An Essential Lesson From Today’s REO Real Estate Market – Planning Repairs For Selling Your Rental House

When considering whether or not to make repairs to your home prior to sale, we can learn a valuable lesson from our local bank owned REO sales and trends. The banks quickly figured out that it is hard to sell dilapidated homes as buyers have a very hard time seeing past damage that may only be cosmetic. When buyers can’t visualize, they don’t buy, resulting in slower sales cycles, lower prices, and more escrow issues. Some banks have started doing the repairs themselves as they’ve learned the hard way that making some repairs may not be cheap but can save them tens of thousands of dollars in discounts and negotiations.   

 

The question still remains, should you make repairs on your rental house or just price it to sell? If you do repairs, exactly how much should you do to maximize profits? These are the things we will answer and hopefully give you a good gauge of just how much repairs it makes sense to do given your current budget.  

 

 

 

Many people every year, especially after an unsuccessful sale, lease their houses out as rentals and become a little emotionally detached from them. If the time comes down the road when they would like to sell, there really are some big bang for your buck repairs and improvements that one should make if their home has just been a little neglected. If your home fits this description, here are some of the best and most common fixes, and coincidentally, the ones we are most commonly seeing the banks making as well. 

 

Fresh Coat of Paint – This is often the biggest bang for your buck. One thing that always makes the house look new and improved is a fresh coat of paint. This applies to both interior and exterior paint depending on how bad it has gotten. Avoid wild colors but avoid boring apartment-like colors as well. If you need help with a palate, consult a design professional.

 

Replacement Flooring – If a home has damaged flooring it really should be replaced. Carpet allowances are great in theory, but only practical when the existing carpet is in good shape. Buyers have eyes that will naturally look down when touring a house and will have a hard time getting past the stained or damaged carpet they’ve been stepping on. As far as flooring choices, carpet is a staple and not a bad choice; we have however seen an improved quality in laminate flooring and great pricing on ceramic tile. Most of our recommendations lean toward 18” ceramic tile in the kitchen, baths, and maybe living area.       

 

Fixture Update – It is very easy and relatively inexpensive to install new fixtures in your home. This could mean new light fixtures in the entire house or just replacing the really dated ones. You can get some real bargains right now on fixtures from the big retailers. You don’t need super high end unless your home is high end. For example, we just found some stainless trimmed light fixtures for a lower end condo that cost the owner only thirty bucks! They’re not fancy but make a world of difference compared to the old cheap florescent lights.      

 

Any Major Eye Sore – Broken windows, green pools, holes in walls, dead landscaping. Having these problems taken care before going on the market would be ideal. These are the types of things that buyers, especially first timers, are not familiar with. When they don’t know, the imagination runs wild and fear sets in, even if not warranted. Not having any eyesores goes along way in ensuring confidence in the buyers mind.

 

 

Not fixing enough is one thing, but fixing up the rental house too much is an issue to be aware of as well. Usually buyers say they’d like to purchase the least expensive home in the most expensive neighborhood that they can afford, however, most quickly change their mind after viewing just a few of the “fixers.” 

 

Still, a house with too many improvements will usually be priced at the top of the local market, not the place you need to be right now. Think in terms of doing repairs to a damaged home and applying the rules above to get big value for each repair. Sometimes you’ll be spending a little more to give that semi-custom feeling (like a designer paint scheme); other times you’ll be shopping the clearance rack. Avoid the feeling that you’ll need to upgrade everything, unless again the property is high end, because most big improvements and projects just will not pencil out well.   

 

 

 

When thinking about what repairs and improvements should be made to your rental house, keep an open mind to the fact that each house is different and market conditions fluctuate.  Still, lessons learned from the past should play an important role in our planning. Despite the negativity surrounding our current inventories of REO bank owned homes, there are some valuable lessons to be learned, among the most pertinent, how a little bit of work can pay big dividends when selling your rental home.