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Cover story: Repair costs repaid in faster sale
Question of the Day
For many homeowners, when it’s time to sell, it’s often also a hectic time - packing and cleaning, preparing to move out of the area, beginning a new job, ending or beginning a relationship. Add home renovations to the mix, and it’s easy to see why many homeowners throw in the towel and opt to sell “as is.”
But real estate experts point out that’s typically not a smart move - either financially or logistically - because the house likely will sell for significantly less if it needs repairs and it could stay on the market for much longer.
On the pricing side of the equation, Harold Huggins, a Realtor with Harold H. Huggins Realty Inc. in Burtonsville, said it works like this: “Take the cost of the repair and multiply by at least two and subtract that off the asking price.
“So if your house needs $20,000 worth of repairs, figure on $40,000 to $50,000 coming off the listing price. It’s better to put that money into the repairs and keep the difference for yourself.”
The predominance of two-income households is one of the reasons many buyers offer so much less on a house that needs repairs, Mr. Huggins said.
“It’s not just a factor of the cost of the repairs, but also the time and aggravation to schedule and oversee the work,” he said.
Jonathan Miller, president and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm, agreed, pointing out that banks and buyers are equally leery of homes in poor condition.
“Lenders are actively looking for reasons not to lend - they’re very risk-averse right now,” he said. “And because of the economic realities, consumers - if they are able to line up a mortgage - they don’t want to have to turn around and then take out a home-equity loan to make repairs. That adds another layer of complexity into the transaction.”
Mr. Huggins pointed out that selling a home quickly is a cost savings in and of itself.
“If a house is in perfect shape, it’ll sell in a matter of days or weeks, versus months if it needs work,” he said, explaining that this saves homeowners from making additional mortgage and tax payments.
Mr. Miller added that with so much economic uncertainty, it’s advantageous to sell sooner rather than later.
“The S&P is falling; Greece is unraveling and threatening to bring down Europe,” he said. “It’s smart to play the odds and get your home sold as fast as possible, especially if the market in your area is declining.”
Elizabeth Weintraub, a broker associate at Lyon Real Estate in Sacramento, Calif., said some homeowners elect to sell as is because they mistakenly think the new owners will want to make all the decisions about repairs.
“But they don’t realize that if there are too many problems with the house, the buyers will just decide to buy another house,” she said, adding that homeowners looking to sell should focus on the big systems of the house.
“Buyers expect the major components of the house to work - the central air and heating works, you’re able to lock the doors, the lights should go on when you flip a switch. If the dishwasher’s on the blink, that’s not going to blow the deal.”
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