What, if any repairs, should I make to my house?
Oftentimes, I am contacted by homeowners whose house needs repairs.
At first the repairs might be small and easy to manage by doing the repairs themselves or calling a handyman. After awhile, though, these repairs can become expensive. Then what do you do?
Well, you've got a few choices and it depends on your goal. Do you want to sell the house? Do you want to keep the house as long as you can? Do you want to live in the house?
I want to sell the house
If you want to sell the house and the house needs repairs, you have 3 main options: fix-up the house completely, fix all the worst repairs or sell the house as-is.
Fix-up the house completely
By that, I mean remodel the house and get it looking like a model home. On average, if a house needs repairs that are expensive and has deferred maintenance, then a rough esitmate on price would be $100 to $125 per square foot. Your house will be the best on the block and will sell at a high price.
Well, the downside can be really steep. You have to ask yourself if you have the money to pay for this remodel, accounting for the fact that you will want a 10% additional buffer in case something goes wrong. What could go wrong, you ask? Your contractor could flake on you, there could be additional repairs that weren't visible until the work started (think water damage, like a pipe dripping behind the walls for years, think mold, think termites). Not to mention the holding costs while the remodel is taking place.
If you have the time to manage the project, the cash to finish the remodel and are okay with selling 6 months to a year from starting, then you are good to go. The one other point I want to make here is that we won't know what the real estate market will look like in 6 months to a year, let alone in 1 month. If you complete the remodel and everything goes according to plan, you may still have an appraisal issue. Having the nicest house around might help you sell it quickly, but the appraisal needs to match or exceed the sales price. With newly remodeled homes, the appraisal can become a huge issue. If it doesn't appraise at the sales price, the lender will only lend on the appraisal price, then buyers have the right to renegotiate and now you are stuck with a low appraisal.
Fix all the worst repairs
This is a mixed-bag approach, but it can work. By worst repairs, I also mean the most expensive repairs. Do you think your house needs a new roof? It probably does, if you are thinking so. Have a roofing contractor (make that 3 roofing contractors) come out and inspect your roof. Don't tell them that you need a new roof, tell them you want them to inspect it. If you tell them you need a new roof, they will tell you that you need a new roof. Follow this same process with plumbing, electrical, and paint contractors. If you know that there is absolutely no problem with any of those areas, then by all means, you don't need to repair them. Most likely, though, if you need one, you need a few others.
Roofing, plumbing and electrical are the big 3 ticket items. I always throw in paint because although it's costly to paint the interior and exterior of a home, it is absolutely worth every penny if you are selling the house. You may have other issues that are costly, such as foundation issues, mold, or termite damage. All of these repairs are costly, but will make your house much easier to sell. Buyers these days can handle a mortgage payment, but can't afford any major repairs to their new house.
Hopefully, the grand total on all of these bids won't break the bank and you can do them. Depending on what it is, the estimate could be $50 to $75 per square foot. It's well worth the money to provide a house to new buyers without the worry of big-ticket repairs in their future. Remember, potential buyers are going to have a home inspection if they are in escrow to buy your house. They will take the advice of their inspector and if there are repairs to be made, you better bet they will use that to negotiate a lower price or back out of the deal all together. On the other hand, if you've completed all the big repairs and there's a new coat of fresh paint on the house, many buyers will look at the house as though it's a good value. Buyers looking for value will know that they can do the big remodel down the road, when they are ready. Meanwhile, they know they don't have any expensive repairs that they have to do.
Sell the house "AS-IS"
If either of the two above options are too costly or will take just too much time, you always have the option of selling the house "AS-IS". That means the buyer is buying the house in all it's glory, termites, mold, leaks and all. Of course, you will be selling the house at a lower price, but that doesn't necessarily mean you will be making much less money. When you add up all the costs, repairs, upgrades and holding costs, it can be a huge number. And that's assuing things go well! By selling AS-IS, you can minimize your liability completely. Cost to you to do that is $0 per square foot. Not bad.
I have seen such relief on a seller's face when they know the house will be sold in a matter of weeks and all they have to do is provide the appropriate documentation to escrow and sign escrow documents within that timeframe. That's it. I suppose that I am a professional at taking on the liabilties myself and freeing the seller from that burden. Of course, I inherit all the above mentioned issues, but hopefully, I have learned how to do that properly over the last 10 years. Even with my extensive experience, some remodels still go over budget and are extremely costly, but that's the chance I take.
Even though your house needs repairs, you have options. It depends on which one is right for you. Just remember, you always have a choice and any of them can be good for you.
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