Q: How do we decide if we should do the remodel or not and how much to ask for our house? If we haven’t found a house yet, when should we put the property up for sale?
My husband and I (and our two boys age 6 and 9) would like to move. We bought our house new in 1999. We owe $99,000 (original purchase $178,000) it is 2,200 square feet and has a 7,500 square foot lot, which is pretty big by today’s standards and in a nice family neighborhood. We have put about $30,000 into it over the years including new flooring and paint in the last two years.
At the peak of the real estate bubble, our house was worth about $360,000. In 2009 it was about $320,000 when we refinanced for a lower interest rate. (After the initial 30-year loan, we have refinanced twice both for 15-year loans and never taken any equity out).
A year ago, two houses across the street tried to sell for $300,000. One eventually was rented (since the owner couldn’t take less) and the other (which had a suicide in it that made the owners want to sell) eventually dropped the price and sold for $245,000.
A week ago, our friends around the corner sold in 2 days for $260,000 (they have the same kitchen cabinets and tile counter tops we have). The houses are all similar lots, but ours is a little nicer. We would love to get close to $300,000 but don’t know if that is possible.
I think $260,000 is too low since it sold so fast, and I think we have time since we haven’t found our next house yet.
It has come time to have the kitchen remodeled. In November we started looking having the cabinets, counters, range, hood and floor re-done. It will cost about $13,000 and take about 5 to 6 weeks to get it done. The money for the remodel would cut into the cash we have now that could go toward the down payment of our new home.
We originally wanted to buy land and build a house but we can’t seem to find land to build the house we want. Then we thought we would find a new construction that will work. But they are selling quickly in this neighborhood.
We are looking to spend about $400,000 to $500,000 on the new home. We could come up with about 5 percent down now but would like to put the most possible down to get better rates and mortgage payments which would require the sale of our home first (I think?). We both have excellent credit.
We would like to try to sell our house by owner (I am sorry, I know this must make a professional cringe).
A: First, neither of us are real estate agents, and we like the idea of selling by owner under certain circumstances.But, this is a tough time to be selling by owner (more on that in a moment).
Let’s start at the top. If you want to sell your home quickly, it will need to be in excellent condition. By “excellent condition,” we mean two things: everything works in the home and is in good shape and that the condition and appearance of the home is up-to-date and appeals to homebuyers. So if that means spending $13,000 to upgrade the kitchen, just to sell quickly, so be it.
But you need to make sure that you will recover the investment you put into the home. It wouldn’t make sense to put money into the kitchen if it doesn’t help the sale and it doesn’t increase the value in the home.
In some real estate markets, it doesn’t matter what you try to do to sell the home, there is so much inventory out there that putting more money into the home won’t get you any money back.
It sounds as though your neighbor was able to sell quickly for $260,000 without a remodeled kitchen. So you have to decide if you’ll get more than $13,000 in the sales price if you decide to remodel. Can you get $280,000 or $290,000 by spending the $13,000? If so, then you should do it. If not, then you should forget about remodeling the kitchen and just price your home at $265,000 or $275,000 and get rid of it.
We’re big proponents of selling first and buying later, even if that means making an interim move. We’re in the height of the spring home buying season. If you want to move then you should get your home in selling shape now and get ready to list the property.
You can try to sell on your own, but we’d recommend trying that for a month or two at most. If you’re unable to sell it on your own, go out and hire a real estate agent. If you told us that homes are selling very quickly and no one is using an agent and you were adept at using the Internet to market your property, then you could certainly try to sell by owner for a few weeks.
But our feeling is that in a tough market (and this depends somewhat on where in the country you live, and even in what neighborhood you live), you’ll want an aggressive agent on hand to push out your property on a variety of websites and through the agents in their office (who may have buyers who would be interested).
The smartest move you can make is to sell this house, and then take the $150,000 you’ll probably have after expenses and use that as the down payment on your new home.
Interest rates and home prices are historically low and you can get a great deal if you move quickly. You’re better off selling at $260,000 and moving on with your life than waiting around for two or three more years, hoping you’ll get $290,000.
Good luck.
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