Selling Your House-Fix It Up? Yes? No?

When asked if it’s wise to put significant resources into fixing up a house before putting it on the market, I have a different answer than I did before the real estate credit crunch. Back in the “old” days, I would tell sellers to aggressively clean their house and yard, de-clutter, paint and plant flowers. If kitchens and baths were clean and working, but out of date, I would advise against buying new appliances and laying new tile, etc. At the time, many buyers expressed an interest in picking out their own kitchens and baths and didn’t want to pay for someone else’s choices.

Times have changed. I now advise to replace dated appliances, counter-tops, floors, bathroom tile and fixtures. I’m not advocating complete renovations but I believe replacing items in the house that are out of date will result in a net gain over not replacing the items.

Why have I changed my attitude from before the credit crunch? It’s very simple. Back in 2005, if a person bought a house with 0% down, he or she could immediately get a home equity loan to finance a renovation. Those days are over. The only ways renovations get financed in today’s market are with cash or credit cards. Getting home equity loans is very difficult unless the equity in your house is at least 20%. With down payment requirements being what they are in today’s market, very few people have the means to renovate after purchasing. Consequently, buyers in today’s market want houses that need no updating.

A word of caution to sellers. The net gain one achieves by fixing up and updating a house for sale, is more of a prevention of the negative rather than a gain of the positive. What I mean by this, is if a seller has a dated house for sale that should sell in the $700K range, and he or she puts in $30K to fix it up, it is unlikely that the house will bring $730K. On the other hand, if the seller leaves the house as is and doesn’t invest in the updating, it is very likely the house will end up being discounted far more than the $30K that would have been spent on the updating.