We had the opportunity to sit down recently with Tiffanie Jones, an agent on the Red Robin team, to help answer a common question we hear from sellers – “How much money should I put into my house before selling?”
Tiffanie is an investor herself, and while many agents help homeowners make these decisions, she has a great perspective on what to do when a house needs a considerable amount of work.
Q: So, Tiffanie, how do you decide if a house is a “fixer-upper” and should probably just be sold to an investor, or whether it is worth making some improvements?
A: I generally find that houses fall into 3 categories. First they are a true “fixer-upper”, meaning they need in excess of $50,000 in repairs and may have more than one significant issue, like some structural damage or water and mold issues. On the other end of the spectrum, there are homes that are pretty much ready to go and a I think it’s almost always worth painting and staging a home – a seller will almost always get a big bang for their buck.
But, in the middle, there are homes that need a fair amount of work, but maybe aren’t quite a fixer-upper. These homes are too nice to wholesale to an investor at a low price. But, they also need repairs and maybe some cosmetic improvements to make them appealing to a buyer who is going to be an owner-occupant. These are the homes that are sometimes challenging to know how much a homeowner should do.
Q: Agreed. It seems like it’s hard to know where to “stop”. If you do one project, it still leaves many that need to be done. How do you make that determination?
A: Well, generally speaking, I don’t think it makes sense for a homeowner to do some projects and not others. In order to appeal to an owner-occupant, the home needs to be free from major defects. This means the home should be free from structural issues, water intrusion and mold problems, significant exterior wood rot and badly peeling paint. We also focus on curb appeal – this doesn’t necessarily mean fancy landscaping, but a good cleanup with fresh mulch and new plantings in the front. Cosmetic updates are a little more forgiving – a homeowner can often put a ‘face lift’ on the interior to make it cute for a buyer, without having to do a complete renovation.
Q: How do you start this process, working through these questions with a homeowner? I’m sure it can be overwhelming.
A: Well, on a home in this condition, I think the best place to start is a pre-listing home inspection. I don’t always recommend this on every house I list, but on a home that is in need of a fair amount of work, we want to know what, if any, significant repair items are needed. That is the very first consideration. I also do a really thorough walk-through of the house and consider the best way to make cosmetic improvements. Like I said earlier, the single most important thing I think a seller should do is paint and stage the house – that is the biggest cosmetic bang for the buck. Beyond that, painting kitchen cabinets, putting up a simple backsplash tile, new cabinet knobs and light fixtures – that can make a tremendous difference in how a kitchen presents to a prospective buyer.
Where I caution homeowners, is overdoing some projects and leaving others undone. You don’t want to have a really nice kitchen, but have a buyer come in and still feel like the house needs “work”. We’re trying to get the house to a place where buyers come in and, while it may not be the fanciest house, they don’t leave with the feeling that they have a large list of things to do. It needs to be in generally good repair and clean and tidy.
Q: Are there any repairs that you advise a seller not to make?
A: That really depends on the house and they are all different. But, the roof and the HVAC are items that owners generally don’t replace until they are literally on their last leg. So, if a roof is old, but doesn’t have any active leaks, we usually wait. We might offer the buyer some compensation toward a new roof, but just because it’s old doesn’t mean it’s ready to replace. Same with HVAC – the seller might offer a home warranty or give a little more toward a buyer’s closing costs, but not replace the whole system just because it’s old. That’s assuming it works, of course! Another common item is refinishing the hardwood floors – the seller often can Rejuvenate them, which saves time and money.
Q: Tell us about a project or two where you’re helping the homeowner do significant repairs prior to listing.
A: Sure. I’m working with an out-of-state homeowner with a property in East Atlanta. It has been a long time rental and had a lot of deferred maintenance. One of the major issues was that a large tree had fallen in the back yard and never removed, so there was more than usual yard clean-up to do. When we looked at the list of “must do” projects, like the yard clean-up, painting, new carpet and the wood floors, we felt like the price point would be around $300K. In this case it really wouldn’t have made sense not to do these items because we felt like the price point would have been down closer to $250-260K. But, when we looked at spending just a little more on staging, some additional front landscaping and minor interior repairs, we realized that it really would drive the price up closer to $340K. That was really a significant difference. Ultimately, the seller is spending about $20K on improvements, but it is going to dramatically improve their bottom line.
There is another project in Ormewood Park, where I really didn’t think it was an investor property, although I would have loved to take it as a project! We did a pre-listing inspection and there were several significant repair items needed, including some minor structural repairs, water in the basement and roof repairs. There was also what I would call ‘heavy cosmetics’ needed inside. The seller isn’t totally renovating the house, but is spending about $50K in repairs and cosmetic improvements. But, before these repairs, we had estimated the list price would be $300K at best. Now, we’re planning to list it for $425K – it is turning out really nice and should hit the market in a few weeks.
Q: Is there any other advice you’d like to offer to prospective homeowners?
A: Obviously, they have to have some available cash to do significant repairs like these. I can help them decide what to do and coordinate with the contractors to get the work done. But, as I said before, it doesn’t make sense to address some things and leave others undone – buyers will still feel like they are buying a home that needs work. It’s OK for them to be inspired by a few projects they want to do. But, you don’t want them to leave a showing feeling like they have an uphill battle before they can enjoy the home.
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