'SHOULD I REMODEL MY HOME BEFORE LISTING?' ANSWERS TO TOP REAL ESTATE QUESTIONS!
How to make a home stand out in the market and possibly get top dollar at closing.
Few can resist a classic makeover story – and home transformations are no exception. TV networks have built empires making it seem that anyone can take an outdated, ’70s bungalow and turn it into a dream urban escape – doubling the home’s value in just 30 minutes.
But how easy is it, really, to make a profit off of home renovations? You’d be surprised, say RE/MAX real estate experts. Here is some advice to clients on potential home updates that can improve their house’s value when it’s time to list.
“I think renovations are important to consider in any market,” the industry expert says. “Making updates will help the home show better and could help you net more money at the end of the day. Buyers love homes that are turnkey – their first impression can make a big difference in your final sales price.”
But before picking up a hammer, sellers should consult with a real estate professional, the industry expert advises. Each home and market is different. An agent can specify which updates will have the biggest return on investment and also advise if a home may be fine to sell as-is.
“If you’re looking to sell your home and you are planning to do some renovations says. “An agent can offer advice on everything from what colors to paint to what flooring to choose, and what will really make an impact in the sale.”
Ready to list or wondering if it’s time to renovate? Here are a few important questions homeowners should consider asking an experienced real estate agent.
1. 'Are there simple updates that can have a big impact in my home’s resale value?'
Updating a home doesn’t have to involve a complete overhaul and demolition crew. Before getting too carried away with updates, experts often remind to sellers that the buyers will want to make the house their home, too.
“Unless a home is completely remodeled, I think many buyers are going to end up making their own updates to make the home exactly how they want,” the industry expert says. “A lot of times I tell clients, ‘Don’t spend too much money because you just want to make it look good enough for a first impression.’”
For quick and simple updates, the expert says sellers can start by updating finishes, such as replacing door knobs or faucets with fixtures in trending colors such as black or brushed gold. Lighting fixtures are another area that can be easily and often inexpensively updated.
“Small repairs can make a pretty big difference and will make the house look better when potential buyers tour it,” the expert says.
For an even bigger impact, sellers should consider the power of paint. Adding neutral or modern colors to key features or even repainting the walls can completely transform a room.
The industry expert offers an example of a home he recently represented with an original brick fireplace dating back to the ’80s. To help modernize the room, he advised the owner to paint the brick white and add a matching wooden mantlepiece above it.
“For less than $300, we turned a fireplace into a focal point of the property. The home sold for $50,000 over asking,” the industry expert says.
2. 'Which home renovations will give me the biggest return on investment?'
While new hardware and fresh paint may be enough to get most homes ready for the market, nothing stands out like an updated kitchen or bathroom, according to Fuentes. These renovations can be more expensive – depending on the size of a home, a full kitchen remodel can cost upwards of $20,000 – but they also tend to have the biggest influence on resale value.
“If you have the money to do a new kitchen, why not? It can be one of the biggest factors in helping you sell a home and getting top market value,” the expert says.
The return on investment from remodeling will be different for every home, and sellers should weigh carefully how their updates may impact resale value. However, the expert says as a general rule, he has seen clients double their upfront investment in renovations once the home is sold.
“For example, if you spend $20,000 on rehab, you could get the $20,000 back and make $20,000 on top of it,” he says.
Popular kitchen updates seen include tiling backsplashes to create a focal point in the room, adding in islands and replacing old countertops.
“You’d be surprised at how inexpensive and easy a counter can be to replace,” said the expert. “If you currently have older tile or other material, you could add in a nicer stone or even do Formica countertops.”
3. 'How can I fund (or afford to) pay for home renovations?'
The cost of renovating can add up quickly, which is why it is not uncommon for homeowners to fund a project through supplement financing such as a Home Equity Line of Credit, or HELOC.
Working with a mortgage professional of their choice, a homeowner may be able to open a line of credit worth up to 85% of their equity (equity is defined as the market value of the home minus the remaining balance of any mortgage loans or other liens or loans secured by the property). For a set time period, often the first 10-15 years after opening the line of credit, the owners have to make only payments on the interest of what they borrow (there may also be a minimum monthly fee that a borrow has to pay to keep the line open). After the initial interest-only period, the consumer would have to make principal and interest payments, but if HELOC proceeds are used for renovations shortly before sale, the interest-only period may still be in effect and the loan balance can be paid off when the home is sold. Ideally, the renovations will help the home sell at a profit.
“If you’re looking at doing improvements for the purpose of selling your home, I would definitely recommend you consider a home equity line of credit,” says a mortgage expert. “That way you aren’t paying the extra closing costs you would be with a traditional refinance, and you’re keeping your current interest rate on your mortgage loan.”
“If you take out a HELOC, you may want to be mindful of making extra payments to actually pay down that balance, otherwise, you may never pay down your balance,” the mortgage expert says. “Some people are really good about making those extra payments, but those that make just the minimum payment may be surprised when principal and interest payments and/or a balloon payment comes due.”
Another option to finance a remodeling project may be a cash-out refinance, which might make sense for those planning to stay in their home a few years longer before selling and who have significant equity in their home.
A cash-out refinance is a new first lien mortgage loan that is in an amount higher than the remaining principal balance on a consumer’s mortgage loan (the loan balance on the refinance loan is generally between about 80%-90% of a home’s then-market value). The new loan pays off the original mortgage loan, with the remaining balance paid out in cash to the homeowner less closing costs and fees.
According to the mortgage expert, “Let’s say you owe $300,000 on a house, and it’s worth $400,000. You may be able to take out a new loan for about $320,000. The original mortgage loan is paid off and you would get a check for nearly $20,000 minus fees and costs to spend on the renovations.”
Cash-out refinances often have a lower interest rate than a HELOC, and there’s generally no balloon payment after 10-15 years, which is why they may make more sense for those planning to stay in their home for a few years after the updates are made.
When it is time to put a home on the market, many experts agree – even in a competitive market where buyers have fewer options, many are still searching for an updated home. It’s simple – buying a home can be stressful enough. Why add the hassle of renovations?
“People know that updating a home takes time, money and finding the right contractors. A lot of people just don’t want to do the work, it’s a headache,” the industry expert says. “That’s why many buyers prefer an updated home. They would rather go and find something that’s already done and ready for them to move in.”
Are you looking to buy or sell property? If you’d like, we can have a real estate expert show you the most efficient process that saves you thousands of dollars, a lot of time, with little or no inconvenience to you. Contact us today!
Source: RE/MAX Canada