My house needs repairs, what should I do?
Often, I am contacted by a homeowner whose house needs repairs, usually many repairs.
At first, the repairs might seem small and easy to manage by doing the repairs yourself or by calling a handyman. After a while though, these repairs can become expensive. You can end up paying more for home improvement that you do yourself, even if you think it’s a good idea, initially. Then what do you do?
Well, you’ve got a few choices on what to renovate and it all depends on your goal. Are you selling your house that needs work? If so, are you looking for a quick sale? 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 are selling your home and the house needs repairs, you have 3 main options:
- remodel the house completely
- fix all the worst repairs (leaky plumbing, for example) and repaint it (paint is a wonderful way to renovate and attract more home buyers)
- sell the house “as-is” and let someone else worry about paying the expenses, the housing market and the renovations
Fix-up the house completely
By that, I mean remodel the house and get it looking like a brand new home. On average, if a house needs repairs that are expensive and has deferred maintenance, then a rough estimate 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 meet 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 if a house needs repairs. By worst repairs, I also mean the most expensive repairs. Do you think your house needs a new roof? It probably does, if you think so. Have a roofing contractor (make that 3 roof 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 the 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 a 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. 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 altogether.
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”
Or sometimes it’s best to sell your home fast, especially if a house needs repairs. If either of the two above options is too costly or will take too much time, you always have the option to sell the house “AS-IS“. That means the buyer accepts all the house and all the repairs in all its 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 assuming things go well! By selling AS-IS, you can minimize your liability completely. The 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 all there is when it comes to selling your property. I am a professional at taking on the liabilities 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 12 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 choices, it’s just a matter of picking the right one for you.