Dear Real Estate Adviser,
Is it better to do the repairs and sell at market price, or sell "as is" at below-market price? Our home needs new siding, new windows and some interior improvements. The neighborhood is stable with mostly middle-class homes.
-- D. Pattkin
Dear D.,
You can certainly roll the cost of the needed repairs into your home's sale price, but you'll likely have to offer buyers an extra discount for the time and trouble needed to address the necessary fix-it work. Otherwise, that same buyer could simply drive down the block and buy another home with newer siding and windows, better interiors, etc., for the same cost as yours and not have to pound a nail.
You are caught in a modern day, real estate Catch-22 -- that dreaded "darned if you do and darned if you don't" scenario. Tattered homes often will not sell conventionally -- at least for a reasonable price -- in this predominantly buyer's market. Only in those rare seller's markets would you have some leverage despite your home's condition.
So you may have to bite the bullet and do the work. Unfortunately, statistics suggest you will recoup less than three-fourths of your remodeling investment when you sell. According to Remodeling magazine's 2010-2011 Remodeling Cost vs. Value report, a full window replacement in a midrange repair project returns 71.6 percent of investment in a home sale, while a siding replacement returns 72.4 percent -- percentages that are higher than most remodeling jobs, by the way. Other interior remodeling projects merit value returns of 45 percent to 73 percent, according to the survey.
While that data seem to suggest that sellers should offer buyers credits and let the buyers perform their own work, the reality is that if a home is too beat up, it may generate little interest from conventional buyers. Contractors or would-be home flippers, who will likely lowball you because they can already get cheap fixer-uppers in the vast foreclosure arena, may be your only customers. Unless they're especially handy and have loads of spare time on their hands, would-be owner occupants typically don't want to wrestle with significant repairs.
Of course, all real estate is local, so these generalizations may not wholly apply on your block. Consider attending open houses in or near your neighborhood to assess the general condition of area for-sale homes, with an eye on any apparent upgrades and other amenities and their apparent impact on sales prices and buyer interest. A seasoned agent can also tell you what buyer priorities are in a given area.
You might have to perform at least some of the repairs if you need to sell your house soon for anything close to optimal price.
Good luck on your sale!
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