Lemonade from Lemons: Renovating Your Home Before Selling
Should you renovate your home before selling? The answer is always a resounding…it depends.
Renovating your home before selling can have a significant impact on the selling price and the time it takes to sell your property. A well-executed renovation can help you increase the value of your home, attract more buyers, and ultimately sell your home faster. But renovations take time and money, and there may be a certain level of disruption to your life. There is no single, clear-cut answer that applies to every situation.
While it's true that renovating your home before selling can be expensive, there are certain renovations that offer a higher return on investment (ROI) than others. First and foremost, it's important to understand that not all renovations are created equal. Some renovations are more expensive than others, and some offer a higher ROI than others. Therefore, it's essential to focus on renovations that offer a higher ROI and can help you achieve your goals.
Factors to Consider
Although renovating your home before selling can be a great way to increase your home's value and attract potential buyers, there are several factors to consider before embarking on a renovation project.
1. Seller's Goals
The seller's goals should be considered before making any renovation decisions. For example, if the goal is to sell the home quickly, investing in a major renovation project may not be the best option, as it may take longer to complete and delay the selling process. If the goal is to get the highest possible price for the home, it may be worth investing in a major renovation project that will increase the home's value.
2. Timeframe
The timeframe for selling the home should also be considered. If the seller needs to sell the home quickly, making minor updates such as painting and replacing hardware may be a better option than investing in a major renovation project. However, if the seller has more time to prepare the home for sale, a major renovation project may be worth the investment.
3. Current Home Equity
The current home equity should also be considered before embarking on a renovation project. If the seller has significant home equity, they may be able to finance a major renovation project without taking on additional debt. However, if the seller has limited home equity, it may be more difficult to finance a major renovation project, and minor updates may be a more cost-effective option.
Other factors to consider may include the condition of the home, the local real estate market, and the preferences of potential buyers in the area. For example, if most buyers in the area are looking for modern and updated homes, and you want to sell the property quickly and for top dollar, investing in a major renovation project may be necessary to make the home competitive on the market.
Cost vs. Value: Significant Updates
1. Kitchen Renovations
The kitchen is often considered the heart of the home, and it's the one room that can make or break a sale. A modern and functional kitchen is one of the most significant selling points for potential buyers. Therefore, renovating your kitchen before selling can help you attract more buyers and increase the value of your home.
According to Remodeling Magazine's 2022 Cost vs. Value report for the South Atlantic Region, a minor kitchen remodel can offer an average ROI of 68.6%, while a major upscale kitchen remodel can offer an average ROI of 51%. A minor kitchen remodel typically includes replacing the cabinet fronts and hardware, updating the countertops, and installing new appliances. A major kitchen remodel involves replacing the cabinets, countertops, appliances, and flooring.
2. Bathroom Renovations
The bathroom is another critical room in your home that can have a significant impact on the sale of your property. A clean and modern bathroom can help you attract more buyers and increase the value of your home. Therefore, renovating your bathroom before selling can be a smart investment.
Going back to Remodeling Magazine's 2022 Cost vs. Value report, a midrange bathroom remodel can offer an average ROI of 55.1%, while an upscale bathroom remodel can offer an average ROI of 51.1%. A midrange bathroom remodel typically includes replacing the bathtub, toilet, sink, and vanity, while an upscale bathroom remodel involves installing a new bathtub, shower, toilet, sink, and vanity, along with new flooring and lighting.
3. Curb Appeal
Curb appeal refers to the attractiveness of the exterior of your home, including the landscaping, paint, and overall appearance. Curb appeal is one of the most critical factors in attracting potential buyers and making a good first impression. Therefore, renovating the exterior of your home can help you increase the value of your home and attract more buyers.
Remodeling Magazine's 2022 Cost vs. Value report indicates exterior renovations can offer an average ROI typically around 63.5%, although some exterior items such as stone veneer or a garage door replacement can return north of 90%. A midrange exterior renovation typically includes replacing the front door, garage door, and siding, along with landscaping and exterior lighting. An upscale exterior renovation involves replacing the front door, garage door, and siding, along with adding a new roof, windows, and upscale landscaping.
The Potential ROI of Minor Updates
As discussed, when it comes to renovating your home before selling, it's important to focus on updates that offer a higher return on investment (ROI). While major renovations such as kitchen and bathroom remodels can offer a significant ROI, minor updates often cost much less and can have a much more positive ROI.
Here's a closer look at the ROI for some minor updates:
1. Painting
Painting is one of the most cost-effective ways to update your home before selling. A fresh coat of paint can make your home look clean, modern, and well-maintained, and it can also help to neutralize any bold or outdated color choices. According to a survey by HomeLight, painting the interior of your home can offer an ROI of up to 107%, while painting the exterior can offer an ROI of up to 55%.
2. Refinishing or Recarpeting Floors
If your home has hardwood floors, refinishing them can be a great way to update your home's look without breaking the bank. Refinishing hardwood floors can cost anywhere from $1,000 to $3,000 depending on the size of your home and the condition of your floors, but it can offer an ROI of up to 100%. If your home has carpeted floors, recarpeting can also be a cost-effective way to update your home. According to HomeLight, recarpeting can offer an ROI of up to 106%.
3. Replacing Hardware, Faucets, and Light Fixtures
Replacing outdated hardware, faucets, and light fixtures is another cost-effective way to update your home before selling. According to HomeLight, replacing hardware can offer an ROI of up to 142%, while replacing faucets can offer an ROI of up to 141%. Replacing light fixtures can also have a positive impact on your home's value, with an ROI of up to 116%.
While these updates may seem minor, they can make a big difference in how your home looks and feels to potential buyers. By focusing on cost-effective updates that offer a high ROI, you can increase the value of your home and make it more appealing to a wider range of buyers.
4. Minor Curb Appeal
Often the first image a potential buyer sees of your home is the exterior front - whether that’s in a photo in a search portal or when driving through your neighborhood. Remember that you get only one chance to make a first impression. If your home is in relatively good shape, meaning you don’t need a new roof or siding, your garage door looks nice, and your windows have been well maintained or fairly recently replaced, then a few less-costly exterior improvements can make a big difference. Refresh the mulch in front of the house, and make sure the edges are crisp. Plant some flowers and trim back the hedges so things look colorful and tidy. Keep the grass trimmed and edged nicely. Power wash the exterior of the home, including the porch and sidewalks, to remove that built-up dirt. Stow those trash cans and remove any outside clutter. And consider painting the front door and shingles if they are faded. In a recent report by Zillow, a black front door was linked to significant increases in resale price - over $6000 - whereas a pale pink front door had almost exactly the opposite effect.
Impact on Days on the Market and Selling Price
Renovating your home before selling can have a significant impact on the time it takes to sell your property and the selling price. A well-executed renovation can help you attract more buyers and sell your home faster, while failing to make the necessary updates can result in your home sitting on the market for a more extended period, resulting in a lower selling price.
According to a study by the National Association of Realtors, the median amount of time a home sits on the market before selling is about four weeks. However, homes that require significant repairs and updates can sit on the market for much longer. By renovating your home before selling, you can reduce the time it takes to sell your property and potentially increase your selling price.
For example, a study by Zillow found that homes that were listed as "move-in ready" sold on average 25 days faster than homes that were not. Additionally, these homes sold for an average of 3.6% more than their listing price. In contrast, homes that required significant repairs and updates sold for an average of 5.2% less than their listing price and sat on the market for an average of 30 days longer.
Therefore, investing in cost-effective renovations such as kitchen and bathroom updates and enhancing your home's curb appeal can help you sell your home faster and potentially increase your selling price. By doing so, you can make your home more appealing to a wider range of buyers, which can result in multiple offers and a higher selling price.
Financing the Renovations
Renovating your home before selling can be a smart investment, but it can also be costly. If you don't have the cash on hand to finance the renovations, there are several financing options available to help you cover the costs.
1. Home Equity Line of Credit (HELOC)
A home equity line of credit is a loan that allows you to borrow against the equity you've built up in your home. With a HELOC, you can borrow as much or as little as you need, and you only pay interest on the amount you borrow. HELOCs typically have lower interest rates than credit cards or personal loans, making them a more affordable option for financing home renovations.
2. Personal Loan
A personal loan is an unsecured loan that you can use for any purpose, including home renovations. Personal loans typically have higher interest rates than HELOCs, but they can be a good option if you don't have enough equity in your home to qualify for a HELOC.
3. Credit Cards
Using a credit card to finance home renovations can be convenient, but it can also be expensive. Credit cards typically have higher interest rates than HELOCs and personal loans, and if you don't pay off the balance in full each month, you could end up paying a lot in interest charges.
4. Renovation Loans
Renovation loans are a type of loan specifically designed for home renovations. These loans can be used to finance both minor and major renovations and are typically based on the post-renovation value of your home. Renovation loans can be a good option if you don't have enough equity in your home to qualify for a HELOC and don't want to take out a personal loan or use a credit card.
5. Cash-out Refinance
A cash-out refinance is a type of mortgage refinancing that allows you to borrow more than your current mortgage balance and use the extra cash to pay for home renovations. Cash-out refinancing can be a good option if you have built up a lot of equity in your home and want to take advantage of lower interest rates.
6. Concierge Renovation Services
Some brokerages may offer what they call “concierge” services that will allow a seller to make renovations to a home without making any monetary investment up front and paying for the renovations at settlement. Details of these offerings vary from broker to broker. Some simply front the cash to you, and then you hire and coordinate the work of your own contractors to have the work done. Other programs, like the one offered by Long & Foster, are true concierge programs that involve working with your REALTOR and the vendor to determine the best plan, and then turning the work over to the concierge vendor to manage the entire process.
When considering financing options, it's important to weigh the pros and cons of each and choose the option that best fits your financial situation. It's also a good idea to consult with a financial advisor or lender to help you understand your options and choose the best financing option for your needs.
Financing home renovations can be costly, but there are several financing options available to help you cover the costs. Whether you choose a HELOC, personal loan, credit card, renovation loan, or cash-out refinance, or you go the full concierge route, it's important to choose the option that best fits your financial situation and helps you achieve your renovation goals.
Conclusion
If you're considering renovating your home before selling, it's a good idea to consult with a real estate professional. They can provide you with valuable insights on what renovations are necessary and what updates can help you achieve your goals. Additionally, they can help you determine the right selling price for your home and create a marketing plan to attract potential buyers.
It's important to keep in mind that not all renovations are created equal, and it's essential to focus on renovations that offer a higher ROI. Additionally, failing to make the necessary updates can result in your home sitting on the market for a longer period, resulting in a lower selling price.
In summary, renovating your home before selling can have a significant impact on the selling price and the time it takes to sell your property. By investing in cost-effective renovations and focusing on updates that offer a higher ROI, you can increase the value of your home, attract more buyers, and potentially sell your home faster.
If you'd like to listen to us discuss your options about renovating a home before selling, check out our podcast on that topic here.
