Hypothetical real estate question

[Baz]

Joe and Bill each have identical homes. Both homes need $20 worth of work to bring them up to ideal selling standards. These repairs are ALL AESTHETICS! Nothing pertaining to roof, HVAC, etc. More like re-painting, flooring, sprucing things up here and there, etc.

The market shows their homes are both worth $100, if those standards are met.

Joe decides to list his house "as is" for $80.

Bill decides to go forward with repairs and lists his at $100.

Both houses sell.

Which party did the right thing for himself?

2nd question......what criteria should one use in order to make a decision like this?

Disclaimer: this hypothetical applies to a real life situation.....mine and my 3 brothers who will be selling our late mother's home. So thanks for any input here!

[Paul T]

Personally, I’d sell for 80 “as is” and let the new owners finish according to their own design preferences. If you update it, you are going to be forced to go neutral in terms of paint, wallpaper, lighting, whatever., so that you appeal to a broad swath of buyers. On the flip side, some people are looking for a house that is “done” and needs nothing, so I don’t think there is one right answer. Probably depends on the local market too and what the typical buyer profiles are there.

[aschen]

I think it depends mostly on how skilled and connected bill is to get good value for his 20$ dollar bill.

I think bill loses if he pays full retail but maybe wins if his second cousin knows a great floor guy and his MIL's best friend cuts him a great deal on paint, etc.

EDIT in your specific example, all else being equal I think Joe won. Same net, less work, less realtor fees, possibly better tax situation

[Baz]

Originally Posted by Paul T

Personally, I’d sell for 80 “as is” and let the new owners finish according to their own design preferences. If you update it, you are going to be forced to go neutral in terms of paint, wallpaper, lighting, whatever., so that you appeal to a broad swath of buyers. On the flip side, some people are looking for a house that is “done” and needs nothing, so I don’t think there is one right answer. Probably depends on the local market too and what the typical buyer profiles are there.

Thanks, Paul - makes a lot of sense.

Especially let the new owners choose the paint color and flooring options. I re-did the flooring myself 2 years ago but it's not a perfect job and I never got around to finishing the transitions. There's also a floral wallpaper band along most of the walls...and a million picture hanging hooks!

[jhynesrockmtn]

Lot's of factors. If it's an original condition and clean home in a desirable neighborhood, I'd probably not do anything. If on the other hand it's a more difficult sell, maybe more marginal neighborhood, house is rougher, etc. I might invest some in making it present better. Such a unique situation.

My son just sold his house. They owned it for roughly 3 years. It's in a fairly desirable area but needed some finishing. They painted areas of the deck and front porch that were a bit rough, finished cosmetics on the lower level bathroom, etc. They focused on the obvious things that someone sees immediately. They did not put new carpet in the upstairs, which it needs bad. Sold for $5k over asking during a crap time of year to list a house.

Best of luck, hopefully you can all get on the same page and have a good process.

[Baz]

Originally Posted by aschen

I think it depends mostly on how skilled and connected bill is to get good value for his 20$ dollar bill.

I think bill loses if he pays full retail but maybe wins if his second cousin knows a great floor guy and his MIL's best friend cuts him a great deal on paint, etc.

EDIT in your specific example, all else being equal I think Joe won. Same net, less work, possibly better tax situation

OK thanks - makes sense.

On your first point - that $20 includes getting the best deals/contacts/bang for your buck. Stretching that dollar bill!

[Crowbob]

I’d list it for $120 as is.

Sell at $100.

[fastfredracing]

I used to have this argument with my partner all the time .
He always wanted to go both feet in , and spend tons of cash, and get more money for the places . In the end, all we did was spend money at Home Depot and with our contractor buddy, and make a truck load of work and stress for ourselves .
I guess, its all just personal preference .
We sold a few all gussied up , and sold a few as is. It all came out in the wash in the end , just took longer

[look 171]

Too much to type.

The market is still hot throughout the country so what's target selling price?

Tax?

How much more does your agent expect to get between the two?

What the market like down there? Here, anything sells within one or two days if price right or cleaned up / remodeled. No one wants to spending anymore money to fix a tired old house even through it is all cosmetic. They are strapped with spending and are pushed to the max with their money.

For me, personally, I would fix it. Plus its tax deductible.

[Crowbob]

You buy a car all gussied up already. Guaranteed the seller put more money into it than he sold it for. Same holds true for houses.

Right now, around here, housing is insanely, irrationally expensive. Save yourself some time, money and aggravation. Sell it as is asking mildly above market value.

[Deschodt]

I've found out that despite all of HGTV's efforts, a lot of people have ZERO imagination when it comes to spaces and cosmetics. For a car, I'd be Joe and sell unrepaired. For a house I'd be Bill and do the work and probably get 110.

[911 Rod]

Put yourself in the buyers shoes.
They save $20 and can now do any repairs they want .... or not.
Also save RE fees on the $20.

Plus you know how much of a PITA it is doing renos.

Flog it for $80 is my choice.

[KFC911]

80 without even thinkin' about it ....

80 after giving it serious thought....

In a heartbeat

[GH85Carrera]

When I sold my parents house I put a sign in the front yard, for sale by owner. Anyone that called I told them I had never lived there, and it was being sold as is.

My wife wanted me to use a realtor friend of hers. I stalled on that. My wife had the realtor come look at the house and they suggested I totally gut the pink and green bathroom and totally redo the kitchen. I knew that was be a lot of money, and likely not fit what the new owner would want. Soon after a young man that lived nearby toured the house. He loved the old pink and green bathroom, and the kitchen. I sold it as is. I did hire the realtor with a flat fee of $1,000 to bring over the sales contract, and be at the closing to present the many dozens of documents that have to be signed by both parties. I walked away with a check from the bank that loaned the money to the young man.

I have thought a few times about knocking on his door to see what he has done to it. I did a drive-by and dad's once beautiful lawn was full of weeds and needed to be mowed and edged. I felt sad, but it was not my house anymore. I did not knock on the door. It is sold and gone. I split the money with my brother as my dad's will specified, and I added it to my retirement savings.

[Baz]

Thanks for all the comments and input, so far. Very helpful, guys!

[Otter74]

Which do you value more, your money or your time?

[Rodsrsr]

The $100 house will attract a larger pool of buyers and will sell quicker.

[Alan A]

Cheap fixed up houses sell easier.
The people buying them can’t afford to drop a bunch extra in renovations but can stack a bit more on the mortgage.

Expensive ones sell easier if they are cheaper. The buyer is likely to want to remodel anyway and likely has the $ to do so.

[911 Rod]

I’ve been looking to move and when someone says here is $80 house and if you sweat your balls off fixing it spending $20 you will have a $100 house I walk.
For pain and suffering it needs to raise the value to $120.

[herr_oberst]

Dollar for dollar? No way. Where's the upside?

I would say your time AND your money have to count for something. In the OP scenario, the 20 bucks spent has to bring 25 or 30 bucks; that's for the use of the funds, and then lets talk about the value of your labor.

If there's a scenario where you apply 20 bucks worth of elbow grease, and elbow grease alone, (in other words, you do the work) in order to get the higher sale price, then that's another story!