Reader Question: My condo needs a makeover; painting, new carpet and flooring, kitchen remodeling, etcetera. I am in my eighties and would hate to live through the fixes. What are the pros and cons regarding selling as a fixer-upper in a very desirable building and neighborhood? Mary C.
Monty’s Answer: Hello Mary, and thanks for your question. This question will generate a variety of answers from anyone you ask. Most opinions will boil down to this:
The common wisdom
Two homes are virtually identical. They are both the same price and in the same neighborhood. Except, one of them needs remodeling. If you chose the one needing work for some reason, how much less would you offer knowing you will have to spend time and money to fix it up? Homes in excellent condition usually sell faster and for more money.
The main fact that may change the playing field in your case is the comment “in a very desirable building and neighborhood.” If you are correct the building’s desirability may overcome the common wisdom if the following marketing plan is properly executed.
The alternate method
Promote “up front” that the home is not in good condition, but the remodel cost is reflected in the price you are asking. By taking this approach, you are disclosing up-front the apartment needs work. Now, buyers will not be disappointed when they walk through it. These are buyers who prefer to find a home where they can do the work to their tastes. They may have experience in these areas so the repairs are second nature to them. They can save money with their own efforts.
The key to this approach: you have to price the home and create the allowance to attract a buyer to take advantage of your offer. Print a list of the items that need work, cleaning or replacement along with estimates from companies who fix each particular item and place it on the countertop in the kitchen. To make the list most effective, add an item named “new owner-contracting fee.” Insert the dollar amount, to compensate the buyer for doing the work your circumstances will not allow.
Asking the buyer do the work is a legitimate request and your request can be honored when you sell the property. This marketing plan can turn your requirement into an advantage.
Retaining the best real estate agent
Another key to success here is identifying, interviewing and retaining a real estate agent that understands how to do this, has done it before and will happily do it for you, again. Some real estate agents may even offer to coordinate obtaining the estimates.
There are also agents that will advise you against this approach, and if you do not relent, later may sub-consciously try to prove themselves right. By ferreting out how they would approach the situation early, you can avoid retaining an agent that has no experience with this marketing tactic.
An article on www.dearmonty.com website explains how every seller should proceed when looking to find an agent to sell a property. It is titled “Choosing your real estate agent.” If you follow the process and ask the questions on the list to the three finalist candidates, you will have the information to help you make the best decision.
You want the finalist agents to visit your home. They will most likely recommend a cleanup, paint-up, fix-up solution. In addition to the questions contained in the website link above, ask each agent the following questions:
1. What are my options if I decide to ask the buyer to remodel?
2. What is your opinion as to the “as is” value, and what would the value be if all the remodeling had already taken place?
3. What comparable sale information can you share with me to support your conclusions?
Their answers will lead you to the best agent for the job.
Here is an example
If the estimated value “as is” is $200,000, and the estimated “as remodeled” value is $225,000 remodeling adds $25,000 to the home’s value. Assume the contractors’ estimates total $22,000. If the “new owner-contracting fee” were $3,000, your asking price in a perfect world would be $197,000. You gave the net increase to the buyer and paid them for handling the work. They got to control the outcome and you avoid the cost, stress and inconvenience.
This process allows you to gain the information to make the best decision for your circumstances.