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
Photo courtesy of kinyur