Renovate a House or Sell As-Is: What is Better?
You are planning to sell your home. You are almost ready to take the next step—then you take a second look at the home you’re selling, and you realize it can’t be sold. Maybe there is mold or small cracks in the wall, or perhaps the house is outdated. Many homeowners go through this phase. The house has flaws and can’t be sold as-is.
At this stage, should you spend more time & money to renovate the house? Should you try to sell as-is?
This is one of those questions without a definite solution. The answer depends on the circumstances.
Renovating a House for Sale: Which Repairs are Important?
Market conditions determine the value of your home. Before you renovate the house, it’s critical to understand the after-repair value of the property. What is the price of comparable properties in the market?
Let’s say properties in the local market (with the same features) are selling for $270k-$300k. That’s the expected price range after your home has been renovated. You cannot expect the house to sell for $350k after remodeling. Many sellers invest time & money into repairs that are not important. Most major home renovation projects have an ROI close to 50%-60%. That means you’re not going to recoup your investment. Compared to that, minor renovation projects such as landscaping can bring an ROI that’s close to 100%.
Sell a Home As-Is
Suppose the property under question requires lots of work. The walls have cracks, roof shingles are missing, and all the faucets leak. Both the interior & exterior need significant repairs. Now, this is a house that can’t be fixed for a few thousand dollars. You don’t yet know the hidden details. This house will need a massive dollar investment before you can make it livable.
Do Homebuyers Want Fixer-Uppers?
The structure of the house is composed of essential systems. Cosmetic makeover creates a difference for most properties. When a buyer says they are looking for a fixer-upper, they don’t want to build a new foundation. They don’t want to install a new roof. Instead, the buyer is talking about cosmetic repairs such as installing new cabinets or applying a fresh coat of paint.
Furthermore, when a buyer is searching for a fixer-upper, they would almost always want a discounted price. Don’t expect to get market price for a house that needs significant repairs. Let’s say the after-repair value is $200k, and the cost of repairs is $50k. A retail buyer is not going to pay you $150k. They would want a reduced price because they can purchase a similar house for $150k. So why would they pay the full amount and make repairs too?
It’s a smart decision to weigh the cost of repairs and the future price of the property. The rule of the thumb is to repair the house if it is going to cost under a few thousand dollars. If the roof needs minor repairs, it would be best to handle the task and sell your home in the retail market.
However, if there are structural issues or major problems, then it would be best to sell the house as-is. Other than spending money, you’ll need to pull building permits to fix the structural issues. Get a home warranty from your contractors. The problem is that most buyers are scared to make that final signature, the moment they hear about past structural issues.
If you are not an expert in remodeling, it would be best to sell your home as-is. You can avoid these repairs and the hassles. It is possible to sell for a fair cash price, and you can sell within days.