In today’s real estate climate, the question of whether to sell your home now or renovate to sell later is at the top of many homeowners’ minds. Building equity and garnering maximum profit is always the goal, yet one can’t discount a homeowner’s personal connection to their property, as well as their local market performance. 

Due to economic uncertainty, our brokerage in Austin, Texas, is seeing more people renovate to build equity and improve value while staying in their own homes as they wait for improved seller conditions. This is a solid choice: With every downturn - such as in our national real estate market - an upturn is always around the corner. Homeowners that renovate now to sell later will reap those rewards. Below are considerations for home improvement with the goal to spruce up now and sell later. 

Growing equity with renovations

If you’ve lived in your home long enough and paid your mortgage faithfully, you’ve probably built significant equity. If you have not built up much equity, renovating can speed the process - a boon for first-time home owners. Renovations such as wood floors add equity because they are largely universally preferred by buyers, although you won’t see a return on that investment until you sell. Overarchingly, renovating glaring issues is the best strategy to raise the home’s equity value for a later sale. 

Assess what actually needs to be renovated 

A first step in the journey is to assess what actually needs to be renovated to maximize value versus what you simply want renovated as personal preference. Enlist the help of a home stager to help guide your renovation list. Separate critical improvements that add value from how you personally want your home to look and function, as the next buyer will likely not have the same taste. For instance, a kitchen remodel can be a risky endeavor if you personalize it because buyers tend to have strong opinions on this room. 

In general, larger renovations are less likely to offer ROI. While renovations empower you to make your home what you want, taking upgrades too far can turn into a financial negative when it comes time to sell. According to the National Association of Realtors, major renovations do not immediately pay for themselves. On the other hand, simpler repairs, including those you do on your own, will require much less of an investment and will bear greater ROI.

What will it cost?

Renovations have obvious costs and unanticipated costs, and homeowners must plan for both.

• Labor and materials: Unless you’re doing something basic, you will most likely have to hire a contractor who will charge you for materials and labor.
• Overages: Even the most tightly controlled projects typically go beyond budget, as there are unforeseen costs and disrupting events that drive up price. Whatever estimate you receive, have an additional 20 percent more on hand.
• Permits: Depending on local regulations, you may have to pay for permits. For some major projects like adding square footage, permits may be difficult to obtain.
• Alternate accommodations: Your home may turn into a construction zone. Factor in rental or hotel costs, or alternate housing like friends and family, when considering remodeling impact.
• Financing: If you borrow money for the renovation, factor in the interest and the monthly payments.

Money, time and disruption

Renovations take significant upfront cash and, while it often costs less than buying a new home, a homeowner must be liquid or take on loans. As well, the time commitment and inconvenience of remodeling must be taken into account as many people do not have the bandwidth to live amongst and manage a renovation. Picture not only the monetary factors, but also the time and disruption into your decision. 

Housing market conditions and the waiting game

The market shifted dramatically in 2022 when mortgage rates more than doubled. Many areas of the U.S. saw significant declines in buyer demand and an increase in inventory. Because of these factors, it’s critical that sellers now increase their efforts with things like renovations. They must also understand it now takes months (not days) to sell in many markets. Sellers may feel as though they should have an easy sell after putting forth the effort to renovate prior to listing their home, but they must be reasonable about the time frame to sell in current market conditions.  

To improve or not to improve

Remodeling a home to sell down the road requires an immense amount of work and professional expertise. If you choose a good contractor and a solid agent, the process will be easier and less time-consuming. While an extensive remodel can produce a lower ROI, the right balance can add value to your home both now and down the road. Modest renovations such as fresh paint and landscaping can increase value and should be put at the forefront of your agenda.

Ultimately, if you like your current location, a moderate remodel until market conditions improve will likely yield the benefits you seek while maintaining comfort and long-term profits.