Is it worth it to fix up our home before selling?
Question of the week: Is it worth it to fix up our home before selling?
Answer: This is a question we get fairly often from clients, whether they are looking to up-size or down-size, but particularly from clients who are selling as the result of estate or divorce sale.
There is no cookie cutter answer to this question.
The obvious calculus is how much would it cost to “fix up” the property and how much more that would get in sales price on the market.
A big factor in this decision is what is the competition your property will have when it goes on the market? Are there several homes in your neighborhood on the market? Are they very few homes on the market? Are homes selling in two to three months, or two to three weeks?
The inventory on the market and the average time on the market impacts the benefit versus cost calculation. The fewer homes on the market, the faster homes are selling, it is likely the less you will have to do to get your home sold. If there are many homes on the market, it is likely you will need to do more work on the property to have it positively compete with other homes.
In either market, a seller’s market with low inventory, or a buyer’s with a lot of inventory, your asking price will always be the primary factor in how fast it will sell, whether it is fixed up or not.
If you are selling to purchase a next home, other variables come into play, such as how much work do you want happening in your home while you are still living in it? Right now contractors are extremely busy, in an industry, rightly or wrongly, known for unknown delays, how much time are you willing to have your home off the market while waiting for it to be “fixed-up?”
For many years I have termed some areas, such as the Gold Coast in Seal Beach with homes on the beach north of the pier, or homes on either the bay or ocean on the peninsula in Long Beach, as “D&D” areas; homes only came on the market due to death or divorce. Currently, throughout our region, state, and nation, the real estate market as a whole is D&D. There are some exceptions to those down-sizing, or moving out of the area, but overall, most homes on the market are because the have to be sold, not because the owners want to sell them.
This puts another wrinkle in the to fix up or not to fix up decision process.
In a divorce, the questions are who puts up the money to fix up the property, what is the cooperation between the parties, how contentious is the separation, how fast do we want it sold. Division of assets, especially the family home, is the primary point of contention in most divorces, adding a potentially large expense for undetermined return when the home sells can, does, add more stress and contention in negotiations.
In an estate sale there are other factors to the decision to spend money fixing up the home. If the home has not been updated since the 1980’s or ‘90’s, what will be the cost to completely remodel the home? How much of that money will be recovered by the estate after sale? Does the estate have the assets to pay for the work that would be done?
Divorces are not the only legal settlements that have contentious participants, many estates also have contentious parties when it comes to division of assets—except instead of husband and wife the parties are generally siblings.
Two, three, four, five, brothers and sisters dealing with the loss of their parents, the family home, and depending on the home and how long mom and dad owned it, a lot of equity to be split, can lead to cracks that may have existed in life-long relationships becoming chasms that seem unable to be bridged.
Should the estate spend $100,000 to somewhat modernize the family home to gain an extra $125,000, $150,000? Possibly more, possibly less? Or just sell the property, split the proceeds and move on?
In some estates the question of fixing up the property is not a question as mom and/or dad, may have become hoarders, to some degree, in their final years. Most homes being sold after the occupants have passed on need some clean up; moving out the furniture, family treasures, and emptying the home. This task is exponentially more difficult, and expensive, if hoarding added to the amount of “stuff” that needs to be removed before the home can be sold.
Some families think they can clean out the home themselves, and in many cases they can. Divide up who wants mom’s old dresser, dad’s desk, the copper pots and pans, and have an estate sale for the rest. What’s left, donate to any charity what they may want, and have the rest hauled away.
In many instances the job is too big, too undesirable, for any siblings to take time from their work and family to spend days going through the home and cleaning it out. Thankfully, there are companies that perform this task, for a fee obviously, that can save a lot of time, and likely money, for the estate.
Is it worth it to fix up a home before selling it? Or is it better to put the home on the market at a lower price for a buyer who is willing to fix up the property the way they would like and pay a lower price knowing they will be spending more money over time to fix it up?
Do the math. Get realistic estimates from contractors and tradesmen for the scope of work to be done. Get price analyses from a few real estate agents who work the area to determine the price if fixed or not fixed. Consider the time the home would be off the market, and possibly with contractors in your home.
Finally, and very importantly, consider the relief of just having the home sold, and perhaps leaving some money on the table, but selling “as-is,” versus the cost and time of fixing the property up before putting on the market.
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Phew…That was the reaction to bond and mortgage markets following the Labor Department’s release of July’s employment data. The economy added 187,000 jobs in July, and June’s job reported was revised downward, resulting in the first time since the beginning of the pandemic that the employment grew by less than 200,000 workers in back-to-back months. The slowing in hiring was met with relief as it takes some pressure of the Fed to raise its benchmark rate in the future. Adding some pressure was news wages continue to increase, up 0.4$ in July, and 4.4% for the year—outpacing recent inflation data. The Fed would like to see wage increase decline to 3% or below, due to this additional rate hikes are on the table still.
Rates for Friday August 4, 2023 While rates dipped down today on the employment data, they also dipped down after a week that saw a large sell of in fixed rate investments (bond and mortgages) yesterday for no singular reason other than technical trading. Conforming rates reach 7% for the fifth time in the past twelve months.
FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS FOR PURCHASE TRANSACTIONS:
30-year conforming 7.00% Up 0.125%
30-year high-balance conforming 7.500% Flat
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.
“The dog days of summer.” Typically, a phrase we hear when the calendar turns to August. It is meant to describe the hot and humid days usually prevalent in the month (though in Southern California we can add September to the hot part). The phrase originates with the Romans and the dates between July 3rd and August 11th. These dates are twenty days before and twenty days after when the star Sirius* rises and falls in conjunction with the sun. *Before Sirius was known as a major character in the Harry Potter series, it was, and still is, known as the “Dog Star: as it is part of the Canis Major constellation.
In baseball the dog days of August refer to the toll of summer and over 100 games catching up to some teams and many players. If a team can do well in August and shrug off the dog days it sets itself up well for a run to make the playoffs in September.
It is my hope that the Phillies take advantage of the malaise the will hit other teams facing the dog days and once again make the playoffs, win the National League Pennant, and not only make the World Series but win it!
Have a great week,
Dennis
Past Weekly Rate & Market Updates can be found on my blog page at my website www.DennisCSmith.com/my-blog
