Saturday, May 22, 2010

Renovate of Sell As-Is

Oftentimes, sellers are faced with a difficult situation – whether they should renovate their home before selling or put it on the market as a fixer-upper. With interest rates low and many people looking for a value deal, currently it makes more sense to do the latter. However, the decision is often not as clear-cut.

Since the real estate market recently took a dive, contractor fees are also lower. In fact, renovating an apartment right now will cost roughly 25-30% less than peak costs. Ironically, the reason for such a decrease in renovation costs is a loss of demand. Sellers are more inclined to sell their homes as-is and as a result, very few of them are renovating. As there is a decrease in demand, renovation costs drop. Thus, for a relatively small expense you place your listing into a more competitive position.

In some cases, renovation will not have the desired result. As I stated before, with the market on a downturn, buyers are looking to get a deal. Remember, all renovations will happen according to your personal taste, which might not agree with some buyers. A number of buyers view un-renovated apartments as a chance to make a deal and later renovate the apartment to their personal taste.

As the seller, you must also consider the demographic that will be looking at your apartment. If you are selling a one-bedroom or a studio, you will likely be selling to single, first-time, buyers. Those types of buyers will likely want to move in right away and will not want to spend time renovating. Thus, if you are selling a one bedroom or a studio, it might make sense to renovate it before listing it.

On the other hand, if you are selling a 2, 3 or 4 bedroom, the likely buyers will be families. A family will not feel the need to move in right away, and even if they do they will have ample time to renovate their new home. Keep in mind that families often come with kids and thus must have concrete plans about moving before uprooting themselves. It is likely they will accept to move into an un-renovated home and then make the necessary renovations over time. Be certain to understand your competition and position your listing accordingly, but as a guideline, if you are selling to a family-oriented demographic, it makes sense to leave the home as-is.

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