Fix Up a Home Before Selling it, or Not?
Recently I put
my home up for sale, and because it needed a new roof, deck,
and septic system, came face to face with this question.
This article is based heavily on that experience, in which I
made a serious mistake that other sellers can avoid.
Attend to Cosmetics
It is easier to
sell a house that is attractive to potential buyers, which
means that you spend a little time and money on cosmetics.
This is partly just a matter of making sure it is clean, the
yard is neat, the driveway is swept, bushes pruned, and so
on. Easily-fixed structural defects, like a loose shingle,
should be fixed.
always look better when furnished than when empty – they
also look larger! If you are moving to another residence and
plan to take your furnishings with you, if possible, arrange
things so that you show the house before you move out of it.
your house also has structural defects that are costly to
fix, as mine did, the challenge is in deciding whether or
not to fix them before sale.
Every house has
defects, some obvious and others hidden. Both types
will affect the price a buyer is willing to pay. It
is a mistake to think that a potential buyer will assume
that the only defects that exist are those that are visible.
will most likely invest in an inspection by a firm that
specializes in such services. The firm retained by my buyer
produced a document of 22 pages of small print, plus many
photographs. Buyers that don’t retain an inspector will
probably assume the worst about the unseen condition of the
many buyers who will pay a price based on the assumption
that everything they can’t see must be OK. Pricing the house
on that assumption is a good way to keep it on the market
unsold indefinitely. While you continue to pay for
utilities, taxes and insurance, the condition of the house
worsens and your Realtor loses interest in trying to sell
Facing up to
the issue means asking yourself whether you will come out
better if you fix the structural defects, or if you offer it
at a lower price “as is”. If the repairs cost $15,000 but it
results in a sale price $20,000 higher, you want to do it.
If the post-repair price is only $10,000 higher, you don’t.
Which outcome is more likely depends on the circumstances.
When it Pays to Fix the House Before Sale
There are two
circumstances that favor fix-up before sale. One is where
there is a large variance in the cost of the fix-up, and a
potential buyer is likely to over-estimate the cost. In the
case of a septic system, for example, the cost depends on
the condition of the soil, and if the seller knows that the
condition is favorable and the cost low, it makes sense to
fix it before sale.
The second and
probably more compelling circumstance is where most
potential buyers have the capacity to make only a small down
payment, and are therefore not in a position to fund the
cost of major repairs after purchase. By making the repairs
before sale while setting a correspondingly higher price, a
seller is in effect financing the improvement in the
mortgage. If a buyer with limited cash had to make the
improvements after purchase, the financing costs would be
But note that fixing structural defects before sale takes more time, which a seller may or may not have. In addition, depending on the type of defect, the value to a buyer may be less than the cost to the seller if the “fix” involves questions of taste.When it Pays to Sell As Is
I sold my house as
is because I had already committed to a new one and wanted
detachment from the old one as soon as possible.
Furthermore, the buyer who fell in love with my old house
had the financial capacity to pay for all needed
improvements. She didn’t need the larger mortgage that would
have been obtainable if I had made the improvements.
In addition, one of the required improvements to my
old house was to a deck, which could be done in a variety of
ways based on individual taste, and it made no sense to do
it according to my taste.
Sellers Should Order Their Own Inspection
If a house has significant defects, the smart seller will order her own inspection, and in some cases, solicit estimates of the cost of required fix-ups. This will help in deciding whether the best arrangement is pre-sale fix-up, sale as is, or some combination of the two.
In addition, a seller-ordered inspection will tend to equalize the negotiating power of the two parties. I discovered this the hard way, when the seller used her report to drive down the price. Buyer-ordered inspections are designed, consciously or unconsciously, to provide bargaining ammunition for the buyer by exposing everything that is wrong or might go wrong. I did not have my own inspection, which would have emphasized the trivial nature of most alleged defects, and the small cost of fixing them. That was a costly mistake.