Christopher…, Other/Just Looking in London England

Is it better to spend money to repair a property before selling, or will sale price reflect repair costs?

Asked by Christopher Gibson, London England Thu Jan 3, 2008

I am concerned with an appartment in 1625 Sheridan, Wilmette, which has been allowed to deteriorate, and needs work. I have an estimate for $30,000 to bring it back up to an acceptable standard.

Does anybody have a view as to whether it will be money well-spent? Is it likely to increase the likely sale price by more than $30,000, or the money actually spent?

Many thanks to you all, and happy new year!

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Answers

9
Jim Walker’s answer
There are always a large pool of buyers who seek out "fixers" Some of these people are handy enough to make repairs themselves. These handymen often do not value the input of their own labor as highly as professional contractors, thus they are willing to pay more for the place as a fixer than you would net by fixing it up:

Example: House is worth $200,000 all fixed up, needs $30K in repairs. (if done by your contractor)
"Handyman" is willing to pay $175,000 because handyman thinks it will cost only $10,000 to repair (handyman is just considering his costs of materials and is satisfied with gaining $15,000 in "sweat equity"

Some times, it is wise to take care of lender required items such as termite elimination, health and safety items, and leave the cosmetics and "redecoration" to the handyman buyer. there are many buyers who desire a discount for taking a "cosmetic fixer"

Talk to some local Wilmette agents who have sold fixers for market opinions specific to that town.
1 vote Thank Flag Link Fri Jan 4, 2008
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
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I agree with CJ - Delayed maintenance on any property will affect the value of the property. Needing $30k in repairs may cost you $50k or more off of the selling price. Depending on the location of the property, the type of repairs and the amount of money you have to spend will be the determining factor. However, if you price it right, there is something about FIXER UPPERS that make some buyers want to run and buy!!!
1 vote Thank Flag Link Thu Jan 3, 2008
Christopher,

Delayed maintenance on any property will affect the value of the property. Depending on the actual repairs, they may get you closer to neighborhood market value. Many times this depends on whether or not quality repairs have been made. Upgrades do not alway bring back the money. It will depend on your local market.

A local Realtor can help in estimating what is worth fixing and what is not. You can also view open houses in the area to compare and see what upgrades are expected for your area.

CJ
1 vote Thank Flag Link Thu Jan 3, 2008
If you are wondering if these repairs will be equitable in the total value once completed, it depends on what type of repairs they are. More visible repairs net the most gain (painting, carpentry, finishing floors, updating baths, etc). While sometimes these types of repairs aren't quantifiable, they actually make the difference of a buyer having a lot of interest or none at all. While some people will be interested in a fixer-upper, most homes that sell quickly are those that are in good showing condition. Particularly with condos - think about the likely buyer: younger individuals just starting out who don't know how to make repairs, and often older individuals who are down-sizing. I've seen dated condos sit forever waiting for a buyer, and I always think "if the seller would only have done these couple of things...".
0 votes Thank Flag Link Wed Jun 1, 2011
To accurately answer this question you would need to have an experienced Realtor look at the property and analyze it to determine what work is justified to get the best return possible. From years of experience of looking at homes and seeing what sort of work leads to positive returns and what does not, a good Realtor can accurately advise you on what to do.

Generally speaking, it is good to make a property presentable: freshly painted, floors looking attractive, uncluttered and clean. Beyond these basics it is a case by case analysis. It is a rare homeowner that can do major renovation work and immediately make a positive return on it--only a professional rehabber can pull that off. Guides that document cost versus return consistently confirm this. Nevertheless it might make sense to do some minor rehab work, but you need to have a good Realtor analyze the home to get more specific than that. johnnash.homes@gmail.com
0 votes Thank Flag Link Sat Aug 29, 2009
Hi Christopher,

I can't tell by the way you've worded your question whether you are the owner or an interested investor.

Either way, the first thing you need to do is look at the comps in the building. With 56 units total, you should be able to get a clear idea.

First take a look at the ones that have been upgpraded to today's standards. What types of finishes were used? You don't want to over-improve, but you also want to stand out.

Then look at ones comparable to the one you are considering -- what have they been able to sell for "as is"?

Consider the difference, and know your margin. Are you looking for profit, or do you just want to move it at top dollar?

Also remember that that $30,000 is not likely to be returned to you at 100% dollar for dollar, especially if this is something you plan to fix and flip (again, don't know if you're the owner or interested buyer).

Things to consider, in addition to the excellent thoughts that have already been shared.

Good luck.
0 votes Thank Flag Link Fri Jan 4, 2008
Patti Pereyra, Real Estate Pro in Chicago, IL
MVP'08
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Christopher - good question. How do you define acceptable standard? Granite, stainless, hardwood? I find that most buyers don't want to undertake a major update or renovation - most are intimidated and over estimate the costs. Be realistic when determining what truly needs to be done - have similar units sold in similar condition?

Other factors may come into play as well - your location is HIGHLY desirable. Does your unit have a lake view? Other extenuating factors will impact the decision. If you have a unit with a highly sought after view, the condition of the unit may be secondary.

If you choose not to go the route of updating, be sure to price it according. In addition, to effectively market the property, be sure the comments accurate reflect its condition - target buyers looking to do work.

Best of luck!
Web Reference: http://www.thomasjhall.com
0 votes Thank Flag Link Fri Jan 4, 2008
Have you ever walked up to the window sticker in a new car lot and been "shocked" by the price? Most home buyers seek move in ready homes at the top of their price scale because they have nothing left for remodeling. Provided you don't over-improve for the values in your neighborhood it is especially good advice to update your home before listing it for sale in this buyers market.

Here are some blogs on this subject:
http://localism.com/article/111337/How-to-increase-property-…

http://localism.com/article/113338/Construction-Permanent-in…
0 votes Thank Flag Link Thu Jan 3, 2008
I feel like you should repair first if you can. The lower price with fixing up to do will make most buyers feel like they can even lower on price. A fixed up home appeals better to most buyers unless they want a fixer upper.
Web Reference: http://www.kennaandco.com
0 votes Thank Flag Link Thu Jan 3, 2008
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