Improving Your Home vs. Selling it ‘As-is’
Tips for St. Louis Homeowners Weighing this Decision
Homeowners preparing to sell their home are often faced with a difficult decision. Do you sell your home ‘as-is’ and take what you can get for it, or fork out the money for improvements and hope they pay off at the end? We get asked this question a lot, but our answer is always different; because every situation is unique.
That being said, there are some general guidelines that you can follow when determining the route you’ll go.
First of all, if your home needs repairs, consider how big they actually are. Home repairs can range from something as big as fixing a leaky roof or faulty plumbing, to the little things, like touching-up the paint. So think of categorizing the needed repairs to see which ones are a higher priority, and how likely they are to deter potential buyers. For example, if the needed repairs are a safety concern, then you should definitely consider getting those taken care of, especially since they could hold you up later down the road.
When the needed repairs aren’t a safety concern, though, then other factors can be taken into consideration.
A major question to ask yourself is how does my property compare to other properties in my area that have sold recently?
In some areas, an out of date kitchen is the ‘norm’ and you can get away without updating it. It really depends on the story that other properties around you are telling, and the price that they are selling for compared to the amount of money you have invested in the property.
On one hand, if the current value of your home is similar to that of others’ in the area, then you may not need to make any repairs at all to get a competitive price. If the houses around you are all in immaculate condition, then you will need to update your house to match that condition if you want to sell your house for the same price.
Another option is to forego the repairs, regardless of what’s happening in your area, but be sure to take it into consideration in your listing price. Some potential buyers may actually prefer to buy the home ‘as-is’ and pay for the repairs themselves because it would be more cost-effective than buying a more expensive home in better condition. That entirely depends on the buyer.
Overall, the decision to sell your home ‘as-is’ or make some repairs and improvements prior to listing is multi-faceted and concerns a number of different factors. Your best option is to not call just any local realtor that you may have a connection with. You need to speak with a realtor who is also an investor and can accurately help you evaluate what you need to do to get the most amount of value for your house when you sell it.
There can be some major problems to be aware of if you decide to improve your home instead of selling it in ‘as-is’ condition.
Finding a reputable, honest, and quality contractor to do the work needed to your house. This is a huge challenge and even though we have owned and operated a real estate investment company for over 5 years and bought and repaired well over 50 houses, we only have 2 reputable general contractors on our team…and this is from having been in the business full time for over 5 years!
Accurately Budget for each repair. Not having investment experience makes this difficult. How do you know if a plumber is being fair our unreasonable with his bid to replace your plumbing stack that won’t pass code?
Factoring in your time and holding costs. A big mistake that a lot of homeowners make when they decide to fix up their home is that they don’t accurately factor in all the expenses that are associated with homeownership including mortgage payments, taxes, and insurance.
The other big mistake is they don’t accurately measure the TIME it takes to fix the property up. For example, lets say your house is worth 200K fixed up, and its current ‘as-is’ condition is 150K but your property needs a lot of work and updates.
The advice that you get of what to update from your professional realtor totals 35K worth of updates, so if you do the work you could make an extra 15K from your property!
This on the surface sounds great, but unfortunately it isn’t an extra 15K that you will make. The work will take 3 months to complete, and each month it costs you 1K to hold on to your house. So your profit is now only worth 12K. The higher sales price means higher realtor fees that you will have to pay. The additional realtor fees are 3K so that then leaves you with 9K.
For some people 9K extra for the house is worth 3 months worth of labor on it. For others it is not. You have to then measure how much your time is worth and whether or not it would be a smart decision for you to go forward with the project or not.
I can reiterate enough how unique each and every situation is, and how important it is for you to seek QUALIFIED professional help when dealing with this situation. A friend’s realtor is not enough to help you make this decision. You need a realtor that specializes in ‘as-is’ properties and helping people analyze the situation accurately. Your average realtor has never renovated a house and is not equipped to tell you how much money it will cost to fix up your house.
The best part about getting the appropriate professional advice is that it won’t cost you anything to get their professional opinion, and it will take a lot of the guess-work out of the process for you.