Renovating Your House Before Selling: What You Should Know
Reluctant to renovate your house before selling it? Here are the biggest misconceptions about why homeowners think they shouldn’t upgrade before selling.
At Sundae, we talk to a lot of homeowners who want to put their homes on the market. A common concern we hear is: “I don’t want to upgrade my house because the buyer won’t like it.”
Perhaps they feel this way in part due to watching home renovation shows on TV. Many of these mega-popular shows depict new homeowners redesigning their homes with the help of renovation experts. It’s understandable to think a home renovation isn’t worth the effort if the new buyer plans to change it. However, the data for homes on the market suggests otherwise.
Buyers want move-in ready homes
There are an estimated 90 million single family homes in the U.S. It’s safe to assume that not all of them are in “market-ready” condition. But data from MLS and our own internal data at Sundae suggest that modern buyers want updated, turnkey homes.
Buying a home is typically the biggest purchase a person ever makes. The last thing buyers want after a pricey transaction is to shell out thousands more dollars on a remodel.
As a seller, there are a lot of factors that go into understanding what renovations make sense, including:
- The overall condition of your home
- The current state of the market in your area
- Your budget
- Your timeline for how quickly you want to sell and move
To give you more insight into this topic, we talked to Sundae Customer Advisor Amit Patel. Patel regularly speaks to sellers facing the dilemma of whether to renovate before selling.
If you have plans to sell your home and wonder if you should upgrade, Patel provides invaluable insights. You can always reach out to Sundae if you have more questions or need help.
Q: What should a seller know about renovating before selling their home?
Patel: If you have the time, money, and energy to renovate yourself, the question is always going to be how can you net the most money when you sell.
My job is to get the information customers need in order to make the best decision, even if it means not selling with Sundae. However, if their home is a fit for us, I usually set them up with a Market Expert who can come out to their house and make a cash offer on the property.
Q: How do you know buyers want turnkey homes?
Patel: In a seller’s market, a modern, updated property may spend 30 to 60 days on the market. But one that needs updates will spend a lot more time than that, even at a lower list price.
Q: What’s the one thing you always say to sellers who are thinking of renovating their homes?
Patel: A lot of homes need updating [before being sold] to meet modern buyer demand, and someone has to do that update. So the question becomes, do you as the owner want to do it yourself, knowing the challenges and costs, or does it make sense to let a flipper or real estate investor do it?
Unfortunately, if you choose the latter, it will mean selling for less than the traditional way on the market. But after you account for expenses and convenience, the net proceeds of selling to a cash buyer/flipper may be worth it. This is the calculation I use to educate them.
Q: What are some misconceptions for homeowners who don’t want to renovate before selling?
Patel: I’d say the biggest misconception is the cost at which the seller discounts the home.
I hear, “Well, my house isn’t updated, so maybe I’ll discount $10,000 to $15,000 to calculate for the outdated kitchen and bathroom.” The seller doesn’t realize this is a cost that the buyer will need to take on and assumes that a buyer is ready to take on that responsibility.
These are the same sellers that say, “If I do the updates, they’ll tear it all out anyway.”
Most people want to live in a turnkey property. It’s not to say there aren’t buyers who want to do the renovations themselves, but they’re a lot harder to find than buyers who want a turnkey property.
Q: Why do sellers seem to think buyers want to renovate?
Patel: It mostly comes down to not having the proper education around the process of selling a home. Most people will only sell a home one to two times in their lifetime and haven’t gone through that process.
Q: For sellers who are interested in selling their home as is to Sundae, what should they know?
Patel: I like to tell people that even if they renovate, there are risks involved. It really comes down to weighing their options and seeing if they have the means to renovate.
Whenever Sundae helps connect a seller with a home that need to be updated with an investor on our marketplace, that investor will put anywhere from $40,000 to $60,000 into a property to really do a high-end update. This is the average cost to be successful in terms of being able to sell it quickly. Because we do this constantly, we have the business down, whereas most sellers have never actually done any renovations.
I really like to be thorough and paint the picture of what the renovation process looks like. Updating a house is not easy to manage. Most renovations take longer than expected and go over budget. Sometimes it can be challenging to find a good contractor.
Even the experience of living in the house while doing updates is difficult. Getting sawdust in your cereal is definitely not ideal.
Q: What are homeowners most concerned about, when it comes to selling?
Patel: Price is always important when selling a house and getting the most money are the biggest concerns.
In my experience, I see many homeowners who haven’t made any updates to their home but want to price it for $400,000 to $500,000. In that price range, most buyers will want a turnkey property they can move into without doing any work to it.
Q: If a seller is willing to renovate, what are they usually worried about?
Patel: I often hear them say, “If I do this renovation myself, how will I know the person buying the property is going to like it?” Their theory is that the person buying the property would probably tear everything out and then redo it.
What they may not realize is that even as a buyer, it’s kind of the same situation. They may not be ready to invest that money either. After the down payment, buyers probably wouldn’t want to jump into a renovation and end up getting sawdust in their cereal either.
Q: What kind of renovations should sellers consider making?
Patel: Most sellers don’t have the expertise to know what and how to renovate the property. Renovations should be competitive with other homes in their area and on the market.
Sundae looks at the amount properties are selling for in the area and what remodeled homes look like. Then we determine what it’ll cost sellers to get their property to that level. This is Sundae’s expertise.
Q: What are some things sellers get wrong when it comes to doing a renovation?
Patel: Cost of the renovation is one. Sellers seem to underestimate what it will cost to do a high-end remodel.
Or they might try to do it themselves to cut costs but then they run the risk of quality, and contractors are pretty expensive. If you’re doing a high-end remodel, materials will be also be expensive.
Time and energy are the other big factors that most people underestimate. For Sundae, a renovation project may take three months, whereas for the seller, it may take the same project up to six months.
Q: What else should sellers think about, when it comes to the big picture of renovating?
Patel: Sellers may already have another house in escrow or looking to purchase, so I always tell them it’s nice to already have the deal figured out with their current house. That way they don’t have to worry about things falling out with the buyer.
The other is timing. For example, the value of the property may change between the time they renovate and sell.
Also, if sellers are paying a mortgage or taking a loan out for the renovation, there are added costs associated with that.
Q: What’s your best advice for sellers who are on the fence about renovating?
Patel: I try to educate sellers about what we do here at Sundae, which is to look at other properties in a seller’s area that are updated and remodeled. I recommend that sellers also look to see what properties in the area have sold for. I advise them to take an honest look at their property and see what it’s going to take to get it to that level.
Sundae can typically offer more for properties that are in as is conditions, simply because of volume. We purchase hundreds of properties a year so we can afford to make less per property. This is different than investors who purchase as is homes. They may buy four or five houses a year, so every penny counts.
If buyers are really serious about moving forward, I recommend they have a contractor come out to make a bid. Then make the decision.
Q: What should sellers know about renovating, now that we’re in a pandemic?
Patel: It’s a tricky time for real estate (and everything else).
Sellers will get more and sell quicker if their homes are updated. However, if the renovations take three to six months, the market might change.
The best thing to do is to know your options and the costs associated with each of them.