Home sellers have long grappled with the dilemma of whether to update worn, out-of-fashion features and make repairs before listing. In a recent Realtor.com survey of 1000 consumers who are planning to buy within the next year, 60 percent said they are willing to buy an imperfect home. Half of those who are open to renovation are willing to spend $20,000, and 28 percent are willing to spend $10,000. The study also found a strong "HGTV effect," with 60 percent of respondents who are willing to renovate saying they are influenced by home improvement shows and websites. Here are some questions sellers may have concerning renovations and my answers to them.
How do the Realtor.com survey findings compare to what you’ve seen as a realtor?
The survey results ring very true. It is not uncommon for buyers in our market to invest a significant amount after closing on improvements and upgrades. Even in brand-new communities, buyers are spending on average over $30,000 in extra upgrade fees to have floors, cabinets, and window treatments customized to their taste. At the luxury end of the market, buyers will invest as much as $500,000 to make a move-in-ready home their own, carrying out full kitchen, bath, flooring, or exterior upgrades. We are also seeing more and more buyers investing in the back yard. Whether they are adding a built-in fire pit, a second kitchen, a guest house, or a deck, many buyers are improving the outdoor space to make it an extension of the indoor space.
Given the high interest in renovations/improvements among buyers, is it better for a seller to do them before listing a property or to leave them up to the buyer?
Buyers who are open to purchasing homes that need renovation often prefer to make their own selections when it comes to brands, colors, and quality. A seller may do better by offering a “decorating allowance” rather than running the risk of making the wrong choices by upgrading before listing. In San Luis Obispo, we have seen sellers spend money on painting and installing new carpets, only to have the buyers who closed on the properties take them down to the studs. As it turned out, the agents should have advised those sellers not to spend precious funds on upgrades that ended up being demolished after the keys were handed over. Buyers typically have “dream rooms” in mind. As long as they can see potential in a home, they would much rather finish it to their liking.
How does the HGTV effect enter into the selection of a listing agent?
It’s important to ask these questions concerning updates and repairs when selecting a listing agent: What upgrades or repairs, if any, do you think I should consider doing prior to listing the property? What would the return on those investments be? Do buyers in this neighborhood prefer move-in-ready homes, or do they expect to add their own finishing touches to a house? Are there any reports or inspections I should obtain prior to listing?
Can repairs wait until after listing?
An experienced, skilled real estate agent will be familiar with the financing methods used by buyers in a neighborhood and may suggest repairs to expand the buyer pool. Some financing methods require that certain repairs be done for health and safety. Examples of such repairs are bracing and strapping the water heater, ensuring smoke detectors and carbon monoxide detectors are in place, removing any mold- or mildew-like substance, removing peeling paint, or correcting visible dry rot. An agent who knows the area well can help a seller decide which of the potential repairs need to be made before a house goes on the market and alert them to requirements that may come up once an offer is accepted.
When a home needs work, will it still be marketable?
With outdated elements, such as kitchen cabinetry or flooring, the seller can convey to buyers that they understand updates are needed, but the improvements are being left to the buyer so they can make their own style choices. Marketing materials can highlight the positive features of the property while letting buyers know that there is room for improvement. For example, they can say that the property is "priced to sell" or has been "meticulously maintained" but is ready for “your finishing touches" or "your personal upgrades.” Alternatively, if a seller is up for it, they may offer a redecorating allowance not to exceed a specified dollar amount. A great agent will help a seller develop a marketing plan that emphasizes the best aspects of a property and resonates with the buyers who are searching.