January 16th, 2019
Whew, this is one of the hardest questions to answer that clients ask me; but you may be surprised to learn why the question “Should you fix up your home before listing it or sell it as a fixer upper?” is a most difficult question to answer. It’s difficult because there is no stock answer. There just isn’t. What’s good for one seller isn’t good for another. What’s good for one market isn’t good for another? It just depends and it’s a case by case answer.
So, if you were coming to this post to get some definitive answer on the question that you might as well stop reading and go somewhere else. But what I can share with you is something more valuable, I can help you with the parameters to understand what is best for you. Shall we begin?
Like any other tough question that we need an answer to, we need to break it down and understand the bits of information that we will need to make a good decision for our unique circumstance
- What’s the condition of your home. Really, honestly, how bad is it really?
- What’s the strength of the market in your area? Do you have an objective measuring stick to know this? What exactly are the supply demand trends?
- What might the price differentials be between selling as a fixer upper and doing the renovations? Is it worth the cost?
- Are there high in demand features of your home that would be enhanced by fixing up the house and might those high in demand features be enough to stand on their own so that you don’t have to fix up your home to get a great price?
- What type of buyers exist in your market?
These questions are most often share space in the answering so as you continue to read you will find some overlapping here and I will share with you some real life examples that will help you out.
It’s important to honestly assess your home’s condition. I’ve often observed that “things” that could be fixed up fall into two categories
Deferred maintenance – these are things that you should have been doing all along during your ownership but you deferred in doing. A local contractor, designer and renovator on whom I’ve learned to count on for his expertise, Greg Abramowitz, counsels homeowners that they should budget about 1% of their home’s value every year for needed renovations and even if there’s nothing needed in that year, save that amount for when something needs to be done – a new roof, repair of sewage lines, plumbing re-pipe etc. If you don’t do this, then you’re really behind when it comes time to sell and what budget you may have had to improve your home for resale, is instead being diverted into things that have to be done which from a “1st impression” of a buyer, won’t make any impact at all. One of my clients has a home in which the decks are so rotted out, it will take many thousands of dollars to repair. Right now, it looks and is a death trap to walk out onto the decks. But guess what, when those thousands are invested to fix up the decks, will it have resale impact on the buyer? No! The decks will look just like they’re supposed to, functional decks. Deferred maintenance items then could be things that you just can’t avoid to fix. Realize however, fixing them will only bring your resale value to standard, they won’t make you a profit. Yet not fixing them will cost you more as you will have to discount your property to only appeal to the investor sort and trust me on this, they aren’t buying at retail prices. They only buy because the price they’re going to pay is a price that “bakes in” a return on their time and money.
True Resale Enhancing Improvements – these are things that immediately impact a buyer as a “1st impression”. The minute they drive up to a house, they’re having that “oh wow” positive visceral reaction (by the way, there’s a clue in what I just said as to what parts of the property can help the most in resale). Here’s where it gets a little complicated for this category and where we share space with one of the other questions above. Are you in a market where buyers are very busy with their lives – work, kids etc and are willing to pay a premium for a property that’s tastefully done? If so, it’s worth investing even hundreds of thousands of dollars, if you have the budget in order to profit. Here’s a video documenting before and after pictures which gives you an idea of the type of template in which the following factors were in place that made the investment of about $250,000 work out well for the seller.
Should you fix up your home before listing it or sell it as a fixer upper?
This home that I sold had the following factors which acted as fertile ground for the seller’s investment
- At the time of listing, the market was very strongly a sellers market – low supply, high demand
- The property a high demand feature – panoramic city light views
- The type of buyers buying in this neighborhood are typically busy professionals who don’t have the time to fix up a home and understand the value of owning a “turn key” move in condition property
- The property as you see in the video, had a lot of deferred maintenance and there simply was a necessity to invest in order to escape the investor discount buyer pool
- This property’s market value without doing the work shown in the video, was at best $1,150,000 at time of listing as only investors who would only buy at a steep discount, would have taken the project on. Instead, the seller invested $250,000 and we ended up selling the house for $1,650,000 with multiple offers. The seller nearly doubled their investment.
But sometimes a property just isn’t that bad. The condition is passable. It may be one of our Palos Verdes homes that was built in the early 60s, remodeled once in the 80s and really due for another renovation yet it’s “ok”. A coat of paint, some new carpet, some clever staging by a company like Lotus Designs works like magic. And the factor that allowed for enhanced results for the seller here was the extremely rare quality of the panoramic ocean view. Without this “base factor”, the paint, the carpet, the staging, would not have had the same effect. This property experienced 19 offers in 5 days and sold significantly above its list price
So you see it really depends on so many factors that are unique to each case. So should you fix up your home before listing it or sell it as a fixer upper? Honestly, I don’t have a clue. But what I do know is that I can help guide you to the right decision once I get to learn more about you, your goals for selling, your budget and more about your house. Use the contact button on the bottom of this screen to contact me or book an appointment and let’s figure it out together.