By Ross Wilson
“Any man who can drive safely while kissing a pretty girl is simply not giving the kiss the attention it deserves.” – Albert Einstein
If you work an insanely hot market such as Toronto, in many cases, with the shortage of good freehold listings, you could plant your for sale sign into a lawn of virtually any property, regardless of its physical condition, and receive multiple offers. Even if this is the case, however, I feel it’s still prudent to advise your seller to put their best foot forward by preparing their property – and themselves – properly.
In this new series of articles, which are abridged excerpts from my book, The Happy Agent, I offer a few tips that might make the difference between a quick sale and a better sale. Or in the case of a slower market, any sale at all.
For a plant to procreate, it must entice pollinators to come hither. This miraculous feat of nature is accomplished by producing attractive fragrant blossoms. If you want to sell your car, what better way to improve the odds than a good shining, maybe even tune-up, so it looks and runs its absolute best? What do you do to prepare for a first date? Ensure you’re well coifed and groomed. To best attract passing buyers, wouldn’t it make sense to apply the same logic by ensuring your seller’s property is as appealing as possible?
Many new sellers mistakenly let nothing, including the marketing of their home, interrupt their daily routine and do absolutely zilch to improve its showability. Hence, they typically need coaching on how to effectively prepare, prettify and maintain their home prior to and during the listing term.
In addition to more significant undertakings, this guidance should include homework to be done immediately prior to each viewing, such as vacuuming, making beds and polishing plumbing fixtures. A seller’s contribution – be it enthusiastic or lackadaisical – helps or hinders a sale and has a direct effect on not only how long their property remains unsold, but also the ultimate sale price.
Remember that a buyer’s decision is based primarily on how they feel about it. Their level of excitement about making your seller’s home their own is, within reason, directly proportional to how deeply they dig into their pockets. Successful marketing preparation and culmination relies upon a simple formula:
A pinch of cash + a dash of imagination + a stirring of creativity + a pound of effort + a dose of objectivity = a successful sale
When someone buys a principal residence, they don’t primarily think of it as an investment, but as a home. Thus, any major improvements are usually for lifestyle enhancement. How those renovations might affect the eventual sale price may not even occur to them. Nevertheless, owning a home is indeed a great investment vehicle. But unlike a corporate stock or bond fund, the investor can physically live in it. And unlike the return on a passive stock investment, upon which the casual investor has effectively zero influence, an owner’s home improvement choices – as Goldilocks would say, may be too small, too large or just right – can critically impact the final return on that realty investment. The eventual sale price will obviously depend on market inflation, but also on the quality, extent and frequency of maintenance and upgrades.
There’s no doubt that major endeavours can be expensive. The good news is, though, that renovating can be done, at least in part, at someone else’s expense. By shrewdly choosing projects reputed to generate higher returns, such as kitchen, bathroom or landscaping, a significant portion of the costs may be passed on to the next owner by way of a higher sale price.
It’s common knowledge that sharp, updated homes usually command premium prices. But over the years, if a homeowner habitually neglects their property, when the time comes to sell, to optimize a sale price, they may have to play expensive catch-up by swiftly spending some serious cash that could have been incrementally invested – and benefits enjoyed – during their occupancy. If they refuse to spend a dime on their home before listing, since many buyers prefer to avoid the time and expense of renovation, you’d better prepare your sellers for possible lower buyer interest and corresponding sale price in the lower end of your recommended value range.
A homeowner often has resources from which to draw for renovation expenditures, such as a home equity credit line. A buyer, on the other hand, may not be able to afford to do the work because all their available cash is, by necessity, devoted to their down payment. Thus, even if they see the potential in the house, they may have to pass on the property. If they choose to offer anyway, with the guidance of their agent and home inspector, a prudent buyer will discount the offered price to reflect the cost of doing those repairs and renovations personally or with the assistance – and expense – of a hired contractor. And to compensate for the nuisance factor, they may even deduct a little extra.
There are two categories of buyers who typically show interest in a deficient property. The first wants an affordable home to live in while doing the renovation work personally as resources become available. They’ll probably have a minimum down payment and will justify offering on a “fixer-upper” if they can buy it cheap enough. The second is a shrewd investor/renovator who’s looking for a bargain and refuses to pay anywhere near the asking price because they plan to “fix it and flip it”. Their carefully calculated offer would probably be even lower than that of the novice renovator.
Should your seller prospect invest their resources before listing? It depends. If the property is physically substandard, they should do some work. If they’ve neglected it during their tenure, it’s safe to assume it’s at least tired, if not in desperate need of tender loving care. Things wear out. Fashion styles change. New trends appear, become popular and then disappear, only to be engulfed by the next big consumer crave wave. If their home exhibits pride of ownership and has been periodically upgraded and regularly maintained, you may have few improvement recommendations. It may be market ready without significant effort or expenditure.
Your seller should be careful, though, about over-improving for the neighbourhood. They don’t want to spend so much that they’re forced to demand a price that excessively exceeds the average market value range of neighbouring properties. I’ve seen incredibly beautiful homes languish for months at a price that would have been a fair asking price or even a bargain in a more upscale area.
How much is too much? It’s difficult to say with any accuracy. However, unless you’re in a declining market, it’s likely that whatever reasonable amount they agree to spend, they’ll recover at least some of it. And they may be blessed with a quicker sale.
Next time, I continue with this series with more specific advice on how to effectively prepare a property and your clients for marketing.