Our experts share how to handle renovation properties to get the best results
By Jenna Grundtner
Every home on the market is not going to be a picture-perfect, immediate sale.
Some homes require extensive updates prior to selling, while others must be marketed as purely renovation projects or complete tear-down opportunities. Each house, seller and buyer is unique, and it’s the REALTOR®’s job to guide the sale—from pricing to marketing to finding value when it isn’t always obvious.
Pricing as-is
Matthew Plummer, CRS, CEO and designated broker at MVP Realty Group in Olympia, Washington, says pricing these types of homes is not as simple as adding or subtracting what renovations/repairs may cost; it’s not black and white.
“Buyers often have no concept of what it’s going to cost, so they will, in their minds, likely have an inflated idea of what it will cost to perform the work that needs to be done,” he says. “The other aspect of it is buying a home is an emotional thing, and people have a very difficult time having an emotional attachment to a property they can’t envision yet.”
He says that intangible, emotional attachment equates as value in the buyer’s mind.
“In the end, an as-is sale of a property that is less desirable in its viewing is ultimately going to sell for less than what it would actually cost to renovate and bring it to its fullest potential,” Plummer says.
Peggy Witt, CRS, owner and broker at Witt & Associates in Atlanta, says that “as all CRSs know, it’s the market that ultimately determines the price of the property.” She utilizes comparisons and her past experience in interior design to give clients a good idea of what things will cost.
Timothy Kinzie, CRS, founder of Montlor Luxury Realty in Cary, North Carolina, suggests considering both the value of the land itself and the value of the existing structure, and then providing solutions for minor renovations, expansions or even scrapping the property completely.
“If you price the property solely based on land value—disregarding the existing structure (regardless of what that is)—you’re going to remove a lot of potential profits for the seller,” he warns.
Pam Powers, CRS, owner and broker at Powers Properties in Greenwood, Mississippi, specializes in selling historical properties, and she utilizes appraisals to help sellers list at the prices they want.
“In a way, I’m selling a person’s antique, so I really do take into account what the seller wants to sell at,” she says. “And of course, I compare prices in other towns with historical properties.”
To renovate or not to renovate
Sometimes, it can be a struggle to convince sellers that NOT making renovations prior to selling is the right move, and agents need to be prepared to give advice.
“To go through this expense, right before you sell, and you’re not going to get to enjoy it … why do it?” Witt asks. “Let’s just price it accordingly.”
Christopher Adams, CRS, owner at Montlor Luxury Realty’s Denver office, agrees. “There’s a certain invisible line for the definitive return because if you spend so much money, that doesn’t necessarily mean you’re going to get it back. That’s the most complicated part of selling homes in disrepair,” he says.
Alternatively, Plummer typically advises sellers to make any and all renovations they can, if its within reasonable bounds. “My advice is that if they are at all feasible from a financial and logistical standpoint to do it, you do it now,” he says. “That’s always the best move you can make.”
For those who don’t see it as financially feasible, some companies offer investment funds to get renovations done prior to going on the market. The seller then pays the costs at the close of sale.
How to market renovation properties
When it comes to marketing antique properties, Powers says “putting your bait everywhere” is key.
Size and location
“I’ve realized the importance of out-of-state marketing—California, Colorado, out West” she says. “What they pay for a ‘box’ out there could be a mansion in my market. And then when there’s interest, I have to sell them on where the house is—location, town and people, historical significance, etc.” She also emphasizes the importance of free advertising, like contributing articles in newspapers and community magazines.
For showings, Plummer, Witt and Powers have not entirely bought into the idea of virtual staging, dubbing it a “thin line” between being helpful and being fake or disproportionate and, ultimately, an obstacle to the sale. Instead, they rely on a combination of creative salesmanship and realistic perspectives.
Make it your own
“I tell them, ‘First, we’re going to get a deal on this property.’ If there’s any opportunity in this very tight market to get a deal, it’s going to be on one where the seller did not have the opportunity to do the work necessary to bring it up to par,” Plummer says. “And second, I say, ‘Now you get the opportunity to make it your own—and you won’t have to rip out perfectly good materials that just aren’t your style.’”
Witt creates hand-drawn mockups of potential renovations and has even restaged rooms to be used in ways not originally intended.
Turn negatives into positives
Powers often creates videos walking through the homes to send to potential out-of-state buyers and share via YouTube.
“You have to put the home in a narrative that uses the negatives as a positive,” Adams says. “You basically reverse-engineer the marketing and build the program to fit the home.”
Cost analysis
Many REALTORS® bring in experts in trades, like flooring and painting, to give the client accurate bids and quotes, giving them a full understanding of what this investment looks like. Kinzie also provides actual blueprints, architectural models and material samples in addition to realistic timelines and rough cost estimates for these types of renovations. “When you’re selling these types of properties, you’re really selling potential, and you have to paint a vision for what’s possible,” he says. “You have to find a balance between being honest about the property’s current state and what it could become.”
Doing this allows for a buyer to understand the true potential of the purchase. “Having all of these things together allows a home to go from a dream to a plan of action,” Kinzie says.
For more on how remodeling can maximize your return on investment, visit NAR.realtor/remodeling.
Photo: iStock.com/didesign021
