We’ve previously written about how you can decide if it makes sense to renovate a home or not, as well as what renovations give you the best return.
Let’s consider a question we are often asked by our clients – is selling their home “as is” a good idea? While we would say that in general the answer is no, there are three situations where foregoing renovations makes sense.
1. Before a Market Shift
It can take a significant amount of time to make a home look it’s best. In the weeks or months that you are planning, booking contractors, ordering supplies and doing the actual renovation, the market can shift.
Whether it is a seasonal shift, where you miss the hot fall market and end up selling in the dead of winter, or an event-driven shift, such as new government measures designed to cool the market, waiting to sell can sometimes cost you money.
If you have the ability to renovate as well as hold onto the renovated home until the market is hot, then it almost always makes sense to do the renovations rather than sell “as is”. If, however, you are working to a deadline that doesn’t allow you to wait once the renovations are done, you need to carefully consider if there is enough time before you’re selling in a market you’d rather avoid. Remember that renovations often take longer than expected, so make sure to build in a time buffer to your plans.
2. When Your Home is Among the Lowest Price in the Area
In any street, neighbourhood or building, there are significant differences in value of houses or units.
Whether it is size, features or location, there are often situations where the range of sale prices can be significant, with the most expensive home sometimes double or even triple the price of the cheapest option.
If your home is at or near the bottom of the price range for your street, neighbourhood or building, selling it “as is” can be a very effective strategy. Put simply, buyers who want into your area often have the budget to both buy your home as well as do the renovations themselves. It makes financial sense to them to spend the additional money after purchase as they are getting into the area that they want at a combined investment they can afford.
Conversely, if you are at or near the top of prices in your area, selling your home “as is” is not likely to be effective. Buyers who are paying that price in your area expect a home that has an equally high level of finishes.
3. If There is Infill Potential
The final situation where skipping the renovation may make sense is when your home has infill potential. Infill refers to any project that builds new housing in an already established neighbourhood. In this case, we’re talking about a street or neighbourhood where the older housing stock is slowly being torn down and replaced with new, modern style homes.
If you have a mix of housing types and age on your street, with recent new builds having taken place, and you have a home where you haven’t done significant renovations, you might consider skipping even the cosmetic updates and just sell “as is”. The likely purchaser is either a builder who wants to tear down and build and sell a new home on your lot, or an end-user who plans on hiring a builder to do it for their own use.
It isn’t quite accurate to say this means you are selling for land value only, as it can be quite difficult to get a mortgage on a vacant lot. In the case where you sell your home “as is” to someone who plans on tearing it down, your existing home allows for a conventional mortgage to be secured, at conventional mortgage rates.
While it is often smart to put your best foot forward when you sell your home, it can sometimes make sense to skip the renovations and just get it on the market. If you want to talk about which approach makes sense for your home, get in touch.