Okay I just asked my realtor daughter, who knows the region. She’s seen it go both ways. Sometimes the teardown companies have offered her clients far less than a person who wants to live in it, even taking into account the cost of repairs. Sometimes it’s pretty similar. In general, she says to have done the simplest, easy things to make it look nice such as a quick paint job and pulling up rugs.
This is very true in a lot of the US right now. People either tear it down completely or extensively remodel. Know the area.
Very much this. If cash is needed before he passes, get a new mortgage.
Did you read any of those links?
The real estate agent’s commission is ordinarily 6%. The first article you link’s no. 1 recommendation is to put in a home office but offers no numbers. The same link’s no. 2 recommendation is to finish the basement for a 75% ROI. That means losing 25% on the investment. The second article you post has a maximum potential gain of 2% over the cost of the renovation for a minor bathroom remodel. That means if he puts $10,000 into the renovation, the home price will increase by $10,200. The commission on that increase in price will be $612, so in the best scenario, they will lose $412 by doing the renovations. The return on investment just drops from there. I’m not reading the rest of the articles because you either failed to bother reading the first two or misunderstood what they were saying. I don’t think you’ve found any support for the idea that homeowners should do any renovations before selling their house.
Maybe doing the renovations will reduce the time from listing to the time of sale but I suspect that is more than offset by the additional time it takes to get the listing up because you are waiting for contractors to show up and do the work.
You need to go take some finance classes if you think that’s what it means.
You need to read the article and then the link. The article says, “Finishing a basement of 400 to 1,500 square feet has a potential ROI of up to 75%, according to data from Angi.com.” That sounds promising. But that’s not a return above investment, it’s the return on investment. The source of that number (angi.com) says, “On average, finishing your basement will provide about a 70% return on investment, which means if you spend $20,000 to finish the space, your home value should increase by an average of $14,000.” Wait, that means you lose a bunch of money finishing the basement. Tell me where I misunderstood the bullshit cites you failed to understand. Or frankly, to read. And trust me when I say that my training and experience in finance likely puts yours to shame. I’m done teaching you anything.
Yes, this is an important point, unless the money is needed before that. However, your FIL’s basis also updated when your MIL died, assuming they were joint owners of the house. His original basis is $8,000 and Mom’s was $8,000. If Mom died when the house was worth $600,000, then FIL’s new basis is $308,000 (or is it $316,000?).
There are also no capital gains on the first $250,000 of profit, and if your MIL died within the last 5 years (3? look it up) then he can still take the married exclusion of $500,000. So depending on the exact details there might not be any capital gains liability selling the house immediately.
One place I could see money getting recouped in this situation is on improving the curb appeal. Even if it’s a teardown, the impression people have of the lot will influence whether or not they want to bid on the property. Make the front landscaping look inviting and the front of the house look as good as possible. That may entice more people to envision themselves living there. If the front looks dreary, rundown, and overgrown, then people may not be able to overlook that and end up passing on the property.
I agree that the whole renovations pay for themselves thing is for the most part outdated, at least in the desirable areas of California. People would rather update things themselves to their own taste. It’s a seller’s market and will be for a while.
As an aside, I have done extensive remodeling in my home over the last few years. I love my designer but at first I had to keep telling her that I want it how I want it and I don’t give a shit about resale value. I plan to live here for another 30 years (lord willing) and my heirs can do whatever they want at that point.
One other thing to take into account is that you will still have expenses between the time your FIL vacates the house (presumably when he dies) and the time you close on the sale of the property, even if you elect to not update the property.
You’ll still have real estate taxes. On a property worth $700k, these could be fairly substantial. You’ll still have homeowner’s insurance. (I’m not sure how universal this [but I expect it’s pretty universal] – insurance premiums on my mother-in-law’s house tripled after she died because the house was vacant.) You will need to keep electricity, natural gas and water on while the house is being shown.
It could take you some time to clean out the house, particularly if there are items of sentimental value that you’d like to give relatives the chance to take. It’s not impossible that just clearing everything out could take several weeks. And even in a hot market it could be several weeks between when it goes on the market and you close.
Yeah, it’s been over 15 years since we totally renovated our townhouse, and we had inherited some money to do it. We plan to stay here until it’s physically impossible to anymore, so we wanted the changes we wanted…not those that appeal to an HGTV audience. Like “landing strip” can lights. Gawd, how much time we spent saying "No, we don’t want 20 can lights in a 10’ x 12’ ft. room.
We’re in the southern part of the state, and the market is similar here. One of our elderly neighbors died, and his family sold his townhouse (around 1100 sq ft) for close to $900K. And the couple who bought it have now spent 3 or 4 months remodeling it. Other than a simple clean-up any work done ahead of time would have been ripped out to be replaced with fittings the new owners want.
Will your wife want to sell it to a young family looking for a house, or sell it to get the most money for it? If she wants to sell it to someone who wants a starter home, a new roof (or splitting the cost of a roof with a buyer) may make sense. If she just wants the most money for it, it may not. New paint, exposing the wood floors and landscaping seem like a good use of money either way.
Of course, if she wants to sell the house to a young family, she probably shouldn’t expect $750K for it no matter wheat kind of shape it’s in. Young buyers probably won’t even consider that area.
Moderating:
This is IMHO. Engage with the substance, don’t insult other posters.
Agree. My wife and I are going to be moving out of our house at some point after retirement. I could buy my mothers house. It would feel like Groundhog day to me, and sort of like an odd ‘Welcome back Cotter’ episode. It’s really not right for us anyway.
About the emotional involvement: I have a friend who fairly recently went through selling tje house she’d lived in for more than thirty years when she needed to move into an assisted living facility. One thing she did that she’s very happy about now, is she hired someone to videotape the whole house/contents/yard.
Literally walk around the entire house, filming both the house itself AND the views in all directions as you looked outward from the house. And then the inside of the entire house, room by room, slowly panning around from the doorway along each wall around the room back to the doorway with care to catch each piece of furniture or painting and displayed knickknacks and awards from top to bottom, just the way things were at that moment, and including the rugs in rooms that weren’t just some monotoned carpet. She had them do the basement, too, but not the attic – she’d never really spent any time there, and it held no sentiment for her.
The tape is something like two hours long. She has watched it many, many times, rarely the whole thing, just one room or a particular chunk, but she says each time she’s struck by memories stirred by tiny things you’d mostly never notice, stuff like 'oh, yeah, The stain on the wall paper from where her dog always put his feet so he could look out and watch for her to come home, or the burn on the coffee table from when her son knocked over the soldering iron when he was building that science fair exhibit.
Memories that resonated for her, but the kind of thing you might not ever think of again without a prompt to call it to mind.
I forget what she said it cost to have done, but it wasn’t much. Making that sort of ‘memory’ tape was a side business by a film studies teacher at the local community college, but I suppose it could be DIY if you take care and time.
That’s an awesome suggestion! I wish we’d have done that for my in-laws place - I am sure it would have made my MIL’s transition to senior housing easier. My FIL is deep in the dementia pit, but who knows, maybe something like that would trigger a memory for him.
Did you actually read any of those links?
Yes, renovations may increase the sale value of a house.
But in just about every case, not by the amount spent on the renovation.
So from a pure ROI viewpoint it’s a losing proposition.
Of course realtors will usually be in favor of renovations: increases the sale price and thus their commissions, and probably makes the house easier to sell.
If you plan to live in the house rather than sell it you may want to do renovations for your own comfort or quality of life. But that’s a different matter.
This. Always this. Their goal is a quick low-effort sale, ideally at a lower-than market price. When they stand to make just 1.5% on the deal, you dropping the price $10K costs them $150. They’d be honored to have you do that … repeatedly.
A factor not often considered in the ROI calcs is the cost of ownership and opportunity cost on the capital while the house sits. Which is not a factor at all in a hot sellers market but is very much a factor in a cold buyer’s market.
In the hot market, taking 2 months to prep the house for sale probably costs you more in time value of money and holding costs than it’s worth. Better to have that bidding war above asking price right away and start counting your shiny new cash money ASAP than fiddle around painting the trim and dolling up the shrubbery.
Conversely, in a cold market, the house may never sell until the roof is replaced. You’d think buyers would be logical and recognize they’re paying for that new roof either before or after the sale, but often other factors, such as the need for a turn-key move-in are a big part of their overall decision equation.
It’s also very market dependant. My house, no matter how much i fix it up, is a knockdown. I just spent a lot on home renovations, knowing that it’s money I’m spending purely to make my house nicer for me, and that I’m not getting any return on that. Except the return of enjoying my house more.
My wife just had a revaluation basis done on the house, that is where I got the $750,000 value. The real estate agent (same guy that married me and my wife) said this would save about $110,000 in taxes.
That still sounds mongo-confused to me.
It’s how the house transfers that saves taxes, not the value that matters. Deliberately low-balling a value to “save on taxes” is a mug’s game. I hope you’re not being played.