When time comes to put a property up for sale it may seem beneficial, or even necessary, to renovate it first. But let’s walk through the best option for you.
The Advantages and Disadvantages of Undertaking Renovations
It is generally known that an up-to-date property is more likely to attract buyers; often more quickly; often at a higher price.
The majority of buyers are looking for a new property to easily settle into, and the advantages of being able to do so without embarking on major renovations is very often worth more than the actual dollars expended on labour and materials. It can, however, be riskyin some situations, to make major renovations specifically for the sale of a property. Sometimes their cost can be higher than the return, especially if the renovations are out of step with market trends. Another avoidable mistake that can cause a loss of the potential value of a renovation is misjudged or mismanaged renos, undertaken by inexperienced owners, or “handyman” contractors. A lack of experience can lead to costly overruns, or a failure to predict the scale of a project. Of course, this does not apply to construction or real estate professionals who are often able to make renovations at a lower cost.
Sellers who choose to renovate often make the mistake of renovating according to their own tastes and preferences, regardless of new trends and desires in the market; or, perhaps more dramatically, neglecting to highlight the unique aspects of the property, sometimes even damaging or removing attractive features. It is also important to know which type of buyer is most interested in the specific property type, before undertaking renovations, to ensure that planned renovations will really meet their needs and add value. Some sellers may fall into the trap of embarking on complex renovations: Doing far too much when a new coat of paint would have been more than enough. If a hundred thousand dollars in renovations will add a hundred and ten thousand to your property’s value, but ten thousand adds thirty thousand… The danger in these cases is that renovations may not appeal to potential buyers, for example, in a specific neighbourhood, and the property may still need to be sold at a lower price or may even be priced out of the range of buyers interested in the area where the property sits, thus causing significant losses for the seller. These could even be a near break-even situation where the losses come primarily in time and effort.
Some sellers choose to make cheaper renovations, using lower quality materials; or, they may forgo using professionals to perform complicated aspects of the project; believing they can sell their property for a better price without incurring the risk of spending a large amount. The risk here is that the vast majority of buyers will recognize the gap between the asking price and the quality of the product offered as being unjustified. Even if a buyer misses problems, their inspector likely will not. When doing construction work, we recommend that you hire professionals, and ensure that the quality matches what potential buyers expect, and what they can afford.
Structural renovations are slightly different. One of the basic principles of real estate is that structural renovations do not add any value to your property. Neglecting it however will reduce the property’s value considerably. A property in poor condition requiring structural renovations will attract far fewer potential buyers, which also greatly limits its selling potential. On the other hand, these renovations can be quite costly, and you should always consult with your real estate broker beforehand to help you decide if it really is worthwhile.
Do not forget that your broker is able to reach a larger number of potential buyers, there’s certainly some among them who would be interested in a property in slightly worse condition at a lower price. The reduction in price may well be less than the remedy would pull from your pocket. Each situation will require a unique assessment by your experienced broker.
Are Some Renovations More Valuable Than Others?
If you choose to renovate, it is always wiser to make sure the property doesn’t need any structural renovations. As mentioned above, a neglected structure decreases the value of the property. Make sure that it’s in good condition before making any cosmetic or functional changes to the property. No need to pay for paint and drywall before you’re sure the stuff behind is good.
Vendors often neglect the impact that changing the divisions of a property can have. By making sure that the divisions and the layout of the rooms match the needs of potential buyers, it is possible to significantly increase the value of your property. Whether it’s adding a bedroom in the basement, opening the kitchen into the living room, or creating a lunch area, or even going open concept, it is possible to completely change the appeal your property will have. This can even change the market segment your property resides in, allowing you to compete in an area with more demand, or lower inventory. You may catch an entirely different market segment by blowing out the right walls. These changes are often much more important than the type, or condition, of the floors, or the color of the ceramic in a washroom.
On the other hand, if there are two rooms where style is very important nowadays it’s the kitchen, and the washroom. Updating them can increase buyers’ interest in your property and will almost certainly increase its market value. Make sure these rooms are crisp, clean, bright, uncluttered, and contemporary, in order to maximize their impact.
It is also possible to do more with less. Why embark on major renovations when a simple coat of paint is enough to rejuvenate your property? Cleaning outdoor areas, such as flowerbeds and yards can be enough to beautify your façade without having to make more expensive renovations. Adding shelves or hanging a painting on a large, empty wall can completely change the feel of a room. A signature light fixture can set off a living area. Replacing plug and switch plates can even make an impact, at as little as a dollar or two each. The solution is not always to take drastic action.
In any case, it is best to work with professionals to ensure the quality of the changes and renovations you would like to make to your property, in preparation for a successful sale. Working with a design professional is always recommended before bringing a property up to date or changing its ergonomics. This will ensure that changes to your property will actually increase its value, and without undue risk or investment.
Invoices and Permits: Are They Worth It? Are they Required?
Getting a discount on renovations by dealing with a contractor who will, or even prefers to, operate without invoices may be tempting; but, we strongly advise against it. Invoices will not only protect you in the event of a dispute, but they also represent a guarantee of the quality of work for buyers. Without an invoice, the responsibility lies with you, and that is no guarantee to a prospective buyer. This lack of paper can greatly reduce the value of the renovations in competitive market. Plus, if you’re renovating an income property, the renovations can be tax-deductible, so you’ll definitely win in the end if you have them.
The same logic applies to permits: It is better to have a permit in good standing for the execution of construction work, than to have to return a property to a state of conformity with municipal by-laws. Doing work twice may well be more than twice as expensive, especially once you’ve raised eyebrows at the permit office. Ask your municipality. Most permits are not expensive, and they can increase the value of your property, as well as buyers’ faith in the care taken in the work.
Before doing any work in anticipation of the sale of your property, do not hesitate to contact your experienced broker. They will be able to advise you on the advantages and disadvantages, as well as guide you in the process. Your broker has the expertise to begin guidance, and his network of trusted experts are at your disposal to move forward once you know where you want to go.