What Is a Fair Offer Price When Selling a Home?
How do you determine what is a fair offer price when choosing between selling your home as is vs. renovating it and selling on the market? Read on to find out.
When you want to sell your house, the first thing that may come to mind is price. How much can you get in this market and what is a fair offer price for your home?
The best case scenario would be to sell high (and buy low if you need to buy another home after selling).
The tricky part is figuring out what makes a fair offer. This is one of the biggest questions we get at Sundae.
Sundae customer Jackie: ‘Should I sell with Sundae or renovate myself?’
We’ll help you understand how to assess a fair offer price for your home though Jackie’s story.
Jackie reached out to Sundae to see how much she would get for her home, but she also wanted to know how much she was potentially leaving on the table if she were to do one of the following:
Here are the details facing Jackie when she needed to decide how to sell her home.
- Jackie’s home was outdated—the last time she renovated was a decade ago.
- She was the original owner of the home and remodeled twice.
- She still had a monthly mortgage.
- Her reason for moving? She didn’t want a two-story home and was planning to move to a retirement community.
Buyers want a turn key home
Many buyers in the market want modern, updated homes. These are known as turn key homes, and based on data from Sundae and MLS (Multiple Listings Services) they don’t stay on the market for long.
Read more: What Homebuyers Really Want in a Home
Making renovations before you sell
Jackie took an honest look at her property. She knew it was outdated. Because she had previously gone through two renovations, the thought of spending time, energy, and money on a third did not appeal to her.
She was preparing to move to a senior living community and wanted the process to be as easy as possible.
Every seller’s budget and timeline for moving are different. These are the main factors to consider, if you’re faced with a potential renovation for your home:
- The general condition of the house, including the foundation (plumbing, electricity, roof, etc.) and overall appeal (outside landscape, how updated the kitchen and bathrooms are)
- The neighborhood and how much other homes were selling for
- The current state of the housing market
Selling your house as is
There’s nothing wrong with selling your home as is. In the U.S., there are 90 million single family homes and not all of them are updated or market-ready.
When you list your home as is, it means you’re not willing to make the necessary repairs or renovations before you sell. You’re selling it in its current condition, which means the buyer will need to renovate the home. An as is home is an indication to buyers that the home isn’t move-in ready.
If you’re not willing to make repairs yourself before putting your house on the market, as a seller, you’ll have to be ok selling for less.
Disadvantage of selling as is
- You likely won’t get as high a price as you want
- It may take longer to sell (if you sell on the market)
Advantages of selling as is
- You don’t have to deal with the headache of renovations
- It may sell very quickly (if you sell with Sundae, you can close in as quickly as 10 days)
Working with Sundae
After Jackie contacted Sundae to find out how much her home was worth, her customer advisor walked her through Sundae’s process and:
- Conducted a comparison of how much homes in the area were selling for
- Discussed her situation and timeline for moving
- Set up a time for a Sundae market expert to come out and see her home
Jackie’s cost breakdown: Did she leave money on the table?
An important part of the process was understanding how much she’d potentially be losing if she decided to fix her home and then sell on the market vs. selling with Sundae.
Here are cost estimates if she wanted to update her home first and then sell:
- Home renovation to get it market ready ~ $50,000
- Closing costs (6-8%) + working with a real estate agent (fees and commission) ~ $45,000
- Timeline to renovate, based on what needed to be fixed ~ 3-6 months
Jackie was still paying a mortgage, so waiting three to six months on a renovation would add more to the cost.
Sundae Customer Advisor Amit Patel explained, “Let’s assume her mortgage is $2,500 per month. If it took the full six months to renovate and sell, she’d end up spending another $15,000 on the mortgage alone.”
Doing the math on a fair offer price
The offer Jackie accepted on Sundae’s marketplace was a little less than 80% if what the estimated market value of her home would be with a full renovation.
- The offer Jackie accepted from Sundae’s marketplace for her home as is: $445,000
- Market value of Jackie’s home (updated): $565,000
- Difference: $120,000
Here is the total breakdown with renovations:
- Cost of renovation: $50,000
- Real estate agent fees: $34,000
- Closing costs: $11,000
- Holding costs (mortgage over a six-month projection): $15,000
- Total amount she would have to spend to get this done: $110,000
- The amount Jackie would be leaving on the table: $10,000 ($120,000 – $110,000 = $10,000)
Had Jackie opted for the full renovation, when all was said and done, she would have walked away from the house six months later with an extra $10,000 in her pocket. But she chose not to go down that road.
While $10,000 is nothing to sneeze at, it wasn’t enough to sway Jackie to renovate. Updating a house is a massive project, and Jackie would’ve had to handle it on her own. She decided that not having to deal with the stress and work outweighed the potential extra $10,000.
5 reasons why renovations can be difficult
If you have never faced a home renovation before, these are some common reasons why it can be stressful:
- Not knowing where to start: You may be able to learn how to do small kitchen repairs on YouTube, but the learning curve is steep for major remodeling. You’d most likely need to hire a contractor to help with big repairs. Just finding the right contractor is a chore in itself.
- Budget: Renovations are expensive. For Jackie’s home, which was only updated 10 years ago, she’d still need to spend $50,000. To give you a better idea, this is what it may cost you to make repairs on the following:
- Kitchen Remodel: $4,500 – $49,000
- Bath Remodel: $6,000 – $14,000
- Bedroom Remodel: $1,000 – $5,000
- Appliances: $1,000 – $10,000
- AC Unit: $4,000 – $6,000
- Furnace: $3,000 – $5,000
- HVAC: $1,900 – $4,900
- Roof: $5,000 – $7,000
- Plumbing: $45 – $512
- Basement: $10,579 – $27,000
- Ducts and Vents: $500 – $2,000
- Landscaping: $500 – $5,000
- Knocking Down Walls: $300 – $500
- Permitting: $100 – $3,000
- Surprises: Have you ever watched a reality show about flipping homes? They’re chock full of unforeseen surprises—from termites to electrical problems, anything can happen. This is just one reason why homeowners tend to go over budget.
- Living in a home that is being repaired: Two words describe this—not fun.
- Dealing with contractors: We’d like to believe that everyone is honest and trustworthy. But finding the right people who won’t do shoddy work may be challenging.
Pack it up and move on
After one of our Market Experts came out to Jackie’s property and explained the benefits of selling on our marketplace, she decided to give Sundae a try.
She was glad to no longer have to deal with her two-story home, a mortgage, and a potential renovation that would’ve cost her time and money.