February 2023

Sell your house as-is, or renovate first?

If you're thinking of selling your home, but it needs some renovations, you have an important decision to make: Do you renovate the home before you sell, or do you sell it as-is?

How you answer the following questions will help you make the right decision for you:

Are the renovations structural or cosmetic?

Structural problems are likely to be a hindrance to selling your property, so they should always take precedence. Problems like a leaking roof, malfunctioning HVAC, faulty wiring, termite damage and mold will make your home much harder to sell, so consider tackling those before you put your home on the market.

If you have an outdated powder room, old carpets or peeling wallpaper, those repairs aren't make-or-break in terms of a sale.

Do you have the equity to invest in home renovations?

If your renovations are substantial, you may need to take out a home equity line of credit to cover the cost. Most lenders allow you to open a line of credit for up to 80% of your home's equity. So, start by determining how much equity you have to work with using this simple formula:

Current appraised value of your home - your mortgage balance = your home equity

If you don't have the equity to cover the renovations, it may be better to sell the home as-is rather than dipping into your savings or taking out a personal loan.

Are there any constraints requiring you to sell your home within a certain time frame?

Both options offer advantages time-wise: Selling as-is at a lower price may sell your home more quickly because the price point is so appealing, but renovating and selling your house move-in ready may also sell it quickly because many buyers prefer the convenience of a turnkey home buying experience.

If you choose to renovate, you need to make sure you do your renovations right, that all the health and safety standards are followed to a T - everything needs to be up to code. You'll need to find certified electricians, plumbers, etc., and secure any permits that the work may require. Be sure you have the time it takes to execute these renovations without cutting corners.

How much value will these renovations add to your home's sale price?

Not all renovations are created equal in terms of retaining their financial value. For instance, according to BankRate.com,Footnote1 a garage door replacement will recoup 93.3% of its cost when you sell your home. A minor kitchen remodel will recoup 71.2% of its cost, and adding a wooden deck to your home will recoup 64.8% of its cost.

Can you handle any of the renovations yourself?

The best ratio of renovation price to added value comes from doing renovations yourself. If you work as a remodeler, carpenter, plumber, electrician, painter, drywaller, etc., then you may be able to handle major renovations yourself and save a good amount of money on the labor.

If you're not handy, there are plenty of smaller renovations you can handle yourself, like painting a room, adding crown molding, or replacing bathroom hardware.

Does it seem that the market will be more favorable to sellers now or a few months down the line?

No one can predict the future of the housing market, but you can look at where the market is now and make an educated guess as to where the trend is heading. For instance, if the moment you decide to put your house up for sale coincides with a seller's market, you may want to strike while the iron's hot and put your house up as-is ASAP, in case that favorable selling situation changes.

On the other hand, if you decide to sell in the midst of a buyer's market, it might behoove you to take the time to do your renovations and put it on the market a few months down the road, when things may have shifted in your favor.

Reaching out to a real estate professional would be helpful. A good agent can assess the value of the home with and without renovations, and compare your home' value to other homes in the neighborhood.

Take your time with this decision, do your homework, and if both sides of the equation are basically even, go with your gut. Selling as-is or renovating first both have their advantages and disadvantages. There is no wrong answer here.

A note from your lending specialist

If your renovations require a home equity line of credit, I can help you review your options and get the funds you need.

1 "Best renovations for adding value to your home," BankRate.com, July 7, 2022. Accessed November 2022.

MAP5411355 | 01/2023