In the current market, would you still fix up a house before selling it?

[stealth]

We bought our 30yr old house about 4yrs ago in rough shape with a lot of potential, as a fixer upper.
We're prob about half done, but theres still some pretty major things outstanding that we havent done like a totally new kitchen (including tiling into the hallway and entrance), re-shingled roof, new eaves and new windows all around and entrance door ...But now my wife found a new house that has caught her eye.

So my question is, does it make financial sense to do these things even if it means paying someone to do them, or would we be better off leaving them and listing the house as is?
My concerns about doing the upgrades now is 1) what if the market softens and we dont get our money back from them 2) Even if the upgrades "pay for themselves", are we really getting a net loss, because the incremental value from them ends up being taxed and increased real estate commission? 3) the upgrades would be paid for on a line of credit, which until the house is sold, would count against me for qualifying for the mortgage for our next house (significantly more expensive...about 2x).

Your input would be appreciated.

[MaDgamEr]

The money you make off the increased value of your home when selling is a capital gain (provided you have owned it for at least 1 year) and therefore you do not pay taxes on that money.

Can't help you with the rest of your questions though... But if you're paying someone to do it, you will net less financial gain. Reshingling is a pretty straight forward job as long as you know what you're going, have a pneumatic roofing nailer and a few spare hands. If you do, you'll pay 1/3 to 1/4 of what a contractor will quote you.

[Tijuana]

It all depends on what people are willing to pay for it. Some are looking to buy a house to *fix up* for a lower price, while others want a fully furnished one for alot more.

[urban1]

In a hot market even a below average, run-down home can get good money when buyers out numbers sellers and inventory levels are low.

In a slow market, sellers have a lot of choice and a house needing a lot of work to bring it up to average condition will need to be priced accordingly.

Do your own research or talk to a real estate agent to get some advice on what would be the most important factors that would be bringing down the value of your home and would prevent a quick sale.

We bought our 30yr old house about 4yrs ago in rough shape with a lot of potential, as a fixer upper.
We're prob about half done, but theres still some pretty major things outstanding that we havent done like a totally new kitchen (including tiling into the hallway and entrance), re-shingled roof, new eaves and new windows all around and entrance door ...But now my wife found a new house that has caught her eye.

So my question is, does it make financial sense to do these things even if it means paying someone to do them, or would we be better off leaving them and listing the house as is?
My concerns about doing the upgrades now is 1) what if the market softens and we dont get our money back from them 2) Even if the upgrades "pay for themselves", are we really getting a net loss, because the incremental value from them ends up being taxed and increased real estate commission? 3) the upgrades would be paid for on a line of credit, which until the house is sold, would count against me for qualifying for the mortgage for our next house (significantly more expensive...about 2x).

Your input would be appreciated.

[CSK'sMom]

That's a tough one Stealth. Kitchens sell homes, as we all know. I think if it was me I'd be tempted to at least do the kitchen and the flooring but I wouldn't go all out. I'd try to keep the cost relatively low. Think about using a stock type cabinet (Mills Pride at HD for example) and maybe instead of ceramic think about a decent vinyl just to clean it up and have the listing say "new". As MaDgamEr said, the roof can be pretty straight forward to do yourself with some buddies. I'm not sure I'd do the windows or door though. A coat of paint does wonders for doors.

Who would you be marketing the house to? First time buyers won't be looking to do any major renos or work. Families want a usable kitchen from day 1 and will usually make an offer reflecting the work that needs to be done. They also tend to over-estimate the value of the work that needs to be done. They will look at it and think it's going to cost $30-60k to do the kitchen when it can be done for less KWIM? A lot will depend on your neighborhood as well. If many of the house have these things done your house will be worth considerably less than they are. The lower price can attract buyers but it can also lead to lots of folks looking at the comps and second guessing about the work that needs to be done on yours.... This is one of those age old questions that homeowners go through...

[stealth]

That's a tough one Stealth. Kitchens sell homes, as we all know. I think if it was me I'd be tempted to at least do the kitchen and the flooring but I wouldn't go all out. I'd try to keep the cost relatively low. Think about using a stock type cabinet (Mills Pride at HD for example) and maybe instead of ceramic think about a decent vinyl just to clean it up and have the listing say "new". As MaDgamEr said, the roof can be pretty straight forward to do yourself with some buddies. I'm not sure I'd do the windows or door though. A coat of paint does wonders for doors.

Who would you be marketing the house to? First time buyers won't be looking to do any major renos or work. Families want a usable kitchen from day 1 and will usually make an offer reflecting the work that needs to be done. They also tend to over-estimate the value of the work that needs to be done. They will look at it and think it's going to cost $30-60k to do the kitchen when it can be done for less KWIM? A lot will depend on your neighborhood as well. If many of the house have these things done your house will be worth considerably less than they are. The lower price can attract buyers but it can also lead to lots of folks looking at the comps and second guessing about the work that needs to be done on yours.... This is one of those age old questions that homeowners go through...

Thanks, you make some good points. The kitchen is REALLY rough, so it prob should be done. I guess I worry that a new buyer might've wanted to do something different eg. open up a wall for more of an open concept feel, or knock down a wall to expand it, etc. I guess, I'll downgrade some of the materials I would have used for the kitchen and re-do it more conservatively than I would have if it were just for us.
FWIW, the house is a 4 bedroom, 2.5 bath, approx 2200 sq ft, with an IG pool, in a typical Mississauga residential neighborhood, near most of the major highways. If we sell, it would have to be in the summer, as yards with pools look like crap any time other than summer

Thanks everyone else as well.

[Frankie3s]

Thanks, you make some good points. The kitchen is REALLY rough, so it prob should be done. I guess I worry that a new buyer might've wanted to do something different eg. open up a wall for more of an open concept feel, or knock down a wall to expand it, etc. I guess, I'll downgrade some of the materials I would have used for the kitchen and re-do it more conservatively than I would have if it were just for us.
FWIW, the house is a 4 bedroom, 2.5 bath, approx 2200 sq ft, with an IG pool, in a typical Mississauga residential neighborhood, near most of the major highways. If we sell, it would have to be in the summer, as yards with pools look like crap any time other than summer

Thanks everyone else as well.

Before you do anything you really should talk to a realtor and get their opinion on what might need to be done minimally to get it sold. If they're good they will be able to guide you with this.

[1yellowdog]

I agree with talking to a realtor as they know the market in your specific neighbourhood. My parents are thinking of selling and have lived in their house since 1979 with no updates or anything. The house is in good shape, just a bit dated. The real estate agent said not to bother doing anything as they won't get anything out of it in terms of more money. They can save their money now on fixing up their new place.

[mathewvc]

if you want to make the most money... finish it. it's a risk but it can pay off a lot more. people looking for houses that are fixer uppers aren't too interested in putting big bucks into the purchase. kitchens, master bed and bathrooms are the key areas to work on. it's hard to say without prying too much info, so your best bet would be to talk to a Realtor and check out some comps in the area to see what they've done.

[Dustbunny]

If it helps, I'll tell you about my last house, what I was told, what I did, how it turned out.

Two years ago, 1960 bungalow I had purchased from my mom so it hadn't had any upgrades really since the 80's. Nice neighbourhood, well established, just starting to turn over to flippers and those who were knocking the houses down to the foundations and putting in some real beauties. Basically a neighbourhood where there was a real mix of young families, downsizing boomers, seniors, professional couples. There were almost no first time home owners because of the prices, but lots of second and third time buyers.

That house was at the point where it really was looking tired from windows to fence to carport to floors to kitchen and basement. It all was needing help. I spoke with a lot of Realtors who were mixed in their opinions. Some thought I should invest about $70,000, do the kitchen and some other things to snaz it up, others told me to leave it as it was and let a flipper have it. I really got the feeling that last bunch had flippers in their pockets and so a fast and easy sale more to their benefit than mine. I also thought the first bunch were off the mark as I was pretty convinced there were also people like me around who want no part of a house that has already been totally fixed up since the chances of having the same taste as I do is slim and why would I pay for extras I don't like?

Anyway, what I did was start chatting people in the neighbourhood up when I was out walking my dog. I wanted to know what attracted them to their house. Sure enough, most of them wanted homes they could live in comfortably while fixing it the way they wanted over time. Most said they would rather an old basement they could pull apart than a brand new one which is more difficult to redo. Same with kitchens, bathrooms, knocking down walls etc. Basically they wanted a solid, well maintained house they could make their own, at their own pace, while they lived in it.

I spent my time painting, pulling up carpets to reveal wood floors, new floor and countertop in the kitchen, new floor in the bathroom, new lights in all rooms. Basically I updated with standard materials that no one would feel bad about ripping out if they didn't like them (which many would if for instance I put in a granite that didn't suit) but they were nice, mid priced things that didn't look like they came from the clearance rack. I had the trees professionally trimmed and had a stager (supplied by the Realtor I chose) come and tell me what colours to paint, what stuff to clear out, and most importantly (to me) tell me what things to change that I didn't even notice anymore (like old house numbers). I think I spent about $3,000 in all so not much (and there were already new (1 year old) appliances I put in when I purchased so that helped too). It's really amazing what some fresh paint on the walls will do when there are old ugly tiles on the backspash and icky peach and icky aqua tubs to deal with. It was a matter of downplaying the bad vs replacing it in those cases.

Now Calgary had just hit it's stride in a hot market and that house was on a great lot in a good neighbourhood. It sold in one weekend, bidding war, for more than any house in the area had sold for by a long shot and that included the granite countered, totally redone places. In my heart of hearts, I know it would not have made a penny more had I invested the $70,000, nor would it have sold faster (which is typically a good reason when in a normal market but it doesn't help get your investment back).

What I am trying to say is do your own research vs only asking Realtors who may or may not give you good advice. Bring the house up to date, vs upgrading things so whoever is buying knows there is good wiring, furnace, and no major expenses right off the bat. If you go doing a lot of work you may not recoup the money and you may turn off buyers who would rather pay to have their own tastes reflected. A decent house which can be lived in is worth the same as one that is remodelled generally (or so close it's just not worth the expense). I follow prices and really, unless you have already done the fixing up or have a heap on your hands, it's not worth a big investment.

For sure, get rid of any problems like ratty floors and such, but just get easy decent replacements vs spending time redoing ceramic or marble tiles. Do the fixes you see mentioned most on MLS like making sure they can say you have 100 amp electrical (insurance insists on it now as a min.), newer furnace, hot water, freshly painted, etc. Have your yard brought up so it's a total wow because the exterior can be very powerful in selling in the summer and doesn't cost all that much considering what it means to a buyer making an offer.

You might want to see if you can get a professional stager in (they cost about $100 - $150/hr and can be had for a 2 hr consultation) to go through the house and tell you what they think. They know what buyers like. I swear that stager I had saved me a lot of work as I was totally prepared to paint the kitchen cupboards (major work) and a few other things she pointed out were not needed. I really did end up spending the time and money where it was most needed and it paid off for me (and saved me time and money I was ready to spend that would have made no difference). She started out at the curb and just kept pointing at things, suggesting things, all through the whole property and house and it was not much like any of the selling shows that are on TV. It was a real education to see how that all really works.