Method to the Madness
When selling your house, you will likely have three major topics on your mind: the time and effort to prep the house for sale, the amount of time it will be on the market, and the profit you can put in your pocket.
There is a quick way to avoid both the prep and market time, if willing to lose some of the profit. This method relies on cash buyers, who might buy a house at ~65% of the fair market value if the mortgage is paid, or just over what you owe on the mortgage. Granted, each buyer will have a different methodology for providing an offer that benefits their investment. Cash buyers are typically large companies that flip several properties, relying on bulk flipping rather than maximizing the profitability of any one house.
You might be enticed since you can potentially get the cash in less than 30 days, and the cash buyer might not require an inspection of the house – all of your headache gone, and very fast payment. BUT, a little bit of research will show you to be wary of cash buyers, as there is plenty of room for scammers. If you can afford the time and headache, you should be able to sell for more than the fair market value! Considering cash buyers means doing careful research to ensure they haven’t done shady deals in the past.
If you focus on profit, you will be selling by yourself or working with a cash buyer or real estate agent. Depending on the age and how well the house has been maintained, selling can require a range of investment to get the house off the market as quickly as possible. What should you invest in?
Cosmetics vs Structural Investments
Cosmetic upgrades can have a wide range of price tags that draw people in, but there is no one upgrade that works for all buyers and these investments can take cash away from much-needed structural improvements. “Structural” in this case is an umbrella term for structural, HVAC, and energy efficiency fixes. They are often expensive and not necessarily eye-catching as a means of selling a house, but deficiencies in these categories will be caught by home inspectors. Below are tips to help define your path:
- Hire a pre-sale home inspector to vet any major structural issues. If nothing is raised that would cause concern to a buyer, you’re good to go for cosmetic upgrades.
- If the inspector flags items like a failing roof, inefficient conditioning systems, plumbing problems, etc., you can be assured that any responsible buyer will also find these deficiencies. At this point, you should hire a contractor to help with pricing, and follow through with the fixes or consider deducting those costs from your fair market value.
- A real estate agent can take away some of the headache for you, handling things like listings, marketing, showings, and negotiations, but an agent is by no means required, and they cannot make decisions for you on investments. A local real estate agent should however be able to provide trends in desirable traits for current buyers.
Spend Wisely by Investigating ROI
There are several online services that can help you refine your market price, and there are also services that can list average returns on investments (ROIs) using a wide variety of criteria. It’s possible to find ROIs nationally, by region, by state, and even certain cities.
Common divisions of the US by region include the areas Pacific, Mountain, West North Central, West South Central, East North Central, East South Central, New England, Middle Atlantic, South Atlantic. The regional ROI information is better suited for those selling several properties in different markets who need to understand regional trends, while the individual seller will be much more interested in ROIs of specific cities.
A recent national survey showed that the highest ROI comes from garage door replacement, specifically replacing an overhead door with a four-section garage door. This project is a relatively low investment of approximately $3,500 (depending on the product and labor costs in your region) but has an ROI of ~97%. Replacing a garage door follows a common trend among the top ROIs: curbside appeal. Exactly as it sounds, curbside appeal is how alluring a house appears to a passerby. Similar investments include replacing worn sections of vinyl siding (76% ROI), replacing 300 square feet of vinyl siding with stone veneer (75% ROI), and replacing the front door with a new door and matching panels and glass on each side (72% ROI).
If you live in an area where buyers are very energy conscious, investments that lower the operating cost of a house can be a big seller. Since these adjustments are not usually visual, it’s important to prove the worth of your investment. For instance, if you replace old windows with insulated windows (73% ROI), you would want to show how the heating bill has decreased and what the payback time is. Not only is this attractive to some buyers, but you will watch your investment pay for itself if you find yourself living in the house for longer than expected while it’s on the market.
Looking Your Best
When you go for a job interview, you know to look your best. Imagine that your house is being interviewed! Most would consider the word “cosmetics” to refer to things tacked on to improve appearance, almost as if covering something up. But what about improving appearances by reduction? If you can’t invest in expensive cosmetic improvements, you should at the least invest time in removing clutter and cleaning the house. Some real estate agents will recommend storing as much as one-third of your possessions – focus on removing items you don’t need on a daily basis. Placing those items in a mobile storage unit such as a Pod or U-Box allows them to be transported to your next location when needed. Removing family photos helps potential buyers imagine themselves in the space. Keeping spaces clean, especially bathrooms and kitchens, will also give a favorable impression to visitors. Fresh paint, especially lighter, neutral colors that can make spaces feel larger, are another plus. Real estate agents know the importance of good photos for online marketing and pamphlets. This is sound advice to those selling by themselves; poorly lit, low quality images of messy spaces will never be the click bait that professional photos are.
Conclusion
As one begins selling their house, they will be hammered with advice from several parties. Real estate agents and cash buyers will do their best to convince sellers that they provide the best service. But by following a few simple steps, one can stay ahead of buyers and sell their house quickly at a good market value: Hire a pre-sale home inspector to vet any major structural issues, estimate costs with a contractor and discuss these issues with a real estate agent (if using one), spend capital wisely to invest in cosmetic upgrades that boost curb-appeal, and finally, keep an uncluttered house with a clean, modern kitchen and bathroom.
If you’re looking for someone who can work with you to make sure you’re getting the best deal in the Modesto, Turlock, or Central Valley area, we’d love to work with you.
Seth Choate is a Real Estate Professional from Turlock, CA who’s obsession, beyond helping the community find homes and deals that best fit their situation, is becoming his best self. He enjoys challenging himself with 5K runs, and finding news ways to exhibit infinite love for his beloved wife and children. A man of faith, Seth believes that good things come to those who work hard with honesty and put integrity first.
