The Cost to Renovate Your Home vs The Cost To Sell Your Home As Is
Meta Description: While it can be difficult to determine whether to take on the cost of renovating your home before listing or selling it as is, certain repairs shouldn’t be overlooked.
Should you or shouldn’t you? We’ve all heard that it’s a good idea to make improvements to your house before putting it on the market. But will the cost to renovate a home be reflected in its final sale price? Is it better to fix up your house before you list it or should you just sell it as is? Not surprisingly, the answer isn’t cut and dried.
If you DO go ahead and remodel, there are all kinds of things that factor into how big of a return on investment (ROI) that work will bring. Certain rooms (especially the kitchen and bathroom) have a better ROI than others (such as basements, attics, and garages). Personal taste and decorating trends, changing technology, and general wear and tear also impact how much value renovations carry.
It’s also difficult to say how the final selling price will be impacted if you DON’T go ahead with a repair or remodel. For example, let’s say your house needs to be reshingled and you’ve gotten an estimate of $5,000 for the work. A potential buyer won’t necessarily factor that $5,000 figure into their offer. They might think reshingling will cost more than $5,000. Or, they might factor in $5,000 plus an additional sum to make up for the inconvenience of needing to deal with a major repair.
So how exactly do you choose between paying to renovate your home or listing it as is? Real estate agents can provide a wealth of advice on this topic. But private sellers need to do their own research. It’s important to compare the cost of the proposed renovation with the home’s market value once the remodel is complete. And, a smart seller will keep in mind that all remodels depreciate in value and very few improvements have a 100% (or better) ROI.
Critical Upgrades
Structural Issues
Some repairs and upgrades are worth every penny spent. Major structural problems like a leaking roof or issues with the foundation should always be addressed. While you may not see a 100% ROI on these types of renovations, potential buyers will often walk away from properties with structural problems. To attract any offers at all, these repairs should be done wherever possible.
By law, you must disclose any kind of “latent defect disclosure” when you sell a home in Ontario. These types of issues may make the home dangerous to live in and include:
- Mold;
- Structural damage;
- A leaking or damaged roof; and
- Asbestos.
Choosing to simply disclose these issues instead of having them fixed may result in a significantly lower price.
Cosmetic and Electrical Repairs
Simple cosmetic and electrical repairs will make your home more appealing to potential buyers. Many of these can be done by a handy homeowner, which will save on costs and result in a bigger ROI. If your home has any of the following issues, fixing them will allow you to sell your house more quickly and for a higher price:
- Holes in the walls or ceilings;
- Worn or dated paint;
- Damaged or badly stained carpet;
- Broken window glass;
- Broken appliances;
- A faulty HVAC system; or
- Leaky plumbing.
Kitchen and Bathroom Upgrades
Kitchens and bathrooms are some of the most important rooms in a home and ones that potential buyers will examine carefully. Basic upgrades to these spaces often carry the highest ROI.
Cosmetic upgrades are all it takes; there’s no need to do an extensive overhaul of either kitchen or bath. A piece in The Spruce explains that:
An upscale major kitchen remodel has a return on investment (ROI) of less than 60 percent, while a mid-range minor kitchen redo can return about 80 percent. Bathroom remodels return about 62 percent for upscale renovations and about 67 percent for mid-level remodels.
Modernizing and freshening up the appearance is the goal, rather than changing the way these rooms currently function. Instead of gutting the kitchen cabinets, installing new appliances, and replacing the built in tub, consider simpler fixes like:
- Installing updated hardware;
- Replacing cabinet doors or painting cabinets;
- Installing modern lighting;
- Refinishing countertops;
- Replacing the faucets;
- Refinishing the tub;
- Installing a new toilet; or
- Painting the flooring.
Cost vs Value Report
It’s not terribly difficult for homeowners to determine a cost estimate for a certain type of remodel. But it’s more difficult to figure out how that remodel might impact the final sale price of your home.
That’s where the Cost vs. Value report, published annually by Remodelling magazine, comes in. As explained in a piece at The Spruce, the report compares
the average cost of the most common home renovations, along with the expected increase in home value related to each upgrade. Costs and values are averaged at the national and regional levels as well as for individual cities. A quick glance at the latest report can tell you how much your home value will increase with a kitchen remodel, for example, whether it’s a just a facelift or a major renovation.
Two caveats: first, the cost of renovations listed in the report are provided by a contractor estimating tool. As such, labour costs are included in those estimates. But many homeowners do at least some of their own home improvements themselves and have no paid labour costs. Second, the report is specific to the United States. But, it still has a value as a tool for comparative costs.
This report can be key in helping you determine if the cost to renovate your home is worth it, or if it’s better to sell your home as is.
Upgrades that Aren’t Worth The Investment
Sometimes, an upgrade will make your home a better fit for you but it won’t add any equity value to your house when you sell it. This is true of most large-scale renovations, such as additions to family rooms, bathrooms, and master bedrooms. If you plan to remain in your current home for some time, increasing the square footage may ease things for you. However, an addition shouldn’t be added on as you get your home ready to sell. You simply won’t get your money back for it.
Garage conversions usually aren’t worth the time and expense either. Many potential buyers will want the garage space to use as a garage and would simply adjust their offer to take into account the cost of changing the space back to its original use.
Selling Your Home “As Is”
There’s no way around it – if you want to fix up your house before putting it on the market, there’s almost always some cost involved. Still, it’s usually preferable to shoulder that cost because it will help to sell your home quickly and for the highest amount possible.
That said, there are situations where it’s necessary to sell your home “as is,” without any additional repairs or upgrades. For instance, you may need to move quickly or you may not have the necessary money to do renovations of any size.
While many people are searching for a home that’s in move-in condition, there are others–investors–who may be interested in a home with some imperfections, provided that it’s reasonably priced.
House flippers actively search for homes that have some structural or cosmetic issues and are priced low for that reason.They then buy those houses with the intent of fixing them up and selling them at a profit. It is always a good idea to consult with professionals when it comes to any financial decision and not to make any rash decisions, check out the ones at https://www.davidyorkstaxservice.com. Contractors may be searching for similar homes with the intent of tearing the structures down and replacing them with new builds.
The Decision: Doing Renos First or Selling As Is
There are many factors to consider to determine if it’s better to pay for some upgrades to your home before putting it on the market or simply to list it as is.
First and foremost, it’s important to remember that virtually no remodels will have a 100% ROI. However, in order to sell your home quickly and for the best possible price, major structural issues, cosmetic and electrical repairs, and a cosmetic refresh of kitchen and baths should be taken care of.
As for other remodels, private sellers should check Remodelling magazine’s annual Cost vs. Value report to help come to a decision. The report provides a valuable comparison of the price of remodelling vs the expected ROI.
After all, when all is said and done, every seller would like to have their home sell for the highest possible price.
