Please watch HGTV prior to having an Open House

@Green Witch,

Quote:

Should You Fix Up Your Home Before Selling?
by JOHN GLYNN on FEBRUARY 14, 2011
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According to this report from Hanley Wood, who is “the number 1 media company covering construction”, the short answer is “Hell no.”

There are a few key takeaways from this Remodeling Cost vs. Value Report. I viewed the Pacific region, but it looks like they offer much more granular city/area specific reports. You can drill down into San Francisco, Los Angeles, San Diego etc.

The only investment in remodeling that suggested a lower cost to build than implied increase on sale price of the home was to replace the front door to the house. This is for mid-range value property. At the high end, nothing paid off.

In fact, some of these look terrible. A bathroom addition returns 53% of the cost at resale. A home office remodel returns 46%. Why bother? I wonder how accurate this data is. It’s not like they sell the same house with and without the improvements, and compare the outcomes. They are going off averages and comparables here.

But notice also how each of the categories has shown a decline in the percentage that is recouped as compared to prior years. Makes sense, because home values have fallen over that time frame. So naturally, the averages are all lower. But if the input costs were also falling, the year over year changes would be more mixed.

In other words, labor plus materials to do these remodel projects has not fallen as fast as the value of the product they produce.

This is an interesting subtext of markets in transition. I don’t believe for a second that there are not some remodel projects that, when done with cost efficiency to the right property at the right time, can bring on better than 100% return on investment. If this weren’t possible, it would imply that you couldn’t make money building a house. I don’t think we’ve come that far.

But if you are looking to sell a not-so-pretty property, wondering if you should do some cosmetic repairs – or more – you really do have to wonder about this climate. It could be throwing good money after a not-so-pretty asset..

http://bayarearealestatefinance.com/should-you-fix-up-your-home-before-selling/

I was not giving my opinion, I was talking about the likely reason our OP is finding a lot of houses not scrubbed and waxed.

2 Replies

@hawkeye10,

I suppose I can understand that with some of the lower priced homes - for example the ones that the elderly individuals are leaving. But this was one of the higher priced homes.

You would expect a higher priced home, to be clean and have all the upgrades that should be the reason it is more money; you don't have to put more into it - and not a bargain. One of the reasons we looked at this house was if it had everything that we wanted, and we could get it a bit lower, we might have considered it. Seeing it trashed and not sparkling the cheaper smaller houses looked better.

There are definately both markets though - when the housing market first was going down - and we were supposed to relocate - the comments we got were quite the opposite - you don't have granite counters tops, you don't have - think of any up grade possible.

We have since added many of these upgrades, in part, because we ended up staying and wanted them for ourselves. Also where we live, it is a higher end condo assocations - so people looking there would expect these sorts of things. I think what you need to know is your selling market.

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@hawkeye10,

It is true - when you do research most agree that major renovations will not recoup the added value, however, most agree also that staging and cleaning will add much more value with little dollars. Which does not make sense from what I experienced.

Some info I found:
An average bathroom remodel cost $15,899 in 2010, with a recoup value of $11,857. That's only a 74.6 percent return on your investment in a bathroom you'll never get to use [source: Remodeling Magazine]. Instead, increase your sale value by styling the bathroom in a way that's inviting, luxurious and simple. Updated drawer pulls and fixtures, and tiny touches like fresh soaps and freshly folded towels can help a sparkling-clean bathroom appeal to buyers every bit as much as a newly installed toilet.

"No mention of leaving dirty laundry around the bathroom"

Home staging can improve your sale price by an average of six percent, and you could sell up to 50 percent faster [source: Home Staging Resource].

They also mention that you should complete any necessary repairs - which makes great sense - because when the inspector comes by and finds something in need of repair, the potential buyer can back out of their offer and/or re-negotiate an already agreed upon price.

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@Linkat,

Quote:

I think what you need to know is your selling market.

If you are not going to sell to a carpetbagger you need to know what recent sales per square foot in your areas have been, to include the bank owned sales. People are very resistant to buying at much above that SQ/FT price because they get the idea that they are overpaying, no matter how much they like the place. Also, it is very difficult to get an appraisal the will satisfy the bank even if you do want to buy the really cool place at much above the local comps price.

I have a guy across the street who tried to sell last year after listening to the old advise.....he fixed up the house and put in a yard sprinkler system, it was pristine, but unlucky for him we have had three foreclosure sales on my street so the comps look bad compared to what he was asking and what he needed to get out of the place so that he would not be bitter about all the time and money he had spent shinning up the place. He got very little interest, lowered the price 5% and still got very little interest, and then he gave up.

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@Linkat,

Quote:

I think what you need to know is your selling market.

You can put $20K into repairs and still have the buyers come back looking for price reductions after the inspection. Agreeing to a price contingent upon inspection is commonly a negotiating tactic in this market, to get the sellers mentally disengaged thinking that they have finally unloaded the place. Then a week later the buyers come back demanding a 10% reduction based upon the inspection, the seriousness of the alleged problems are besides the point, they find something because it is the price reduction that they are after, not an honest evaluation of the condition of the house. The hope is that the sellers at this point just want to be done with it, they dont want to take it back (they never got rid of it, but in their mind they had), so they will agree to the lowball price.

So why not just leave the problems, and base the inevitable reduction request on them? You end up in about the same place, but then you are not out the repair money.

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@hawkeye10,

Because if you don't make the necessary repairs you are not going to sell.

Like I said - in my complex people who buy there expect, granite counter tops or better. If they don't get it - they won't buy. Most people looking in my complex expect to buy and more in with little or no work.

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@hawkeye10,

Yes - but if the repairs cost $10k then they will ask for $30k less.

1 Reply

@Linkat,

Quote:

Yes - but if the repairs cost $10k then they will ask for $30k less.

Maybe, but my point is dont assume that these sellers are lazy or stupid, they may well have reasonably and rationally come to the conclusion that not shining up their homes before putting them on the market is the best approach for them. The rules have changed.

Re your current house..assuming that you dont want to sell to a carpetbagger after putting money into the place you should take a good honest look at how long it might take to sell, and what you might get.The resale market is some places is still kinda ok, but in others it functionally has ground to a halt, as the only homes that get sold are done at very low prices to wealthy people with cash, who intend to rent them out. You really need to get on Zillow or some such place and see if any places have sold near you in the last year for non distressed sale prices.

1 Reply

@hawkeye10,

Oh, we definately have done our research - the idea is to price it correctly. They have been sluggish, but selling in our area. We have a bonus of being in an excellent location and plan to sell accordingly. Most of our money is small dollars - hubby painting - easy cheap and de-cluttering and using family's space to store extra stuff.

I agree a kitchen make over does not make sense, but changing some of the hardware gives it a clean look without shelling out the extra dollars. Most of our recent upgrades were a couple of years ago when we decided to stay. Things we wanted, but also chosen with neutral colors as we knew would ultimately help sell in the future. Anything we have done has not been to add value, but to push the sale more quickly.

1 Reply

@Linkat,

One thing that I am sure we are seeing is that people dont feel good about selling, they know before they even start that they are going to come out far worse than they could have imagined just a couple of years ago. There is a psychological resistance to investing emotional energy or any other resource into the home at sale. These people may well be setting themselves up for coming out worse than they need to.

1 Reply

@hawkeye10,

One thing on our side is we went through this a few years ago - when it was worse.

Of course after seeking advice with an experienced realotor (we plan to go with one that has had the most recent success selling in our complex), but we hope to put our place on the market for less than any others - even one that is in foreclosure. All we are hoping for is to not owe any money upon selling which gives us a good window.

1 Reply

when we bought this house the immediate neighbors had a block wall enclosing their front yard, even before we moved in we had our front yard walled in to match the neighbors. Due to poor construction, their block wall is now collapsing. they (the neighbors) are in their 80's and are unlikely to have their wall repaired which makes our front yard stand out in a very ugly way.

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@Linkat,

Linkat wrote:

Also where we live, it is a higher end condo assocations - so people looking there would expect these sorts of things. I think what you need to know is your selling market.

If it's so higher end, what are those bums doing above you and next to you?

1 Reply

@Linkat,

Quote:

One thing on our side is we went through this a few years ago - when it was worse.

It was never worse, we are now near the old bottom in price, and buyers are spooked so very few people are optimistic enough that the price drops are done to roll the dice and buy. Add in that loans have never been more difficult to get due to the US government pulling its support of the market and you have a situation that is worse than it was two years ago.

9:00 PM, Apr. 7, 2011

Quote:

The U.S. housing market looks like a scorched landscape.

Nationwide, home prices are down almost

32 percent from their 2006 peak. Many economists expect them to fall at least 5 percent more this year. Some predict even steeper declines.

Even if home prices hit bottom later this year -- a big if for many markets -- they're not likely to rise much for several years, forecasters predict.

That's because millions of homes still face foreclosure. And lending standards are tight.

Yet, even charred terrain sprouts green shoots eventually. And some areas have laid the groundwork for better days, according to an analysis for USA Today by real estate website Zillow.com.

Of the nation's 100 largest metropolitan areas, Zillow identified six -- Las Vegas; Fort Myers, Fla.; Stockton and Vallejo, Calif.; Hartford, Conn.; and Columbus, Ohio -- that show best what housing markets look like when they are bottoming out but not yet in recovery mode. To identify them, Zillow considered factors such as: the trajectory of home prices, housing affordability based on a ratio of prices to local incomes and foreclosure rates.

None of the six is seeing price gains, just lessening declines that are expected to continue. Their foreclosure rates have peaked, so the worst could be behind them.

"In these markets, you can kind of see a light at the end of the tunnel, and it's been a pretty long, dark tunnel," said Stan Humphries, Zillow.com chief economist.

http://www.rgj.com/article/20110408/BIZ03/104080314/0/LIV08/Housing-crash-slows-6-major-cities-including-Las-Vegas?odyssey=nav|head

6 of 100 MIGHT be NEAR the bottom.....think about that for a few seconds...

One big psychological barrier is that we are now getting stories in the media about people who bought two years ago at what they thought was 30-40% discount, they thought they got a great deal and would be fine no matter what, but they want to get out now and move for their job but they can not sell now except at a loss. This is a kick in the gut, and when the economist say that the prices are sure to drop for awhile but no one knows how much people generally dont want to get envolved. THe carpet baggers will, because they are planning on waiting 5-10 years to sell and rents are great now because of all the people who can no longer get a loan, so their risk is about zero, but you are going to gave to sell at distressed prices to get such an offer.

1 Reply

@hawkeye10,

Actually where we are living - they are beginning to sell again. Prices may be down from a couple of years ago - but they are selling. Before, they were not even moving. We have had several sells this year in our complex.

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@Mame,

Why they have some one renting a room from them.

And having money does not mean you are not a bum. One thing I have noticed though, with the decrease of prices in our area - we have had a decrease in the type of owner in our complex. The unit they live is very nice, but they have probably at the least ruined their hardwood floors with the way they drag things across it.

They have little if any common sense.

1 Reply

@Linkat,

Quote:

Home staging can improve your sale price by an average of six percent, and you could sell up to 50 percent faster [source: Home Staging Resource].

I'd give a bit less than a grain of salt to this when considering that the source of the statement is an industry that profits from people paying them to stage their homes.

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@Butrflynet,

I don't know any hardcore figures, and I'm sure location plays a big part in any sale, but I can tell you from first hand experience that staged homes sell faster and are more likely to close near the asking price. I work with a professional who does interiors and contracts the landscape to me. I rarely have to do more than one tweaking because the house usually sells before the need arises again. Out of the ten homes we did last spring only one is still on the market.

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@Butrflynet,

Actually the overall article I was reading was suggesting staging on your own and gave you suggestions on what you should stage. It was suggesting not hiring some one and how you can stage yourself. This was their source of information.

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@Linkat,

It's probably a catch 22 in that the homeowners' board (whatever you call it) that you like because it isn't rule infested.. is probably less powerful than possible re getting rid of those folks who keep violating the rules that are there.

I've never lived in a place that had a powerful homeowner's association - though I have been involved with a politically active neighborhood group, active re city planning issues and neighborhood watch issues. I was put off by the rules type associations on one of my first land arch jobs - my then boss took me by his place (picking up a file he needed) on the way to a client's place and he pointed to the one terra cotta pot he had near his entry: it violated rules and he was protesting. That was a total surprise to me, that associations could mandate at that level (that was in '80, I think).

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Please watch HGTV prior to having an Open House

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