Should You Spend Money Before You Sell?

It is easier to sell a house that is attractive to potential buyers, which means that you spend a little time and money on cosmetics. This is partly just a matter of making sure it is clean, the yard is neat, the driveway is swept, bushes pruned, and so on. Easily-fixed structural defects, like a loose shingle, should be fixed. It is a widely accepted fact that homes with furniture in them look larger. If, however, you are moving to another residence and plan to take your furnishings with you, arrange things so that you show the house before you move out of it.

Every house has defects, some obvious and others hidden. Both types will affect the price a buyer is willing to pay. It is a mistake to think that a potential buyer will assume that the only defects that exist are those that are visible. Serious buyers will most likely invest in an inspection by a firm that specializes in such services. Buyers that don’t retain an inspector will probably assume the worst about the unseen condition of the house.

There aren’t many buyers who will pay a price based on the assumption that everything they can’t see must be OK. Pricing the house on that assumption is a good way to keep it on the market unsold indefinitely. While you continue to pay for utilities, taxes and insurance, the condition of the house worsens and your Realtor loses interest in trying to sell it.

There are two circumstances that favor fix-up before sale. One is where there is a large variance in the cost of the fix-up, and a potential buyer is likely to over-estimate the cost. In the case of a septic system, for example, the cost depends on the condition of the soil, and if the seller knows that the condition is favorable and the cost low, it makes sense to fix it before sale.

The second and probably more compelling circumstance is where most potential buyers have the capacity to make only a small down payment, and are therefore not in a position to fund the cost of major repairs after purchase. By making the repairs before sale while setting a correspondingly higher price, a buyer is in effect financing the improvement in the mortgage. If a buyer with limited cash had to make the improvements after purchase, the financing costs would be substantially higher.

Sellers should undoubtedly order their own inspections, because if a house has significant defects, the smart seller will order her own inspection. And, in some cases, solicit estimates of the cost of required fix-ups. This will help in deciding whether the best arrangement is pre-sale fix-up, sale as is, or some combination of the two. Not to mention that a seller-ordered inspection will tend to equalize the negotiating power of the two parties.

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1 thought on “Should You Spend Money Before You Sell?

  1. I wouldn’t really pour a lot of money into a house I was selling. I think what I would do, even, before I started a remodel is call an appraiser and have him come over and show him my plans, and the materials, etc. and tell me what the changes would make in the appraisal. If the difference was “not much” then I wouldn’t.

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