When it's time to sell your home, it's tempting to make a bunch of expensive changes in order to appeal to prospective buyers.
That temptation could become even stronger if early showings or an open house results in feedback on the lack of expensive finishes, hardwood floors, or a revamped kitchen. A certain number of buyers want a move-in ready home, one done exactly to their liking with all the high-end touches that they would have picked.
When my wife and I sold our Connecticut home, much of the early feedback focused on our carpeted floors, the lack of granite in our kitchen, and the fact that we somehow lived without stainless steel appliances. It was tempting to make some of those changes to appeal to people who may or may not have actually been interested in our home.
We didn't and that proved to be the right call because the money we would have spent would never have been made back. Yes, we might have sold our home faster, but we might not have sold it for more money then we ultimately did. That's because the same buyers who were horrified by our carpet, and granite-less and stainless-steel free kitchen almost certainly would have had issues with any upscale changes we would have made.
Maybe the hardwood floors would have been the wrong shade. Perhaps the appliances would not be the ones they would have picked, and the granite might well not be the color the possible buyer would want. There are absolutely changes you should make before putting your house on the market, but they are not the budget busters listed above.
What changes should you make?
If you're going to put your home on the market you should repair anything obviously broken because you will end up doing so anyway after an inspection. It's also reasonable to do some touch-up painting work, and it's not unreasonable to restore any rooms painted in a bold color to a more neutral look. Basically, the only changes worth making, Remodeling Magazine Editorial Director Sal Alfano told HGTV are ones that correct obvious problems.
"Buyers want to take the basic systems for granted," he said. "They assume the roof doesn't leak and the air conditioning and plumbing work. Maintenance can chew up a lot of cash quickly, and people are afraid of that."
Don't spend big money
Making a major change to a home simply to sell it generally does not pay off. The two highest returns-on investment, according to HGTV, are adding siding (which recoups 92.8% at resale) or a small (under $15,000) kitchen upgrade (which returns 92.9%). Next on the list is replacing windows or a roof, which brings back 80%.
Those are the best-case scenarios and they are all money losers. Making big changes could make your house sell faster and for more money, but you won't make more once you subtract what you spent.
"I don't believe renovating a kitchen will give you a good rate of return. In this market buyers prefer the home priced to sell in regards to what works needs to be done as opposed to a home owner remodeling a kitchen that now will only appeal to a small percentage of buyers," Robin Nardozzi, a South Florida real estate broker told The Motley Fool.
Nardozzi (who helped my wife and I buy my current home and buy, then sell a vacation condo) explained that not doing most major repairs comes down to simple math.
"An average kitchen remodel will cost $40,000. With a home currently priced to sell at $300,000 spending $40,000 on the kitchen will only give you a return at $315,000," she said. "A seller is better off painting the home a neutral color and decluttering the entire house to give potential buyers the vision to make that house their own."
Don't ask for more than your house is worth
The other big mistake people make when selling their home is assuming that it's worth more than their real estate agent tells them it is. In general, the days of unsophisticated buyers paying too much for a property are gone and tightened mortgage standards make it hard for anyone not paying cash to overpay even if they want to.
Almost anyone buying a home either works with a real estate agent with access to comparative sales or runs the numbers on their own. That means that asking too much for your house is not just a waste of time, it can actually stop people who would be willing to buy it at the proper price from even looking at it.
Listing at the right price can be painful if your house has declined in value since you purchased it. Still, if you actually want to sell it, it's best to start at the high-end of reasonable rather than shooting for an over-market number that's not likely to happen.