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2011-04-26 13:37:12
Sell the house as is or fix it?

A home in subpar condition may leave you with little leverage in a buyers’ market.

By Steve McLinden of Bankrate.com

Q: Is it better to do the repairs and sell at market price or to sell 'as is' at below the market price? Our home needs new siding, new windows and some interior improvements. The neighborhood is stable with mostly middle-class homes. — D. Pattkin

A: You can certainly roll the cost of necessary repairs into your home's sale price, but you likely must offer buyers an extra discount for the time and trouble needed to address the necessary fix-it work. Otherwise, that same buyer could simply drive down the block and buy another home with newer siding and windows, a better interior, etc., for the same cost as yours and not have to pound a nail.

You are caught in a modern-day real-estate Catch-22 — that dreaded 'darned if you do and darned if you don't' scenario. Tattered homes often will not sell conventionally — at least for a reasonable price — in this predominantly buyers’ market. Only in rare sellers markets would you have leverage despite your home's condition.

So you may have to bite the bullet and do the work. Unfortunately, statistics suggest you will recoup less than 75% of your remodeling investment when you sell. According to Remodeling magazine's '2010-2011 Remodeling Cost vs. Value' report, a full window replacement in a midrange repair project returns 71.6% of investment in a home sale, while a siding replacement returns 72.4%. Both percentages are higher than most remodeling jobs. Other interior remodeling projects merit value returns of 45% to 73%, according to the survey.

While those data seem to suggest that sellers should offer buyers credits and let the buyers perform their own work, the reality is that if a home is too beat up, it may generate little interest from conventional buyers. Your only customers may be contractors or would-be home-flippers, who will likely lowball you because they can already get cheap fixer-uppers in the vast foreclosure arena. Unless would-be owner occupants are especially handy and have loads of spare time on their hands, they typically don't want to wrestle with significant repairs.

Of course, all real estate is local, so these generalizations may not apply on your block. Consider attending open houses in your area to assess the condition of homes for sale, with an eye on any apparent upgrades and other amenities and their impact on sale prices and buyer interest. A seasoned agent can also tell you about buyer priorities in an area.

You might have to perform at least some repairs if you need to sell your house soon for anything close to optimal price.

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