Which is better: buying or selling a home in “fixer upper” condition, or aiming at “turnkey”? In Silicon Valley today we are experiencing a shortage of good inventory. Home sellers may be tempted to market their home without preparing it well. Buyers may feel that they will get a better deal if they purchase something that needs some work. What is really in your best interests?
Silicon Valley home buyers decide: bargain price and do the work, or turnkey and pay a premium?
Often it’s not a black and white choice of extremes between a “total fixer” and a “completely remodeled” home, but often there’s a basic stance that Silicon Valley home buyers must take: am I searching for turnkey or something that needs work? And if it needs work, how much am I willing to do?
A deep discount will be had on properties which are “all original”. The question, though, is whether or not it will be worth the effort and cost to go through the trouble of extensive repairs and thorough remodeling. Often the biggest projects are more profitably taken over by contractors – and even then it may not be profitable in the long run. Last summer I sold an original condition home to a contractor who remodeled and sold it. The contractor did a lot of remodeling and sold the property a few months later for about 18% more than he paid for it. When you consider the costs of buying and selling (8-10%), the cost of the remodeling (probably another 8-10% of the purchase price if you include the value of his labor), I’m not sure he really make much money. For his sake I hope so. For consumers, though, not contractors, it’s even harder to break even with huge remodels if you want to sell anytime soon. What you do, do for the long run and for yourself – not because it will make you money!
At the same time, buyers need to be careful of homes which have been flipped by investors for a quick profit: they may have simply done the most visible work, leaving undone items which still need addressing, such as pipes, foundations, or structural items.
A few questions to ask yourself if you want to do a massive remodeling job (and buy a fixer upper):
- Do I have the time to oversee the work?
- Am I knowledgeable about construction? Or do I have time to research and learn prior to doing it?
- Can I do what I need and still put aside an allowance of 20% for non budgeted surprises?
For most buyers, changing paint, carpet, windows, appliances or counter tops is a big enough assignment. Rearranging floor plans and expanding a house is going to be too much work, cost, liability and stress for most.
Repair and staging advice for Silicon Valley home sellers
For most people who are selling Silicon Valley real estate, the house, townhouse or condo they are about to put on the market is the single largest asset they own. For this reason, maximizing the return on investment is extremely important. Most sellers avow that they want top dollar for their home. Many, in the next breath, say “I want to sell As Is and I don’t want to fix anything.” Those two, unfortunately, are mutually exclusive.
To get the best price for your property, it needs to be the most attractive to potential buyers for the money (even in a seller’s market). Often that means not just making the home attractive, with things like fresh carpet and paint (if needed), but worry free. First time home buyers are especially prone to worrying: worrying about hidden costs, how difficult it will be to fix problems, whether issues will come back once addressed, etc. A great example of this is water damage. If a bathroom has water damage, and the seller wants to sell the house As Is, the buyers will be concerned, naturally, that if they complete the sale without a pest clearance they will later find that the entire bathroom needs to be remodeled due to the previously unknown extent of the problem.
One of the most important things that sellers want to understand about home buyers is this: worried buyers pay much less for their homes than do confident buyers. For this reason, it is often best to get presale inspections and possibly have work done before a buyer ever crosses the threshold. A super clean, well presented home (appropriately priced) will attract buyers who are confident and in turn will pay more for the home.
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