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2011-07-16 16:32:04

Seller Strategies: Should You Upgrade Before Selling?

It’s a well-known fact that very few home remodeling upgrades are good financial investments.  The best return on investment often results from a kitchen upgrade, which typically increases the value of a home by about 75 cents for each dollar spent.  Swimming pools, backyard landscaping, entryway flooring, and similar upgrades produce an even lower return on investment for a seller.  Why, then, should a home owner install upgrades before putting their home on the market?

Many don’t.  They might sell the property “as-is” or offer different types of “credits” or “allowances” that are really nothing more than price adjustments that acknowledge outdated features or a flaw in the property.  Credits for worn-out carpet, “unusual” paint colors, faded kitchen cabinets, falling fences, and roofs that are about to leak are common.  If the seller doesn’t have the desire or cash to remove these flaws, buyers will notice them and lower their offer price – if they make an offer.

Despite the lack of return on investment in most upgrades, there are times when making them could be the difference between getting offers or not getting offers.  Homes that have not been updated will often have problems selling under these conditions:

  • High number of homes for sale
  • Relatively low number of qualified buyers
  • Most of the competing homes in the neighborhood have been updated

Offering allowances or credits assumes that the buyer will update the home after they buy it.  Unfortunately, most of today’s buyers are putting nearly all of their available cash into their down payment and have little left over to invest in upgrades.  It is usually easier for a buyer to pay a little more for an updated home and spread the higher cost over the life of the mortgage.  Yes, some buyers have extra cash to make the upgrades, but they usually make up just a small portion of all buyers.

Updating a home prior to putting it on the market is usually not about getting back the dollars invested, it’s about generating any reasonable offers at all.  In a competitive selling environment, homes that are “move-in ready” will sell faster and for a higher price than homes that are not.  Exceptions exist, usually because of a property’s unique location, but in most cases the updated home is more competitive.

 


I hope you found this information helpful.  If you have questions about real estate jargon or buy/sell/investment strategies, drop me a line!  john@jsrealproperty.com It would be a pleasure to help you get the most from your home sale or to help you find your next home!

To receive in-depth local, state and national market information, subscribe to my Housing Trends eNewsletter at www.jsrealproperty.com

Follow me on Twitter:  @CalBrokerJohn

Copyright 2011   John A. Souerbry

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