate for the time and effort.
Moreover, if the home is old but un-renovated, you might consider marketing the home as a “clean slate” for ambitious buyers to put their unique touches on. If the home is renovated in a style unique to the seller, however, potential buyers may be unable to see its potential, and a renovation to at least remove the seller’s aesthetic tastes may be called for.
Many sellers are shocked at the difference a new coat of paint will make to the overall feel of their house. Beyond this, however, a skilled home inspector, appraiser or contractor is your best friend in coming to this decision with your seller.
