Home renovation can be expensive, but is often necessary prior to selling. It is important for all real estate sellers to learn when renovation is a good idea and when it is better to sell the property “as is”. Remember, some circumstances will make the property more appealing as a “fixer upper”.
Renovation is not only costly, but is also a time consuming endeavor in many cases. Additionally, the outcome of renovation work is unpredictable, since the quality of workmanship varies and renovation can also uncover other unknown issues with the home that might now need correction. It is no wonder that many sellers are unsure whether renovation is worth the cost and work involved before marketing the home for sale.
This guide educates property sellers on the pros and cons of renovating a property before sale. If you are simply not sure which projects to do and which to skip before selling, this is the right article for you.
Home Renovation Downsides
Renovation work can be very expensive. Some updating projects are not overly pricey, such as flooring and finishing work, while other projects can be very costly, such a bathrooms and kitchens. Typically, the more value a project will add to the home’s sale price, the more it will cost to undertake.
Besides the monetary expense of renovation work, the project will also take time. Depending on many factors, major renovation might take months, during which time the owner will still have to support all of the expenses of the home and might even have to live there inconveniently with work in progress. If there is lots of construction and demolition to be done, this can become a very stressful and uncomfortable time for the occupant of the home, especially when kitchen or bathroom work is being done.
Renovation is famous for uncovering previously unknown issues with a home that will now need to be repaired or replaced. Renovation will provide a tool for discovery of electrical, plumbing and infrastructure concerns which will need to be fixed or brought up to code in order to sell the property. Therefore, it is quite common for the cost of renovation to far exceed the original allotted budget, as new issues come to light and require expert attention.
Finally, in some real estate markets, it might be difficult to recoup the cost of renovation work. When sellers renovate just to sell and do not get any joy or value in living with the improved home for any length of time, the investment in a full renovation might simply not pay off in the long run.
Benefits of Renovating Your Home
Renovation can be a great investment when economic and real estate market criteria cooperate. Many sellers commit a reasonable amount of money into a renovation and realize a 200% return on their investment. Even more modest gains of 120% to 130% returns can amount to tens of thousands of dollars in extra profitability from many real estate transactions.
Renovation can make a home easier to sell, particularly to buyers who want everything new and desire a turn key experience when purchasing their next home. Renovation will make the promotional materials for real estate marketing much more appealing, since photos and video tours will be able to depict a brand new look and feel to the home that may increase the number of showings that the property will receive.
A very case-specific benefit of renovation for real estate investors is the chance to develop close working ties with contractors or even the opportunity to develop their own renovation team. This will make future renovation work less costly and more predictable in budget and outcome. Many investors will use these connections to “flip” properties that need overhauls for relatively quick sales over several months, after renovating and increasing the asking price for the enhanced home substantially.
Home Renovation Decisions
Should you renovate or not? This is the major question facing so many property sellers. Well, if you are a major real estate investor, you might be able to realize both tangible and intangible benefits from renovating and even developing your own renovation team. However, what if this is a one time project and you do not have the financial resources to take chances? What should you do?
Study the current real estate market in your area and speak to some successful real estate agents. Ask their opinions on whether renovation makes sense for your property or whether it might be best to price the home lower and look to attract people who want a “fixer”. Every real estate market is different and all markets are in constant flux in terms of pricing, supply and demand. If you can establish a demand for renovated properties in your area and a low supply, then it is a safe bet that renovation will pay off for you. Meanwhile, if the supply of renovated homes is extensive and the demand is for project houses, then save your cash and sell “as is”. You might not get as much money from the sale, but with basic home staging, you can still bring out the value in the property and save lots of renovation costs in the process.