In this Hot Sellers’ Market, is Updating a Home Prior to Sale Advisable?

We are currently in the midst of a very hot “sellers’ market” in the Charlotte metropolitan area.  Like many other regions of the country, inventories of homes for sale remain low and buyers find themselves competing to find good values.  A question frequently asked by sellers in this market is: “Should I spend the money to update my home prior to marketing it for sale?  Won’t this maximize my final contract price?”  The answer to the second question is probably “yes.”  But whether it is advisable to spend money on updates, how much money to spend, and whether those expenditures will increase the final contract price sufficiently to make those expenditures worthwhile are more complicated questions.

The answers depend on a lot of variables, such as: Where is the home located?  Is it an older “original” home located in a neighborhood that is seeing a lot of revitalization?  If so, more extensive renovations may be advisable.  The seller would really be taking his or her own home of many years and doing what many flippers do—transforming an “old original” into a desirable modern turnkey property.  But larger renovations only make sense if they are very carefully managed and the home is otherwise positioned to take advantage of a revitalization trend in the particular neighborhood or area.  It doesn’t make a lot of sense to take a home that is worth $250,000 “as is” and spend $50,000 to give it a market value of $300,000.  You would obviously just be breaking even.  But if you are capable of managing the work—using contractors you trust and whose estimates and work you can rely on—and you can take that $250,000 home and transform it into a home you can realistically expect to get $300,000 for after spending $25,000 on updates, the money may be well spent and the aggravation may be worth the reward roughly $25,000 reward.

However, if you have a relatively new track home that has seen ordinary wear and tear over five or six years but has otherwise been reasonably well maintained, it probably does not make sense to tear out the kitchen or renovate bathrooms.  You might make the home look “flashier,” and it will probably sell faster at its market value, but it is very unlikely—even in this sellers’ market—to sell significantly above its market value.  In this case, refreshing interior paint may be advisable and carpet cleaning or carpet replacement might be a good idea, but larger expenditures are not likely to move the final sale price up enough to make them worthwhile.

As in most other undertakings in life and in business, the key to making a truly wise decision on how much to renovate a home for resale is correct, complete and current information about the particular home and recent surrounding comparable sales. If there is such a demand for homes in the same neighborhood or area, it may make little difference to the pool of interested buyers whether the home has been significantly updated.  In fact, it might even be advisable in this market to take a home that the data indicates should have a fair market value of $250,000 “as is” and list it for $260,000 or so without spending any money on updates.  The amount of interest received may help the seller make a decision on whether they want to go through the time, expense and stress of managing contractors and renovations.  The seller might well find that he or she receives multiple offers on that $260,000 listing price in this market, and perhaps even gets an offer above the listing price.

So the honest answer to the question of whether and how much to update a home prior to resale in this hot sellers’ market is “it depends.”  It depends on the facts and recent sales data surrounding the particular home.  The best advice I can give the seller is to partner with a competent professional to gather the information you need to make an informed decision.  Doing so will enable the seller to maximize his or her return on this very large investment.