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Rob Paulson, Both Buyer and Seller in Fort Collins, CO

Investing in a new furnace and/or AC Unit...

Asked by Rob Paulson, Fort Collins, CO Fri May 23, 2008

My home was built in 1978 and the furnace is original to the house, according to the hvac guy who gave me an estimate on a new system. New furnace AC would cost $6,200. I'm wondering if this is a good financial investment? If I am planning on selling my home in the next year - would I expect to see a 6.2k increase in the sale price by having new AC and furnace?

My guess is that most home buyers won't care or even think about energy efficiency - all of the homes will have heat. Most of the homes will have AC, I'm guessing? Would I be better off throwing the cheapest AC unit I can find, in terms of a net gain at resale?

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Answers

11
Rob,

Do you know what the percentage of homes with AC is? If it's substantially below 100%, say 60%, then unless the furnace is not working correctly, leave it alone.

As for investing in a new one, you can't make a blanket statement that the investment doesn't make sense. That is, you can't say you won't get your money out of it, but it typically is unlikely. Most often, your best bet is to put the home on the market as is (presuming the furnace works as intended). When you get an offer, expect the buyer to want to negotiate the cost of a new furnace and an AC unit. Then just work it out. If there's nothing else wrong with the home, a reasonable deal for both parties is to split the cost of a new unit, primarily because the buyer is getting all of the benefit of the new unit, not you, and you shouldn't have to pay full price for their benefit.

However, consider the possibility that your home in its present condition, with an original furnace and no AC might take longer to sell than your competition. Could be considerably longer. Then in addition to the split cost of the new furnace/AC, you have to add the carrying cost of having to hold the property on the market for a longer period of time - I presume you're not living in the home for free every day. This additional hold time also means you're not moving on to where ever it is you're trying to get to by selling your home, which could also have a cost associated with delaying that move.

In the end, try to look at the decision considering all costs to you for not replacing the furnace. Add up those costs for potentially having to keep the home on the market longer, plus probably half the cost of a new furnace/AC system that you're probably going to have to negotiate to pay for anyway, and see how that compares to just replacing the system now. In some cases, the numbers aren't far enough apart and it can make sense to bite the bullet today.

But in general, as the previous answerers indicated, it usually doesn't make sense to upgrade before you sell.

Regards,

Jeffrey
2 votes Thank Flag Link Fri May 23, 2008
No - it would not.
HVAC units are something that is simply expected to come with the house. If you have a good one, great. If not - expect to have someone ask for a credit.

I agree with Ben here - that looking at dollar for dollar return like this simply isn't the way to go. A New unit will make your home more attractive to buyers, as it's one less expense they have to worry about - but you will not be able to say "well i spent 6k on this last year, i'm upping my price 6k."
2 votes Thank Flag Link Fri May 23, 2008
I don't think you will get dollar for dollar back on that one. If it is going bad it will come up on the home inspection.
Web Reference: http://getprequalified.com
2 votes Thank Flag Link Fri May 23, 2008
Hi Rob,

I'm not sure that the upgraded furnace-A/C unit will increase the value of your home, but it may improve the time on market, or how quickly you can sell your home. If other homes comparable to yours in the area have an upgraded furnace and you do not, would that be enough to motivate a seller to buy that house over yours? Perhaps. Instead of looking to get a dollar-for-dollar value increase in your home, it might be better to look at the question as a "will it help me sell my home."

Take care,

Ben Edgson
ben@bythebrookemortgage
2 votes Thank Flag Link Fri May 23, 2008
Your question reminds me of a situation I found myself in as a freshman in college. I had a $800 VW and right before I went to sell it I had to put a $50 battery in it. Thus, I believed the car was now worth $850 b/c it had a new battery. What I failed to realize was the VW was worth $800 period. The $800 value on the VW assumed it had a working battery.

I'm a Texan at heart and believe it isn't broke don't fix it. I've always got HVAC guys trying to up sell me on the furnaces I have in my properties. They run, we service them annually and our bills are no higher than homes with upgraded furnaces. Thus, why would I take a perfectly good working furnace out to replace it with a $4800 model just to save $50 a year? I think you get the point. Also, my grandmother is right. They don't build stuff like they use too. 30-50 years ago these items were built to last forever. The new ones have life expencies of less than 15 years. See the link below:

http://www.storyofstuff.com

When I price a home to list, I price it assuming the furnace works regardless of brand, etc... I've never lost a buyer because there wasn't an upgraded furnace. In terms of a/c. I'd say, without knowing your local comps, maybe $1500 more in listing price if that.

The simple answer to your question in my experience is 'no' you won't see a net gain. It just might help in selling the home slightly faster, but that too will depend on your competition.

Good luck,
Susan Walker
1 vote Thank Flag Link Fri May 23, 2008
If it's working, I would leave it alone. You are better off financially to offer a Home Warranty with the house which will not only cover the heat and air should it fail, but many other items such a plumbing electrical and hot water heaters. The only thing a new system will do for you is perhaps help you sell the home sooner... but it is an expected part of the home.
0 votes Thank Flag Link Fri Oct 3, 2014
No input on will you get the money back out, However it will sure help you sell it.
0 votes Thank Flag Link Tue Feb 15, 2011
It has been my experience that buyers would rather have everything brand new and in tip top shape rather than buy something that needs a new furnace AC, and whatever other updating your house needs to be brought into the 21st century that is at a discounted price. Just my own experience, and if you live in a raging seller's market I say forget it, don't fix it, but if there are as many homes for sale where you are as where I am I would seriously think about I'd fix as much as I could and get it sold.
0 votes Thank Flag Link Sun May 25, 2008
Rob - That seems high but maybe you were quoted for a high end, high efficiency system. Judging by your information provided that your home was built in 1978 and is located in Fort Collins, my experience tells me it's probably less than 2,000 total square feet (my guess is in the 1,700 sq. ft. range) and it's either a bi-level or tri-level. I had a client put in a brand new system after closing a few months back on a similar home and it cost him $2,000. So you would want to shop quotes around...I know 2 places that do great work at competitive prices.

An old, outdated furnace stands a strong chance of becoming an item noted on the inspection report and would allow the buyer to renegotiate with you so keep that in mind as you consider the best solution for your situation. Feel free to email me with any questions: Mike@MikeMalvey.com.
0 votes Thank Flag Link Sun May 25, 2008
Rob,

I agree with what a lot of the other answers here that if it works don't replace it. What I want to add is I suggest when you do put the home on the market in the next year, you buy a home warranty for the new buyer at closing or better yet have the agent who lists your house buy a 1 yr home warranty for the buyer at closing. The home warranty will give the new owners piece of mind knowing that even though the heat/AC is old they will be covered for the first year and the new owner can renew it after that. Not only is the heat/AC covered but all the appliances will be covered. So, when it does finally fails they can replace it for a $50 to $100.00 deductible. There are different companies that offer home warranties and the price depends on the size of the home and extra that need to be covered. The ones we buy run around $450. We buy them for our listings and if one is not offered by a seller we buy it for buyer clients.
0 votes Thank Flag Link Fri May 23, 2008
HI Rob,
Don't expect a particular increase in your sale price. What your $6,200 investment will do is make your house more likely to sell, especially if the houses competing with you don't have new furnace/AC.

The buyers will want to have a furnace that works and that can be certified. If it won't certify your buyers will insist that you fix/replace it or reduce the price of your house accordingly.

My perspective on AC in Colorado is that it is not one of the most important items that buyers are looking for. Having AC will make your home more desirable and saleable, but not necessarily at a higher price.

And, unless your home is VERY large or there are other issues to consider, $6,200 seems quite high. Make sure you get a few quotes.

Lil Lively
Lil@TopProducer.com

http://www.LilLively.com
Cell: 303-746-8827
Your Castle Real Estate
950 Wadsworth Blvd. Suite 120
Lakewood, CO 80214
Fax:303-265-9318
0 votes Thank Flag Link Fri May 23, 2008
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