What Is The True Cost Of Selling A House?
Your home sale is one of the biggest financial decisions you will ever make. You may be thinking of selling because you’ve outgrown the space, need to relocate, or have decided to try your hand at investment properties. Whatever the reason, we are going to focus on a seller’s best return on investment.
If you think selling your home will be easy and quick, think again. Even in a sellers market, some homes can stay on the market for weeks and months, while other homes in their neighborhood get under contract within days. “Price and condition are the two biggest reasons a house doesn’t sell, but mostly it’s price, price, price!” says Hope White, a Colorado Springs broker. For more information on what you need to know about selling your home, check out this comprehensive article.
Let’s take a look at some quick statistics from the 2017 National Association of REALTORS® Profile of Home Buyers and Sellers regarding home sales in the US.
Home Seller Facts:
- 89% of sellers used a realtor to help them sell their home
- Sellers typically lived in their home for 10 years prior to putting their home on the market
- The typical home seller was 55 with a median income of $103,000
- Homes were listed on the market for about three weeks prior to sale
- 8% of homes sold were listed as For Sale By Owner (FSBO)
- Homes sold through a real estate agent averaged $249,000 per sale vs. $190,000 as FSBO
The below video compares the two main ways a homeowner can sell their property.
Using a Realtor vs. FSBO (For Sale By Owner)
89% of home sellers still use a realtor to assist in selling their home
According to the 2016 National Association of REALTORS® Profile of Home Buyers and Sellers, almost 90% of sellers engage a realtor to help them sell their properties. There are many contributing factors to the importance of using a realtor instead of listing your house as for sale by owner; complex, ever-changing real estate laws and regulations, accurate home estimates and listing pricing, and confusing contracts and negotiations are a few factors.
While realtors are expected to adhere to strict regulations, there is more you need to know about selling your home. A great realtor will provide an accurate and in-depth market analysis so your home is priced to sell. They will know the neighborhood and have experience selling your type of home. They will have exceptional negotiating skills and be in constant communication with you. The sign of a great realtor is that they make it seem so easy, you think you could do it yourself.
If You Have to GO FSBO…
The studies and statistics all confirm that a seller’s best return on investment comes from employing a realtor. Despite the stats, more individuals want to sell their homes themselves. This means that you take on the added responsibility of a realtor for researching, listing, marketing, negotiating, meeting critical deadlines for inspections & appraisals, making sure buyers are pre-approved, following up with the buyers lender and agent, title companies, and closing procedures and figures. In addition to that, you still have to get the property cleaned up, fixed, and staged, and manage your moving process through it all.
A Colorado realtor wrote a great article on how to sell your house as a for sale by owner that is pretty comprehensive and accurate. It touches on how to go about researching, getting your home ready, listing your home, and getting it sold.
Before we get into selling specifics, let’s touch on the most common reasons why your house might not be selling quick enough.
Why a Home Doesn’t Sell and How to Reduce Time on Market
Pricing your home to sell the first time is imperative. According to a study by Redfin, a homes first two weeks on the market are the most crucial with it getting 4x as many hits than a month later. After that, offers will slow down, as the traffic is limited to only new buyers entering the market. And the longer your home sits on the market, the more buyers will think you will reduce the price to below market value to get it sold. Overpricing your home is a sure way to end up selling it at a much lower price in the future.
Don’t: Don’t assume that just because your neighbors’s house sold for $500, 000 that yours will too. Specifics like year built, lot size, living area square footage, bedrooms, bathrooms, updated kitchens and bathrooms, and much, much more goes into determining price. Don’t set a higher price thinking you can always reduce it later either! The first 10 days on the market is the most important for a house being sold as it gets the most exposure within that time.
Do This Instead: Request an in-depth Comparative Market Analysis (CMA) by a real estate professional who has experience and who knows the market. Some brokerages and realtors will offer this as a free service, while others may charge a fee.
Buyers prefer upgrades and new finishings. If your home isn’t upgraded it may not sell for as much as other properties in your area. Don’t go crazy trying to make everything new, but rather focus on upgrading kitchens or bathrooms as these give you a better return. We have an excellent guide to a sellers best return on investment that will help you pinpoint areas to target for update or remodel.
Don’t: Don’t start remodeling or updating everything you think is wrong with your home! Chances are that you will spend way more money than you should, and you will be fixing things that bother you instead of things that may bother a potential buyer.
Do This Instead: Get in touch with a realtor or industry professional who understands what is most important to focus on. Kitchens and bathrooms typically net the a sellers best return on investment, while other areas such as flooring, walls, or windows do not. Read on below for our detailed Remodeling for Selling Checklist for the complete scoop on what to remodel and when.
You have no control over this factor but it’s important – where your home is located makes a big difference. People don’t just want to move into a nice home, they want to move into a nice neighborhood. Recognize the pros and cons about where your home is located so you can list it accordingly.
Don’t: Don’t lie to potential buyers about where your home is located or omit important details about the neighborhood.
Do This Instead: Instead, be honest about your home’s location and let the price reflect that. DO definitely highlight the good things about your neighborhood or how close it may be to local amenities such as the grocery store, movie theater, restaurants, or more.
Loan amounts and interest rates, current market trends, comparable properties and amenities are additional factors that make a big impact on your sale. Keeping up with these details will help you stay ahead and potentially sell your home quicker. We have a great mortgage calculator tool that can help buyers determine their numbers, and help sellers understand the financials.
Don’t: Don’t show your home to individuals unless they’ve been pre-approved or pre-qualified through a quality lender.
Do This Instead: Make sure your realtor gets a letter from the lender regarding pre-approval or pre-qualification; better yet is a buyer who has an Earnest Money Check in hand.
What You Should Know Before You Update or Remodel
Updating and Remodeling
Firstly, it’s important to understand the difference bewteen updating and remodeling it. Updating typically denotes taking something old and making it look newer – such as painting old, worn walls or re-lacquering wood surfaces; whereas remodeling tends to replace things, such as cabinets or bathroom fixtures. Most people typically update and remodel and call it a remodel project. For the purposes of this article, we’ll be calling it remodeling as well.
Remodel Preparation Checklist
A seller’s best return on investment comes from knowing what and when update. There are three main areas to be concerned with before upgrading or remodeling your home. The general rule of thumb is to start outside and move your way in – looking first at curb appeal, structural damage or roofing issues, then moving into the interior such as kitchens, bathrooms, and appliances. Here’s the list, which we will explore in detail after.
- Ceilings and Walls
- Heating & Cooling
- Lead Based Paint
Important: get the professionals involved by hiring a home inspector who will determine any maintenance or testing issues. It’s a cost-effective way to find out what may need work.
Remodeling Your Home to Get it Sold
Why it’s Important to Prioritize
When remodeling or updating, it’s important to set a priority list. Another Colorado realtor shares her experience on why:
“A very well intentioned seller’s father died so they remodeled some things in his home prior to speaking with any realtor. This was a very nice home in a very nice neighborhood and the value would be close to $800,000 in today’s market. Hardwood floors were installed in two rooms and walls were retextured, among other things. The exterior of the home was not painted and the paint was probably 10-15 years old. It took nearly a year to sell the home and I guarantee you it was due to money being put into the wrong areas for return. The seller spent close to $30,000 for those “fixes” that bothered her and could have put in a new kitchen or remodeled the bathrooms plus more for the same amount of money.”
Bottom line? Fixing everything that’s wrong won’t necessarily get you the price you want or the home sold in a reasonable amount of time. Consult a knowledgeable professional who understands what makes a home sell and who has experience with the local housing market.
CLICK HERE to download our FREE Remodeling Checklist!
Remodeling for Selling Checklist
After following the Remodel Preparation Checklist above, the priority list below will help you get the most bang for your buck where your home investment is concerned. There are two main areas of concern on this list, remodels or updates that net you additional value to your home and remodels or updates that will net you your current home’s value.
Additional value items will increase the pricepoint at which you can sell your home and current home value items will allow you to maintain the pricepoint your home is currently at. For example: if your exterior paint is old, you’ll need to re-paint or risk having to lower the asking price of your home because overlooking this item will take away from your home’s current value.
Additional Value Items
- Replacing exterior siding
- Replace or install brand new outside deck(s)
- Updating windows/window trim (only will net you additional value if you install custom upgraded wood windows or something along those lines)
- Replacing kitchen surfaces
- Replacing bathroom surfaces
- Upgrading/Replacing flooring (hardwood, carpet, or tile)
- Upgrading light fixtures
- Replacing cabinet and plumbing fixtures in kitchen
- Replacing cabinet and plumbing fixtures in bathrooms
Current Value Items
- Exterior painting and/or repairing siding
- Wash, re-stain, or re-paint outside deck(s)
- Replacing or repairing windows/window trim
- Refinishing kitchen surfaces
- Refinishing bathroom surfaces
- Deep-cleaning/Refinishing flooring (hardwood, carpet, or tile)
- Re-painting or touching up walls and ceilings
- Re-painting or touching up trim around windows, doors and floors
- Replacing outlet covers, switch covers & light covers
DIY or Hire a Pro?
The decision to do-it-yourself might seem like an easy one. Besides, in the age of YouTube anyone can figure out how to do anything right?
While you may think you can get it all done yourself, you may want to think twice. Many homeowners who choose to remodel their home end up paying more in the long term. Things like electrical, plumbing, and roofing may require permits to be filed in order for it to be determined “up to code.” If you end up doing the work yourself and have no permits to show for it, this will harm your ability to net a higher asking price.
Other items such as painting, laying flooring, or replacing lighting might not require permits, but it’s easy to tell when a rookie has done the job. Painting is a very cheap and easy fix if you paint it yourself, however, if you aren’t a skilled painter, don’t do it! Crooked lines and “tagging” walls and ceilings are a no-no. A bad paint job is not a clean look and will only repel potential buyers.
Advice from Hope:
Hope White has some actionable tips on remodeling that has proven useful to her clients in the 25 years she’s been in real estate.
“First of all, any remodeling or updating you do in bathrooms and kitchens typically will net you a better return than any other remodeling or updating. Light fixtures are a very cheap way of updating a room or rooms starting at only $10 each.
If your wood floors are not damaged and don’t need to be replaced, but appear to need a new coat of lacquer, you can clean them and put a good mop on “finish” to brighten them up. I have used Holloway House’s Quick Shine Floor Finish. I really like the way it looks and lasts as long as you do not put an excessive amount down and give it time to dry.
Updating is the next best return on investment where you clean all surfaces in a room and update by cleaning and painting and just replacing whatever is the oldest. Cleaning carpets is extremely important but replacing them is more important if they don’t come clean.
Obviously, if you have abilities in the construction trades, put those skills to work and improve your home!
Don’t want to or can’t go through the hassle of upgrading or remodeling? Read on to learn about how to sell your home in its current condition.
Selling Your Home “As Is”
Remodeling vs. Selling As Is
There are pros and cons to remodeling or selling as is. Most homeowners will opt to update or remodel when needed instead of trying to sell as is. The amount of time, energy, and financial backing you may have determines whether you should remodel or try to sell your home in its current condition. Light updating or remodeling can be done by you, but if you don’t have the resources to make major repairs on your home, you may find yourself in a position to sell without putting the work into it.
Should you fix up your home or try to sell as is? You may need to consult an experienced realtor or industry professional that can give you advice on how to proceed. Either way, always make sure to do as much DIY work as possible.
If you can’t (or won’t) put the time and resources into upgrading, selling your home without fixing it is your next best option. A seller’s best return on investment in this circumstance comes from knowing the condition of your home and pricing it accordingly.
Impact of Condition on Price
Like we mentioned earlier, the condition of a home is a huge factor in it’s listing price. For example: if the home you are trying to sell needs a new roof, it can typically cost about $10,000 to replace. A potential buyer may not want the hassle of replacing the roof themself, so if your home is worth $100,000 you won’t attract many buyers if you reduce the price to only $90,000.
Homes that require a lot of work or heavy remodeling or upgrading draws investment buyers or people who want to “fix-and-flip” houses. These individuals are looking to make a profit, so the pricing of your “as is” home will need to be attractive to them.
You Can’t Avoid Fixing These
Even if you decide to sell your home as is, there are some things you won’t be able to avoid fixing or talking about. You are required by law to disclose known issues with your property, and the buyer has the power to come after you down the line if problems arise after the sale. This doesn’t mean you have to detail out every crack or flaw, but anything you’ve been made aware of through home inspections or use of the home has to be reported. Getting ahead of the game by ordering a home inspection first can help you while negotiating price.
Most lenders won’t provide financial backing to buyers if the home has structural, safety, or health issues. The good news: investment buyers typically pay in cash and thus you can avoid strict lending laws and regulations. The bad news: these types of buyers are going to want a sizeable discount on price if there are major problems that need to be corrected. Even investment buyers may want you to fix some things before they will consider buying the property. Bottom line – know what the issues are and be ready to affect the asking price.
Making a Smooth Transaction
Even when selling as is, make sure to get it thoroughly cleaned as it goes a long way towards interior and exterior appeal. Also, remember to highlight your homes selling points and amenities to get the most out of your sale. You may also want to get a market analysis of similar “as is” homes or do walkthroughs of them yourself to get an idea for what they are going for.
While you may need to come down on price based on what may be wrong with your property, don’t blindly accept low offers. Engage the advice of a trusted realtor to help you determine how low is too low. The types of buyers you will be marketing to will likely bring lowball offers to the table right away. Have a plan in place for how you will respond, or better yet, hire a realtor with excellent negotiating skills and a great track record.
A Seller’s Best Return on Investment
Whether you decide to put the time and resources into a remodel or navigate the challenges of a quick and cheap sale, being knowledgeable and flexible is critical.
Sellers on a longer timeline with resources should focus on knowing what they can do themselves and what they should hire a pro to do.
Sellers on a shorter timeline with limited resources should focus on being flexible with pricing based on the condition of their property.
Hire a realtor, get advice from an industry professional, or do your research. There are hundreds of authoritive sources online and offline, and many free tools to get you started.