There are many reasons why a homeowner shouldn’t remodel before selling. Here is the biggest one: Sellers are not investors! You are selling your used home so don’t try to make it new. It’s too expensive and too late in the game – and at best, you are trading dollars and taking on the risk of losing money on the remodel. Investors take calculated risks when buying a property whether buying at auction, from a bank, or from a wholesaler. They make their money on the buy, not the sell. The reason why is that when investors buy a property, they are taking many unforeseen risks such as:
- title defects
- unpermitted work; code issues
- poor workmanship
- HOA/Condo association liens
- survey issues
- bad roofs
- aluminum wiring
- structural issues
- water intrusion
- polybutylene plumbing
- failing septic
- HVAC issues
- fire hazards; panel boxes out of code
- a prior owner that will not leave the premise once foreclosed or auctioned of
…and a host of other issues sellers also encounter when remodeling:
- going over budget
- unexpected delays
- contractor issues
If as a homeowner you want to live with a nice new remodeled home, do it well before selling and enjoy those improvements. Adding all that money for someone else to enjoy is not wise. You aren’t going to make money; you may even lose some. Instead, give the buyer a discount for your “A, B or C” home as compared with others in your neighborhood so they can spend their own money on these proposed improvements…and then move on with your life. Not only will it save you money, it will save you time and aggravation.
Another way to think of it is this: Where and how are you adding “value” by the remodel? You had old outdated stuff worth “X” and now you have new stuff worth “Y” but you won’t make a premium on the cost to bring it from X to Y. In other words, they won’t pay you for your efforts. Anyone can buy stuff at Home Depot or IKEA and remodel themselves for the same money so they won’t see the time spent as the value added, just like they won’t factor their own time in when they think about remodeling.
You may say to yourself, “but flippers do it all the time! …And what about ‘List it or Leave It’ on HGTV?” The difference is that the value comes from the risk-taking of buying uninspected homes at auction. These homes are sold at a discount because they are at higher risk of damages and other issues. That is where the profit is realized. Flippers will buy a property that could innately be worth tens of thousands more if the home were to be repaired.
So, for example, you take a house bought at auction for $150k. The neighborhood houses that are similar and are upgraded are selling for $250k. The investor then puts in $60k of improvements/repairs; now he/she is in it for $220k but can sell it for $250k and the profit is $30k. Whereas, you have a house that is not remodeled in the same neighborhood. You can get $200k if you sell it as is. But you think that if you put $50k of improvements in, you’ll get $270k. Not going to happen. You have only brought your house to equal value to the flipper, not more. You can’t charge people for your efforts to remodel!
As for “List It or Leave It”, keep in mind that this is a TV show; they have entire crews dedicated to the orchestration of the remodel and interior design/staging and likely spin things to make the outcome look a certain way so that people keep watching. This is not the real world and you do not have a crew of 20 people helping you navigate the decisions and challenges that come with remodeling.
If you are concerned about getting full value out then do some minor cleanup: keep the bare minimum remodel to re-painting, re-carpeting or vinyl floors, pressuring cleaning the pool area, minor stucco repairs and deferred maintenance, leaving the big ticket items off the list. Total money $10,000 or less.