What home improvements have the best return on investment?
The more you spend on renovations, generally, the less those repairs will be likely to pay off when you sell the home. Fortunately, many low-cost repairs and renovations can help a home sell. If you have experience with home repair or improvements, the DIY route can save money on labor costs. If you hire contractors to perform any improvements or upgrades, using a construction contract, such as a Painting Contract or Home Improvement Contract, makes the costs, services, and other terms, such as the timeline for completion, clear.
A home inspector can tell you what repairs your home needs. A high priority for a home seller is to make sure everything is in good working order. Nothing can stifle a buyer’s interest more than learning of faulty plumbing or substandard electrical wiring. You can also ask a real estate agent to perform a market analysis to help you identify improvements that have the best chance of boosting the market price and increasing your ROI.
Renovations that could have a good ROI include:
- Repainting the home in neutral colors.
- Replacing appliances and fixtures that no longer work.
- Checking drawers and cabinets for water damage and other problems.
- Making sure all doors, closets, cabinets, and drawers open and close smoothly.
- Deep cleaning the carpets and flooring.
- Bringing the electrical panel, circuit breakers, and other utility systems up to code.
- Installing modern light fixtures to create a “new home” look.
The pictures for your listing can help to drive interest. By repainting with neutral colors, deep cleaning, fixing anything cosmetic, and staging your home, your listing photos are likely to drive more interest, which can help lead to a sale or even a higher selling price.
Is a big remodel worth it before listing in a buyer’s market?
Home sellers rarely recoup all the costs from a major remodel. If you have owned your home for a very long time, or own a fixer-upper, this may be an exception. If you were able to purchase at a bargain price, have experience doing renovations yourself, and can obtain a premium selling price, it can be worth it. Checking with a local real estate professional, however, to learn about comparable listing prices and actual sales prices is important to understand whether you can expect to profit. Otherwise, your best bet if you own a fixer-upper may be selling to a buyer who plans on making the repairs themselves.
Small upgrades and minor repairs have the best ROI in most cases. You might try a fresh coat of paint, a new garage door, or improvements to the landscaping. The goal is to make a memorable first impression on potential buyers.
If you decide to take on a big project, ask your real estate agent what they think will have the highest ROI based on what buyers in your area want. They may have insights from their experience in your local market that can help you maximize your return.
What are the most important home repairs to make before selling?
Your instinct might be to focus on making the house look appealing to buyers. You may be better off, however, starting with making sure everything in the house functions as it should. A buyer is likely to require a home inspection before closing. If the inspection reveals problems, and you do not make the repairs identified by the inspection, your buyer may insist on a discount to the purchase price agreed to in the Property Sale Agreement. In a buyer’s market, you might not be in the best position to negotiate.
You can save yourself and your potential buyer’s time by tackling essential home repairs first, such as fixing any of the following items that may require attention:
- HVAC system.
- Flooring, including carpets and wood floors.
- Plumbing, including faucets, toilets, and drains.
- Windows, doors, locks, and trim.
- Electrical systems.
- Roofing, such as shingles and flashing.
If major repairs are needed to any of the above, the sale price could suffer. Buyers might not place as much value on your home if a home inspector finds numerous problems, or may want to back out if those problems were not disclosed upfront. Disclosing known issues may discourage some buyers, but doing so builds trust, and allows buyers to make offers that take into account the cost of significant repairs that may be required.
Are there benefits to taking out a loan to remodel or renovate before selling?
A home equity loan or home equity line of credit (HELOC) can help pay for your home repairs and renovations. Whether it is a good idea depends on numerous factors like your home, your finances, and the local market.
A home equity loan allows you to borrow against the equity you have built up in your home. Your equity is equal to the difference between the home’s market value and the outstanding balance of your mortgage. If your home has a market value of $500,000, for example, and your mortgage has a balance of $200,000, you have $300,000 in equity. A home equity loan provides a lump sum that you can use for repairs. A HELOC lets you borrow money as needed up to a certain amount, somewhat similar to a credit card.
Using a home equity loan or a HELOC offers some advantages:
- The loan is secured by your home, so you do not have to put anything else up as collateral.
- You may pay a lower interest rate than for other means of financing, such as a personal loan or credit card.
Home equity loans also have some drawbacks:
- Because your home secures the loan, you will have to repay the balance in full when you sell.
- The amount you can borrow is limited to a portion of the equity in your home. This is typically around 80% of your total equity. This might not be a problem if you have substantial equity. If, as in the example above, you have $300,000 in equity, your home equity borrowing would be limited to $240,000. If you have far less equity, your borrowing would be much more restricted.
- As long as both your mortgage and the home equity loan or HELOC are outstanding, you must make payments on both.
If you have more questions about preparing to sell your home, reach out to a Rocket Lawyer network attorney for affordable legal advice.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.