Keep cost vs value in mind
One of the most common questions I get asked is “What updates should I make before listing my home that will have the highest return on investment?” It’s important to keep in mind the difference between cost and value. Cost is the amount that a seller actually spends on a renovation, whereas value is how much more a buyer is willing to pay for that renovation, which is usually less than the cost. Sometimes sellers think if they recently installed a new roof that cost them $15,000, it will boost the value of their home by $15,000. Since a roof is among the minimum requirements that buyers expect for a house, the full cost of that improvement will likely not be recoupable in the sale price. With that being said, try to put yourself in the buyer’s shoes when thinking about valuable features.
Here are the most common renovations I recommend sellers make that tend to have the highest return on investment:
- Fresh Paint
- Easy and inexpensive, giving your walls a fresh paint job will make your home look clean and polished.
- Opt for a neutral color, paint over accent walls and remove wallpaper so buyers have a clean slate to imagine themselves living there.
- Professional Cleaning
- Another inexpensive option that makes a huge difference. First impressions are everything, so if buyers immediately notice grimy walls, dusty fixtures, or funky odors, you’ve already lost them.
- Flooring (*sometimes!)
- This one is case-by-case. Stained or extremely worn carpet is sure to catch a buyer’s eye and stick in their mind. If you’re able, I recommend replacing it with a neutral-colored, builder-grade carpet.
- Similarly, scuffed or scratched wood floors will garner negative attention. Refinish the wood or replace it with an economical luxury vinyl tile or plank (LVT/LVP).
- New hardware (like cabinet and drawer pulls) and lighting fixtures are an easy way to transform the look and feel of your kitchen.
- Depending on the price point of your home, replacing laminate countertops with granite might be a good investment. I tend to warn against “luxury” renovations before listing, but granite has become a highly-valued feature.
- Curb Appeal
- Buyers’ impressions of your home start with the exterior, so putting your best foot forward is important here. Make sure the yard stays green, mowed, and edged. Clean up any flower beds, fill them with black mulch, and plant low-maintenance flowers or plants.
- If your exterior siding or driveway is grungy, a quick power wash will make all the difference.
I’ll say it: real estate transactions are complicated. You’re signing a million forms, splaying open your finances, coordinating your move (sometimes cross-country), talking to Realtors, lenders, inspectors, and title companies. There are countless moving parts and it’s imperative that your Realtor keep everything on track and, more importantly, on deadline. Contingencies are milestones set forth in the contract that allows a buyer to back out if certain conditions aren’t met in a timely fashion. These are mechanisms that protect the interests of both the buyer and the seller, preventing an instance where perhaps you get all the way to the closing table just to learn that the buyer can’t obtain financing to purchase the house. While several possible contingencies can be added, there are four main contingencies that come standard in a Missouri real estate contract.
- Title Contingency
- At closing, the seller must transfer to the buyer “marketable title” to the property via a deed. Marketable title means that the ownership of the property is free and clear of any clouds, such as liens or other potential claims of ownership. Once you are under contract, a title company will conduct an examination of the title in order to issue a title insurance policy. If the title company discovers any clouds or defects on the title, this contingency allows the buyer to object to these conditions. The buyer may request that the seller clear up the issue prior to closing, or if they wish, the buyer may simply back out of the contract with their earnest money returned.
- Inspection Contingency
- When a contract falls apart, home inspections are often the culprit. The contract allows a buyer to obtain professional inspections of the property in order to gain a better understanding of the home they are purchasing. If the inspections uncover any issues that are unacceptable to the buyer, the inspection contingency gives the buyer a couple of options. First, the buyer can choose to back out of the contract with their earnest money returned, though they still must pay for the cost of the inspection(s). Or, the buyer can request that the seller fix the issue. This opens up a negotiation window allowing the parties to go back and forth about what and how the seller will fix the problem, either through repairs or sometimes a closing cost credit or price reduction in lieu of repairs. If the parties can’t reach an agreement within the specified time period, the buyer may back out of the contract with their earnest money returned.
- Financing Contingency
- The buyer is likely already pre-approved for a mortgage at the time their offer is written, but the real work begins once the contract is finalized. The buyer’s lender will get to work on securing the loan, which can include a formal loan application, credit report, appraisal (more on this later), pay stubs, tax returns, and more! If the lender discovers something that will prevent the buyer from obtaining a loan at the contracted purchase price, the financing contingency allows the buyer to terminate the contract with their earnest money returned.
- Appraisal Contingency
- Though the buyer’s loan may depend on an appraisal, it is a separate contingency. In most cases, the buyer’s lender will require a formal appraisal to ensure that the property is worth the amount that it is being purchased for. If the appraisal reveals that the home is worth less than the contracted purchase price, the lender will only loan the buyer the appraised amount. Enter: appraisal contingency. In this scenario, the buyer has three options: terminate the contract with their earnest money returned, make up the difference between the appraised and contract prices in cash, or ask the seller to reduce the purchase price to the appraised amount. The buyer and seller can negotiate on the purchase price and if they fail to reach an agreement, the buyer may back out of the contract.
All of these contingencies are important safety tools in a real estate transaction, but they only exist within a timeframe. If a buyer slips up and misses a contingency deadline, they could forfeit their earnest money or worse: end up in litigation. Make sure you enlist a trusted, experienced Realtor to keep the transaction on track and get to the closing table on time.
Getting multiple offers is a sure-fire way to sell your home at the highest price possible, but multiple offers don’t happen by accident. Here’s a four-step action plan to create a buyer feeding frenzy:
- Price it right. Overpricing is the worst mistake a seller can make because it leads to extended days-on-market (DOM). The longer a home sits, the lower the ultimate sale price will be. Buyers often (erroneously) jump to the conclusion that if a home has been languishing for a while there must be something wrong with it. That’s when they’ll begin to make low ball offers — oftentimes with little sincerity — just to see how desperate you’re getting. As the days rack up, they’ll steer clear out of an abundance of caution and simply move on. Remember, too, that buyers have received a gut-wrenching education over the past couple of years. They’ve been in multiple bidding wars only to come out as the bridesmaid, time and time again. They’ve gotten savvy at understanding market values and they can immediately spot a home that’s overpriced. They don’t have time to pursue a property or become emotionally invested with a seller they view as ‘greedy.’
- Present it with pride. When potential buyers walk into your home, they’re trying to determine if they can see themselves living there. They’ll gauge whether it feels welcoming, comfortable, and whether they can envision gathering with family and friends there. If the carpet is stained, the walls are scuffed, and heaven forbid if it smells like a litter box, they’ll quickly exit! Even if they do pursue your home, they’ll estimate the cost to remedy these things and it will be reflected in their offer. Remember, most buyers are trolling new listings online daily. They’ll decide whether or not to even visit your home, simply by the listing photos. Put your best foot forward on photo day AND for each and every showing. If circumstances necessitate selling it “as-is,” refer to #1, above, and price it accordingly!
- Be practical. Let’s say you’re preparing your home for sale and, for example, you know that the carpet downstairs needs to be replaced. Don’t assume that the buyer would rather receive an allowance to install the carpet of their choice. This is flawed thinking! The more “move-in-ready” and the fewer costs associated with moving in, the better. An allowance or seller credit doesn’t put cash in the buyer’s pocket. So, go ahead and pop for new, builder-grade, neutral-color carpet. You’ll ultimately get your money back out of it. Also, there’s a phenomenon in real estate known as “functional obsolescence” that you need to be practical about. Just because you spent $4,500 on a temperature-controlled henhouse, it doesn’t mean a buyer will assign the same — or any — value to it. Be a realist when pricing your home and, again, refer to #1, above!
- Promote it properly. Although this is the final step, it is by no means the least important. Just because your home is on the MLS and there’s a sign in your yard, it doesn’t mean you’ll attract multiple buyers. Utilizing a “coming soon” strategy, engaging staging services, using professional photography, launching a single-property website, having a social media plan, and many other strategies should all be considered. Each home requires a unique strategy and there’s truly no “one-size-fits-all” marketing plan that works best. A good Realtor understands this and will work hand-in-hand with you to develop a winning strategy.
At the end of the day, there’s a price at which every property will sell. The buyer determines a home’s value, not the seller. It’s ultimately worth what the winning bidder is willing to pay. Your goal, as the seller, is to attract the highest number of potential buyers by absolutely nailing these four steps. Do that and the buyers’ “gotta-have-it” adrenaline rush will drive the sale price skyward.