renovation for selling home

Hey guys, Hope I'm posting this in the right section. I have a broad question and I hope you guys can help. I purchased a home 2 years ago and my wife and I would like to sell now, however we're first time sellers and could use some advice.

We want to increase the equity by renovating, but we want to maximize our return. So we're wondering, what renovations would give us the biggest bang for our buck? What areas of improvement around a home usually bring a higher valuation when the home is assessed?

I would like to renovate the back yard, take out all the cracked cement and plan t grass, create a nice brick walkway, maybe put in an outdoor fireplace, etc. is this a good place to start? the inside of the home is pretty new still, renovated just before we moved in.

Should I be doing additions to the inside? Working on structural objectives instead of the backyard? We do have a couple small cracks in the cement foundation, a few rusted plumbing pipes under the house, etc. Should those come first?

Should we have a contractor come over to look around and give us suggestions on what would give us the best return? My concern is he'll be more interested in making his own best return. How do we handle the process?

Ideally, we want to take out a $10-20K loan and hopefully add $30-50K additional value to the home. Is that a reasonable expectation?

THANKS!

I will offer my advice and also welcome you to the forum.

So much depends on so many things. Let’s start with your house and location and how it compares to other homes in that area. Are you above or below the median price point? How is the housing market in your area? Is it a buyer or seller’s market? When you bought your home two years ago do you feel the price then to now has been stable? Do you feel there is increases in equity just do to the improved market? The reason I ask is often the break-even point is more than two years.

Curb appeal is very important as is back yard appeal. Home staging is also important. Anything that is visible is important as are aged features. Remember you want your home to appeal no longer to your tastes but to the tastes of the masses. Neutral pallets of colors and design flow from one room to the next is important.

I would say yes a poor cracked walkway should be fixed or replaced. Landscaping should be all perfect. Roofs and gutters people look at closely. Then inside the kitchen counters and fixtures make a huge difference. Overall fresh paint if needed carpets looking spotless.

I would suggest going to a few open houses around and get a feel for the reaction you have to how others do it will tell you a lot.

As to spending 10-20 hoping to get 30-50 would be a stretch in most markets. Unless you do the work yourselves and then 10k will go a very long way. If you are at the lower end of the market in your area and housing is in demand you select the right places to put the money and try and do some of the work yourselves you should get your investment back and then some. And if nothing else you will turn your place over sooner and that’s also something important to think about.

Good luck and give us more input maybe some photos to get a better feel and you will get lots of help here.

Welcome to the site, No quick answers for that.
Find the best home inspector to do an inspection. Repair and document everything that a smart buyer would use to drive the price down. Use a realitor to do a comparable and they will give you advice on short comings. Then go to open houses and see how the other half live. You want to look at comparable houses a little cheaper and a little more expensive. That will give you an idea what needs to be done to bring it in line with the higher end of the market. Once you have all that information, you can come up with a list of the things that should be done and you can do a budget for that. Spending the money and doing the work still doesn't garrentee the sale. Sometimes you can do better by doing this great report and listing the house on the high end with a cash back to the buyer do do their own improvemnts. This opens the market to more buyers, like the home handyman or the people that would use the cash back for downpayment or the people that would rip out your back yard just to make it the way they like it.
You should be able to get the extra you are looking for without paying interest on a loan.

Some great advice, thanks so much guys!

In another forum they're telling me to hold my money because renovations rarely if ever help a seller break even, let alone bring an ROI. So now I'm a little more worried.

Additional info: We're in Los Angeles. We purchased this small 3 bedroom, 2 bath home on the west side for $320K 2 years ago. It's 6K sqft lot, 1400 sqft house, 2 car separate garage that is about 900 sqft. the biggest eye-sore is the back yard, which is about 500 sqft of cracked cement inside chain linked fence. It's terrible.

For what it's worth, Trulia and Zillow have our home estimated now at 390-450K. An agent who recently sold a home very close to us with the same specs says we can get $400K, no problem. Homes around us are selling in the 350+ range now, and they are not as nice.

Renovate? Or just clean it up and sell?

We really want to get out of this neighborhood, a lateral move is fine as far as size, and hoping to have a $20K (ish) profit to invest into the new home.

Any thoughts welcome!

If your house is already above the average for the area. you want to be real carefull about spending any money. Cleaning up and removing broken stuff might be the key.

Your post reminded me how different this country we live in is from east to west and north to south. We just bought a somewhat distressed home for 24k we are living in now and put in maybe another 20k and a lot of DIY labor to get a really nice home along with at least tripling the value in one year. But even at that housing is so low priced here the equation and math don’t even compare to the west coast. Our goal wasn’t to make money or resale just to make a payment free situation for now.

I guess the math should include how big of a dent or percentage the investment money is of the total selling price. In our case 20k was almost equal to the purchase price 100% where in your case 20k would only be about 6% investment. In all cases sweat equity attaches the same cost of zero and I don’t think a gallon of paint costs that much more where you are than here. So with the value of a home based so highly in supply and demand it’s very hard to say. I’m assuming labor costs are higher there as well.

Neal made some really good points from the financial side as well as testing the waters around you for a feel of what your improvements will return.

Bud: It's hard to get the head around 24K when people buy teardowns for $1m and the framing lumber cost might be $20 to $30K. The OPs lot might be worth more than $200k

I agree with what the others have posted, and would also recommend going to some open houses in the area or just look at local listings and see what you're competing against and the price ranges.

Don't go throwing money at things that won't increase the value. And, cleaners, elbow grease and no clutter go a long way in making things salable.

Several homes in my area of similar size have been selling for 350+. Ours is nicer than most of those.

I think the plan is to do the backyard myself, spending a few grand, if anything just to give it a better aesthetic appeal. It's just awful as it is right now. Hopefully come out of this 20-30K in the green to find a new place.

Neal: That was kind of my point the value of the land can’t be improved no matter how much improvements are made to the structure. In the example you made as a teardown sale a person would be wise to do just the opposite of fixing up the structure they could salvage it prior to sale and make money on it and at the same time make the property more attractive to a buyer without the structure. I’m not saying the OP is in that situation but I know in high demand areas where land is a premium it goes on every day.

I was just making the point it’s really hard to apply any kind of formula to this without taking into account a lot of factors that first don’t seem to factor in. I gather from watching the house flipper shows on tv they think they have it figured out and when watching them based on reality prices here and the overall market the west coast model would have them bankrupt in no time.

I think the OP is on to something if they can do the cleanup work themselves spending less and going for the most bang for the buck they have a gut feeling about adding some value. And it really boils down to a gut feeling about this stuff. You never know what will motivate a buyer. I had a friend that had a really nice house with a beautiful in ground pool and in trying to sell it he heard over and over we would buy it if it didn’t have that dang pool. Around here a pool is a negative. He filled it in and capped it making a patio and the place sold for asking price right away.

A friend spent a 100k to get top dollar for his parents house just to see it torn down for a monster house to be built.

Generally people spend as little as possible and only on what is needed.

Example you buy a house for 200k, you upgrade the heating and cooling, new deck, painting etc. It may cost you a 20k with a contractor but you house may still only be worth 200k or maybe just 205k now. Assuming the market stays they same.

Everything needs to be maintained. If you think of everything that needs to work properly in a house, it can be a full time job. If you buy a house at low price and do all the work your self you will make money but probably get paid less if you just found a renovation job.

Other than that if you have architectural and design skills you could have a lot with creative ideas. Keep in mind a lot of people have engineering degrees, architecture degrees and design degrees and they still don't know anything.

How your house looks invites buyer interes and speeds the sale process. Overdoing the fix-it's is a money loser ... So, be smart about what you do. Think of it as a part of "house staging" which goes deeper. There is also a tax difference between a repair and a "betterment." The latter is included in the basis of the house ... thus reducing your tax liability ... just don't get carried away.

Start buy doing some tours of competing houses for sale. Carefully note the upgrades, deficiencies, significant add-ons ... This is your competition if you want top dollar. How does your house measure up to the competition? Consider their asking price ... do you have the dog on the block which could be made competitive at a much higher opening bid?

Lets start with repairs ... Problems with the house which would diminish the buyer appeal should be fixed. Drywall cracks due to typical sagging? Fix. Broken/cracked driveway or walkway? Fix ... but unless the area supports it, upgrading to interlocking pavers might not be recoverable. Plumbing leaks? Fix, particularly the main, the pressure regulator, run-on toilets, dripping showers ... Check garbage disposal for leaks/functionality ... same goes for dishwasher. Change out faucets? Probably not, unlesss yours are rusted and pitted. Eradicate any surface mold with careful use of bleach or special purpose remover BEFORE the real estate agent does his initial assessment. If he sees "MOLD" he may require you to disclose what is not truly a problem.

Dated electrical fixtures? Leave, unless all the competing houses have all dumped the 1980's brass fixtures ... Replace with LED bulbs? No, you will get zero payback for "green." Add security lighting outside? Maybe ... depends on the competition and how handy you are at adding such fixtures.

Carpet/flooring? Expensive items which may or may not get any return but could speed the sale (possibly bidding war). You have to compare your place against the other housese for sale. Laminate is popular now and easy to install. However, most will tell you you cannot get your money back, even if you DIY.

Interior paint? Invest in neutral colors, removing your custom lime green touches or left overs from the "Southwest Look." Make sure all traces of grease, grime and wear are covered. Pay attention to window sills ... use semi-gloss, not flat paint. Check for mildew or mold in the windows ... wipe it out!

Exterior? Investing in a major landscaping overhaul is a loser. However, a serious cleanup, hedge trim, lawn rejuvenation, and spot color planting for the Spring is a good idea.

BEST OF LUCK ... and bring your before-and-after pics back to this site ... we love to make fun of newbies!

Just me, but if I were selling, I would keep my improvements visual and cheap. All inside walls painted. All floors cleaned or refinished. Yes, patch the sidewalk. Even a meager kitchen, if clean, will make a good impression.

The last time we sold, we painted all walls, painted the eaves. I refinished the wood floors myself, painted the basement walls, floors, and steps. I put a new inexpensive sink and counter top on our small kitchen sink counter. I doubt we put more than $500 into it all. It looked clean as a whistle, even if it was not much of a house. The house sold in a week after being shown twice.