Fixing up your property, what your Realtor may not tell you!

By
Real Estate Broker/Owner with Respect Realty LLC 200311024



Do you own a home that might be considered a cosmetic fixer, or even a major fixer, and you want to sell it?
There are two options. First, sell it as is for a discounted price, or second, fix it up and put it on the market and hope to get all your money back out.

So, the first thing you do is call your favorite Realtor, who may not be doing so well right now, and is glad to hear from you. You tell him you are thinking of selling. You hear the excitement in their voice and they ask when they can come over and list it.

At this point you put the breaks on that conversation and tell them you have some questions first before you put it on the market. They tell you that they will happily answer those questions for you.

You ask them, "Is it better for me to fix up the property or is it better for me to sell it as is?" This is a very loaded question, but you need to listen to your Realtor and how they answer maybe the truth about your agent's motives.

If I were your Realtor I would want to come over to the house and preview like a buyer would. Then I would make sure to ask you some important questions about the repairs that are needed.

Are the repairs that are needed on things such as plumbing, gas lines or heating units? If the answer to this is yes, then those are things that must be repaired unless you are planning to sell on a contract. Most banks won't lend on a property that is having issues with a heating unit or gas line.

The next question should be is the cost of the repairs going to cost more than you will get if you raise the price of the home? If the repairs cost you $20,000 and you can only get $10,000 more for the property, then it isn't worth it to spend the time and money for the repairs.

This is where some other Realtors and I have a difference of opinion. I've seen many Realtors tell their clients to fix up the property no matter the cost. Why would they do this? They tell the client that they will realize more money in a quicker amount of time. That may be true, or is it? In my opinion, they usually do this because they know they can get a bigger price for the home and sell it quicker, which means they get a bigger commission in a shorter amount of time.

But, what does it mean for you, the client? You actually have now had it off the market for two months longer than you would have had if you had put it on as a fixer. Your cost of fixing the property is, let us say, $20,000 and you only raised the price of the home $15,000. So now you have lost two more mortgage payments, a thousand more dollars in commission, and another $5,000 for the repairs, and that is only if it sells for full price. The total loss to you is about $11,000, total gain to the Realtor is a quick sale and an extra $1,000 for your efforts.

So ask yourself, what are your Realtors motives behind having you do those repairs? If you don't know, you may want to ask.



Todd Clark - broker
Kastings & Associates
Phone: (503)524-9494
Fax: (503)622-8739

Photo courtesy of kinyur

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Barbara Carter 08/26/2008 01:13 AM
Location:
Oregon Washington County Tigard
Groups:
Local Expert
Tags:
realtor
repairs
resale value
cosmetic fixer
fixer properties
arv
after repair value

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Rainer
11,766
Matt M-Income Property Investment
Real Estate Marketing Resources - Los Angeles, CA

some great advice thanks for sharing!

Aug 25, 2008 05:27 PM #1
Rainmaker
656,857
Randy Prothero
eXp Realty - Mililani, HI
Hawaii REALTOR, (808) 384-5645

Those are important points.  I have had clients go way over board and then expect to get a return on all the work.  That can be a bad mistake at times.  I have also had them go to the other extreme where they do not even want to clean it.

Aug 25, 2008 06:54 PM #2
Rainer
274,551
Adam Waldman
Westcott Group Real Estate Company - Hauppauge, NY
Realtor - Long Island

TODD - Personally, I would rather sell it as a fixer, but it can only be done with homeowners that realize the shortcomings of the home, and are willing to price it accordingly.  Too many people think of their home in unrealistic terms.

Aug 25, 2008 09:47 PM #3
Rainmaker
145,270
Barbara Carter
C21 Alliance Realty Group - New Paltz, NY
Serving Your Real Estate Needs in the Hudson Valle

Todd- This is a great blog and wonderful advice- I am going to reblog this- Thank you.

Aug 26, 2008 01:10 AM #4
Rainmaker
247,023
Mott Kornicki
• Waterway Realty, Realtors® • Broker • South East Florida • - Miami Beach, FL
Waterway Realtors, Notary Public

I would agree that selling "AS-IS" is the preferred choice- assuming that major repairs are not needed. Roofs, Electric, Plumbing, Structural; should be in top condition. In this market of abundant inventory- it seems that price is what moves property.

Aug 26, 2008 01:53 AM #5
Rainmaker
142,685
Cristal Drake
Prudential California Realty - Fullerton, CA
Realtor - Fullerton Real Estate

Todd, this is a great post.  There are so many questions and so many different situations.  Your advice is very good and it is so important for the sellers to find an agent that will help them get to the bottom of it all and get the right answers!

Aug 26, 2008 02:47 AM #6
Anonymous
Mike Rohrig

Someone has to get 5% on that $20,000, which means they had to double end it, to get $1000.  I think the agents are few and far between that ask their clients to spend needless money to sell it higher in this morning.

If you weren't an agent I would say this was a bit of Realtor bashing based on the blog headline and accusing agents of trying to get an extra thousand where it would only add up to less than $600 in typical circumstances.  I think you have some good points but it sounds like the exaggeration that is against people outside of our industry

Aug 26, 2008 08:30 AM #7
Ambassador
2,067,047
Respect Realty LLC
Respect Realty LLC - Milwaukie, OR
Brokers - Oregon / SW Washington Real Estate

Matt - I'm glad I could, now if we could just get people to listen.

Randy - Yeah, I've had those also!

Adam - They think of it as an ATM and then they let the property go to hell!

Sep 02, 2008 01:27 PM #8
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