 Personal Finance PowerPoint Presentation. What not to fix when selling a house. Get ready to get financially fit by practicing personal finance. Most of this information can be found at Investopedia. What not to fix when selling a house, which you can find online. Take a look at the references, resources, continue your research from there. This is by Ray Hartley Beck, published January 3rd, 2022. Learn what repairs and upgrades to avoid when preparing a home for sale. We're in the sailing of a home thought process, the sales thought process. Preparing to sell a home can be daunting. Popular shows like Fixer Upper, Flip or Flop and Property Brothers make it seem like you have to spend thousands of dollars and make renovating a full-time job to prepare to put your house on the market. So obviously when you're looking at shows like this, they're in the business of flipping homes or upgrading homes so that they can add value to the homes often times, which might be a different type of scenario than when you're in a home that you've lived in for some time and are selling it under those conditions. So while real estate flippers do frequently make money doing cosmetic renovations on homes and selling them, these people are professionals who have spent decades building up their own skill set, knowledge base and network to be successful. So obviously if you're in the business of purchasing a home and then selling the home shortly after, then you're not simply dependent on the market in those cases often times. You're trying to put some more value into the home so that you can increase the equity on a short-term basis. If you purchased a home for living in the home and you've lived in it for some time and are then selling the home, if you're keeping up the home in good basis, well now you're not doing a short-term flipping process. You have a longer term between the purchase and sales price. So it's more likely or possible that the value could go up during that time period hopefully just simply to the longer extent, the longer investment that has been put in place. So therefore you don't really need to do all the renovations in order to increase the equity in the home in a flipping type of scenario. Obviously you need to keep the home in good condition in good working order and so then the question would be what kind of repairs, what kind of things are necessary and what kind of things might be over the top or not necessary in that type of scenario. So the average home owner getting ready to put their home on the market won't see a huge return on investment or OI for many of the biggest home renovations such as kitchen remodeling. So often times if you're going to take over a home and flip it one of the things that you might see is that well the kitchen is not up to par and you remodel the whole kitchen. But if you're living in the home you probably have the kitchen up to par for you. You might you know keeping the kitchen up to a good standard use setting that you're using. So going from that standard use up to a remodel of it or taking it up a notch just for the selling process might not be worthwhile. But even the most popular fixes like repainting your interior and exterior offer only a 51% ROI return on investment according to the analysis done by real estate agent referral company Homelight. And I think some of the problems are with these kind of renovations like painting the inside of the home and the kitchen renovation as well. They're deeply personal into a lot of people. A lot of people would just like their kitchen to be different or just like the color to be different. And so you might put a lot of work in it to sell it to somebody who is then just going to move into the home and redo the whole home the way they want to do it. So it kind of depends on the market you're in as well if you're in the type of market where you feel like someone wants to buy a ready-made house that's ready to go type of thing or if you're in the kind of market where people are basically going to come in and then do their own kind of remodeling of the home no matter what you put in the thing. So for homes with neutral colors and good condition repainting is even less profitable or conventional wisdom on what is worth fixing is often skewed in favor of spending more money and time than necessary. So the general thought process and I think this comes from the idea that people typically think well I have to do something I need to do something and when you're going through the selling process and you're doing some waiting for the selling process and so on you might think well I need to do something to make the selling process go easier. And I often think about the adage for medical professionals where they have the saying that their first thing is they don't want to do any harm. Whatever they should do there shouldn't be causing harm if you're taking action just for action's sake and it's not action that you think or have some evidence to think it's going to actually improve the situation. It's likely that you're at the least just spending your wheels and at the most you're making things worse by taking action and you know so then just being patient and maybe the way to go sometimes often times. So consult a real estate agent before making repairs no matter your market there are several things that everyone should do to get a quick sale. You should make sure your home is clean. So obviously when you're making a sale that you know you may not do the whole renovation process but clearly if you've been living in the home you would think the home is kind of up to par you're keeping the home up to par for your living conditions clearly you want to make it look nice for the home process cleaning it up. You want to declutter the home so you don't want to have a bunch of stuff all over. Obviously you would like to make the home look open look expansive look kind of bigger on the inside as big as possible on the inside and storage to some degree with the highest curb appeal that you can manage. A local experienced real estate agent should know the market conditions in your area and have a good idea of what repairs are necessary to get your home in line with comparable sales at your desired price. So obviously you'd want to speak to a real estate agent and get an idea of what home purchasers are looking for in that area what kind of renovations would be beneficial for that particular area. Would it be would it be a good renovation to do the basics are you selling to people that are going to have the idea that they would like to move into the home and just not do as many repairs and so on or are you in the type of place where a lot of people are moving into the home and they're planning on doing their own kind of renovations once they move into the home. So ask your agent for a competitive market analysis CMA so you can see what other homes are selling for. So if everyone on your CMA at your desired sales price is in a condition similar to yours you may not need to do any repairs before listing. So if you're looking at the sales that have been made and you're saying hey my place is up to par with these places then maybe you're good to go. If everything on your CMA is much more updated do some estimates to see the cost and money and time that it would take to get your home to the sale price you need. So if you're looking at other properties and you're saying okay they are up at a higher grade than my property then of course the question would be what's the risk versus reward of putting in the more renovations versus the possible increase in the sales price. The cost of updates often won't be recouped in the sale. Take your agent's suggestions on repairs with a grain of salt so clearly the agent has their own opinion but they're also kind of involved in the sales price and they're going to make some money based on the sales price so clearly a higher sales price to them would be beneficial and they're not paying for the fact that you're renovation so they're not involved in the cost the increase in the renovations they are going to possibly make a benefit from a higher sales price so you could see that doesn't mean they're going to lie to you but you could see their financial conditions are lined up to sell it for the maximum amount of price that you can get even if it costs more money to get that maximum price meaning you could be in a losing end even if they're on a winning end because it could have cost you more money to get the higher price but if the higher price is in place the sales agent is going to be better off so real estate agents get paid commission based on the sale price of your home so therefore you might even want a third party opinion possibly if you could find a third party opinion possibly pay someone or get some advice from someone who's not directly engaged in the transaction don't have a direct interest in the sale of the home so the realtor costs you $200,000 and increase the sales price by $100,000 that is a bad investment for you but a big jump in commissions for your realtor so the realtor just from a money standpoint they're going to say well yeah that would be great that's a great deal because they're going to get an increase in the commissions but you lost a whole bunch of money in the process so make sure but again the realtor kind of incentives skew the behaviors oftentimes make sure that you are working with an agent who keeps your best interest in mind don't do a major renovation while many costly upgrades can increase their overall home sale price depending on the project owners can also recoup a high percentage of the value and decreased sales price according to the national association of realtors the NAR and the table below using estimates from the 2019 remodeling impact survey the most recent year available due to COVID-19 remodelers estimated that the cost of certain projects and realtors estimated the cost of recovered and the sales price of the home so you've got your table here the return on investment of major renovations we've got the renovation type we've got the kitchen renovation bathroom renovation adding a bathroom new master suite with the estimated cost of the project so the kitchen was 68,000 estimated recovery cost was only 40,000 so percent of value recovered 59% the bathroom renovation 35,000 the estimated cost estimated cost recovered 20,000 so again the percent of value recovered 57 adding a bathroom 60,000 so you think that could be a big one you might say a whole another bathroom might increase the price because you might have different listings on that and so on but they're saying that the estimated cost recovered is only 30,000 you would think it would cost a lot to put a bathroom in as well with everything the plumbing and what not so that's a 50% value recovered and the new master suite that cost 150,000 estimated recoveries to 75,000 so 50% value recovered don't start a tax that you can't finish so clearly often times when you're looking at the long term projects and if you ever get into some of these long term projects it's quite easy to say I'm gonna do that I'm gonna work on it everyday and I'm gonna get it done but then they kind of take longer than you would have expected possibly having more work than you initially estimated that they would have home repairs are frequently more expensive take longer and need more skill than most people expect with supply chain issues and a tight label market as a result of the coronavirus pandemic is harder than ever to finish home improvement project on time and under budget so clearly the current market conditions make it even more difficult because you got these supply issues the cost of the materials and what not are fluctuating or could fluctuating given the current circumstances the Federal Reserve Bank has been tracking delivery time data for the manufacturing sector in New York Texas Philadelphia and has seen an increase in some areas of 300% over the pandemic timelines that's a problem so that means you're not only waiting for the appliances to get to your local store from the warehouse and then waiting for the installer but also waiting 300% longer for the materials to even arrive at the manufacturer to make your appliance so this means that you should not go into the demolition phase of any repair or upgrade until the items and tools that you need to finish your project are physically in your home so we've gotten really used to be thinking well these tools that the things I need are right down at the store right there because everything has been working fairly smoothly the global market has been all connected we've got the just in time supply chains supplying all of us but with recent conditions that have been going on those supply chains have been disrupted and we can see how easily they can be disrupted and therefore you want to be more sure that you have all the materials you need before you start taking that sledgehammer and cracking down walls and what not it is better to keep the 1970s shag carpeted than tear it up and expose staining floorboards because the 2000 square feet of hardwood that you ordered six months ago still hasn't been produced or is sitting on a ship outside the port of Los Angeles I live around Los Angeles crazy to see the ships lined up it seems so wasteful but in any case that's true the old carpeting is better than no carpeting or a bare floor that's ugly stained floor so you want to make sure that you got your stuff before you start tearing things out so don't fix and replace with trends replacing broken or damaged things like light fixtures faucets cabinets hardwood and so on can quickly change the appearance of the home and help it sell quickly or even a phrase for more painting a room door trim or a cabinet tree I can also provide a quick facelift however be sure not to replace anything with something too obnoxious or trendy so if you're trying to renovate everything to get it up to a certain new trendy look as opposed to fixing it you know to give it a good a good updated look I guess in terms of just having a newer item involved that might not want to do that because you have no idea of course of the trends and I've seen this happen a lot it's kind of interesting when you watch the home sales happening you see the types of things that they're fixing inside and out and then you see the next person move in and the whole and they just remodel the whole place right they they have brand new carpets in there but the guy didn't like the new carpets or whatever and he took out the new carpets so it just seems again it kind of depends on who you're going to be selling to or who you think the potential buyer is likely to be in terms of what kind of renovations they might have but you probably pretty clearly don't want to take a bold stance painting it the whole bright neon orange or something like that because that seems to be the trendy thingers so what is currently trending for a specific slice of the population may be extremely off-putting for others keep your population keep your population of potential buyers as broad as possible so obviously when you're trying to sell the home usually you know you think in kind of neutral type of things that would have a broad appeal to many different people and would be the the general idea generally right and then if the person wants to make the changes they can go in there and make the changes but if you go way overboard on on an extreme it's likely that you're going to pinch the market down to a fairly small segment which maybe there maybe those are the segment that you're really aiming for so maybe that would be the way to go but generally would think that would be not not the way to go so by thinking so you generally would want neutral colors and common fixture styles they can appeal to everyone so should you should I sell my home for cash selling your home for cash is more convenient but you are typically accepting an offer from a buyer that is subtracting any fixing up expenses and then offering 75% of what they expect to sell the home for so doing whatever cleaning decluttering and fixing that you have the time and money to complete while listing your home on the market most likely will net you more money than selling for cash what do I have to fix at a bare minimum what's the bottom line what's the bare man so if you are able to you should fix anything that is significant get safety issue and would cause your home to fail inspection so obviously you got to have the home up to par so if there's anything where you are going to say well the state is not going to let me sell it then those things you want to fix and typically those have to do with safety kind of issues any major leaks infestations, sewer issues or electronic hazards should be repaired before putting your home on the market unless you intend to sell for cash so typically obviously those things need to be generally updated possibly for the sale of the home itself should I stage my house yes staging a home should cause your home to sell quicker and for more however staging doesn't necessarily mean hiring a professional staging a staging service cleaning and decluttering are part of staging and need to be complete for moving anyway so do it before listing photos are taken to have the greatest positive impact on your sale on your sale obviously when you're taking pictures to home and what not you'd like to have it as decluttered and beautifully set up as possible make it look as spacious as possible so what's the bottom line you may not actually need to fix anything to put your home on the market the most important thing is to make sure that you clean declutter and increase your home's curb appeal talk to a real estate agent to get an idea of what is needed in your current market run some basic math on your repair costs during the current supply chain crisis make sure you don't start anything that you can't finish before your listing goes live and if you're doing upgrades right before selling do things in neutral tastes rather than your own