Should You Renovate Before You Sell?
To renovate, or not to renovate? That is the question! It is one that occupies the mind of many people as they list their home for sale. The dilemma they face is common, and one I am frequently asked about. My response is usually along the same lines, and is something of a question in itself: Will you get a tasty return on the money you have spent on your renovations?
A kitchen renovation isn’t cheap. A bathroom renovation is a costly exercise too. These two rooms are the ones that home sellers renovate more than others as they attempt to raise the property’s value before it goes to market. It might be understandable to spend forty thousand dollars to improve the kitchen in a multi-million-dollar home. But when it comes to the average-priced home, that sort of investment is highly unlikely to reap any great financial dividends.
Even in today’s hot property market, home buyers still want a bargain. That’s why the worst house in the best street still has great appeal. When a property like this is renovated, the value may increase but the demand may soften because it no longer holds that perceived “bargain” tag.
Over capitalisation, where you pour more money into a home than the return it will give you, is to be avoided. In today’s market, where there’s a shortage of housing stock for sale and properties are being snapped up by hungry home buyers, renovations might not be required anyway. It should be enough to sell a home’s potential, rather than presenting it in a perfectly finished state.
I suggest you place a higher priority on presentation. A coat of paint, new roof gutters to replace the rusty things currently up there, and even a big tidy up of the back garden are relatively inexpensive and make more sense than investing a lot of money in major structural renovations.
Selling potential rather than perfection is fine, as long as you manage the expectations of buyers. When people come in to inspect a home with a good idea of what they’ll see, you won’t disappoint them. So, the listing should be honest about the home’s current state, while promoting what can be. When buyers have no false illusions, and actually come in with lower expectations, they might be surprised when the property looks better than they anticipated.
While presentation above renovation is the rule of thumb for most properties, it won’t apply to all of them. The state of the market at the time you list should be considered. So too should the value of your home and its capacity to soak up a decent amount of capitalisation and produce a solid profit in return. With that in mind I am happy to discuss the renovate or not to renovate question with you when it’s time to sell.
