January 25, 2017
Should You Always Renovate Before Selling Your Home?
For most homeowners thinking of selling, it seems like a no-brainer to do some renovations before putting their house on the market – anything from repainting a couple key rooms, to maybe installing a new cheap and cheerful kitchen or bathroom.
But you might not always get the return on your investment, particularly if the work causes you to miss a prime market for real estate sales. Here’s a look at when you might be better off just listing your home as is.
Lot Size Matters
If you’re in an older suburban area with wide, deep lots and yours is one of the few bungalows left on a street filled with newer two- and three-storey homes, odds are that most buyers are primarily interested in the land. In most cases, their only consideration for the building itself is how much it will cost to demolish and dispose of.
The overall condition of the house is also a factor. If a would-be buyer would likely gut it or tear down the building anyway, it’s probably not worth investing in a cheap new kitchen hastily thrown together.
“If a house is really nappy, with old carpet, chipped linoleum floors, a weathered old deck, and falling apart garage, I wouldn’t touch it as all,” say Pro Sarbadhikari, a Sutton Group broker in Toronto. “I’d come in at a lower price point to attract a larger pool of buyers. That can really help push up the price.”
There was a great example of that in Toronto in January. A very dated bungalow in a trendy west-end neighbourhood on the subway line went on the market for $499,000. Six days and multiple offers later it sold for nearly double the asking price: $988,018.
How can you tell if it’s a gut-job? If your home has one or more of these unwanted features, buyers will be tallying up the reno costs along with their offer price.
- Extensive knob-and-tube or aluminum wiring
- Lead plumbing
- Buckling lathe-and-plaster walls
- Un-insulated exterior walls
- A small bungalow in an area with lots of recent second storey “top ups.”
Timing is Everything
Renovating to sell not only costs money, it can cost you ideal timing. According to data compiled by the Canadian Real Estate Association going back to the 1980s, March through June are always the most popular months for homes to sell in Canada, with usually twice as many sales as in December and January, the slowest months of the year for total sales.
Why? With typical two- to three-month closing times, that gets them into their new home in time to do their own renos while they’re on holiday, and get their kids registered in their new school.
You generally want to avoid listing during the prime summer months when many would-be buyers are more interested in holidays than home shopping; likewise, in December and January people are preoccupied with the holidays and family visits.
Give Full Disclosure
In his dozen years as a real estate agent, Sarbadhikari has walked into some pretty disgusting homes, including one where there was so much mould he had to wear a respirator and a jumpsuit over his clothes, and another where there was a bucket on the floor catching water leaking in from three storeys up. Yet potential problems aren’t always so visible. But you can’t pretend they aren’t there.
If you do happen to discover a major renovation issue – say, a leaky roof that’s led to some mouldy framing in the attic – do not ignore it. “If you have knowledge of a problem, you’re responsible for disclosing it,” says Sarbadhikari.
If you do discover a problem like that and think you’d rather just rush the sale and leave the problem for someone else, listen to Sarbadhikari’s take on how you can get caught:
“The new owner will call in the biggest roofing companies in the area to get some quotes. One of them might say, ‘We quoted on this job a few weeks ago.”
That’s when the new owners make a call to their lawyer.
“It happens a lot more than you would think,” he says.
In many cases, renovations do make sense, particularly if the home just needs a little TLC to make it more attractive.
Adding a skylight, installing a pool, or repaving the driveway are generally seen as some of the reno projects with the lowest rate of return, typically recouping only 25 percent (or less) of the investment upon sale.
Related Read: 6 Renovations That Will Decrease Your Home’s Value
Which renovations do help bump up the sale price?
- Replacing worn carpets or flooring