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At first, the repairs might seem small and easy to manage by doing the repairs yourself or by calling a handyman. After awhile though, these repairs can become expensive. So what do you do?
Well, you’ve got a few choices and it boils down to what you want to do. 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?
If you want to sell the house and the house needs repairs, you have 3 options:
By that, I mean remodeling the house completely to bring it to after repair level, basically brand new without any other repairs needed. On average, if a house needs repairs that are expensive and has deferred maintenance, then a rough estimate on price would be $75 to $125 per square foot. Your house will be the best on the block and will sell at a high price.
Do You Really Want to Pay Those Home Remodeling Costs?
Well, the downside can be really steep. You have to ask yourself if you have the money to pay for this rehab, 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). Not to mention the holding costs while the remodel is taking place, which if you don’t have a trustworthy and reliable contractor could dig deep into your pockets.
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. 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 all means nothing if the appraisal doesn’t meet or exceed the sale 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 appraised value, which can be a huge problem to a buyer obtaining a loan.
This is a mixed-bag approach, but it can work. By “Most important things,” I mean the worse things, which boils down to repairs that cost the most to fix. Do you think your house needs a new roof? It probably does, if you think so. Have a roof 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 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. 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.
If either of the two above options are too costly or will take too much time, you always have the option to sell 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 assuming 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 time frame. That’s it. Nader Atoui of Cedar’s Investment Properties a professional at taking on the liabilities himself and freeing the seller from that burden, and has done so countless times successfully. Even with his experience, some remodels still go over budget and are extremely costly, but that’s the chance we take as investors.
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 and that’s where a free evaluation can educate you on which options may be available. If you are looking to sell your house, give us a call today at 954-774-8506. We look forward to hearing from you.