The process of selling a home is a whirlwind of decisions and preparations. One critical choice you’ll face is whether to invest in repairs before putting your house on the market. This decision can impact the speed of the sale as well as the final sale price. Whether you're a first-time seller or a seasoned real estate veteran, understanding the pros and cons of pre-sale repairs is essential for making an informed and strategic decision.
step 1: know your market
Better yet, hire a knowledgeable agent! This step requires more than simply looking up your Zestimate. You need to go beyond the surface level to find out who’s been buying in your area and the common terms of those agreements.
Were the most recent comps sold to investors or owner occupied buyers? Have there been many cash sales? If your neighborhood has a high percentage of investment properties and/or cash buyers, there’s a decent chance you’ll attract a buyer who can afford, and perhaps even prefer, to do their own repairs. That doesn’t mean they’re likely to pay top dollar for a house that needs expensive fixes, but you can consider whether the convenience of not taking on those repairs yourself is worth a lower sale price.
You should also research how your home stacks up against the comps. Read through the remarks on those sales, assess the listing pictures, and check the auditor site to see if you can find permits on recent work. Let’s say you find two recent sales that are very similar to your home, but your roof is at its end of life while both comps had new roofs. If that’s the only significant difference you can find between your home and the comps, be prepared to negotiate this item with buyers or price your home to reflect these needed improvements. If you’re unsure what these repairs will cost, obtain estimates from contractors so you can set realistic expectations.
step 2: research the requirements for federally-backed loans
In some areas— particularly rural properties, neighborhoods that attract first time homebuyers, or communities near military bases— federally-backed financing may be more common. This includes FHA, USDA, and VA loans— all of which have minimum property requirements that evaluate the condition of a home for safety and longevity. It’s important to note that conventional loans can also be subject to repairs, though this type of financing tends to be more lenient.
Before listing, determine if the current condition of your home meets financing standards. How common are these loan types in your area? Will you be cutting out a significant percentage of your buying pool if you don’t offer the home to buyers using federally-backed loans?
You certainly don’t want to accept an FHA, VA, or USDA offer without a solid understanding of the property requirements. That could become a frustrating deal for all parties involved if the home ends up needing thousands of dollars worth of work prior to closing— and yes, in most cases the work must be done and re-inspected by an appraiser before final approval is given by the lender. If you’re unaware of these caveats before accepting an offer, not only could you end up shelling out more money on repairs than you had budgeted for, but it could also create substantial delays to the closing timeline between remedying the issues and scheduling re-inspects.
On the flip side, sellers might write off these loan types due to overestimating their stringency. If all your home needs is a handful of GFCI outlets and to remedy some peeling paint, it would be unwise to reduce your buying pool for such minor fixes.
These loan products were designed to promote homeownership and they’re a wonderful tool for many buyers. However, it doesn’t benefit anyone to end up in a contract with a bunch of unexpected issues, so make sure to do your homework beforehand. Learn more about minimum property requirements for VA, FHA, and USDA. The documents might seem long and daunting, but many items are simply routine maintenance. Your Realtor is a great resource for helping you identify your home’s potential flags.
step 3: inform yourself on issues that could impact homeowners insurance
There are massive shifts happening in the insurance industry. Weather and climate disasters have been wreaking havoc on the profitability of insurance companies. Munich RE, an insurance-related risk management company, reported that natural catastrophes cost insurers $95 billion last year.
Due to these losses, insurance premiums are rising across the country and insurers are cracking down on the requirements for property conditions. Some states are facing even more drastic repercussions with companies declining to offer insurance in certain areas. This presents a major problem for homeowners and buyers as insurance premiums could price them out of certain homes or they could have issues finding an insurer altogether. Homeowners insurance is a requirement for properties that have a mortgage, and it’s a crucial protection for all owners.
While this dilemma is more prevalent in states at an increased risk for hurricanes or wildfires, the impact is quickly spreading throughout the country. Ohio and Michigan are two of the 18 states where insurers lost money on homeowners insurance in 2023. Both states have already surpassed the average annual number of tornadoes this season and we haven’t even made it to June when tornado risks are highest.
These insurance challenges are relatively new and less widespread in the Midwest, so it remains to be seen if the coming years will bring sweeping coverage changes to our area. Regardless, all homeowners should be aware of the potential impact. Aging roofs, knob-and-tube wiring, history of claims, and proximity to flood zones are some of the most common factors that determine insurability and premium costs.
step 4: perform a pre-listing inspection
Ignorance is not always bliss. Some homeowners might feel that a pre-listing inspection is a bad idea because it could uncover items that they’d need to disclose, but the reality is that 81% of buyers perform inspections, according to the most recent Realtors Confidence Index. The odds are fairly high that any buyer whose offer you accept will discover your home’s issues. Houses require a lot of work, and even the most diligent homeowners can encounter unexpected issues. Would you rather address those hurdles when time is of the essence while you’re under contract, or prior to listing to ensure a smooth deal? There isn’t a one-size-fits-all to this. It really depends on your personal situation, so make sure to discuss the best course of action with your Realtor.
step 5: know which issues to fix immediately
We’re mostly looking at you, water. Of all chemicals, H2O is the most important one on Earth. And yet, water intrusion is the bane of every home’s existence. There are many instances where moisture or leaks can be swiftly and affordably corrected— but they must be addressed at the first sign of issue. Even minor leaks can lead to extensive damage rather quickly. In the same vein, mold can become a major problem in no time. Pests that compromise the health or structure of your property are another item you shouldn’t ignore.
If your house is in a state of disrepair, there’s almost certainly someone out there that would be willing to buy it for the right price, but that price will be a fraction of what it could have been. Don’t make a mountain out of a molehill— address emergencies and growing issues as soon as possible.
By carefully evaluating the condition of your home, understanding the local real estate market, and considering insurance and financing requirements, you can make well-informed decisions that help your bottom line. A knowledgeable Realtor can offer valuable insights on prioritizing repairs to make your home as marketable and profitable as possible. Prep your home for success and spare yourself from unnecessary stress!