First, thank you for all of the positive feedback - it really means a lot and the team is thrilled that everyone is loving the new branding. Getting back into the normal newsletter format, this newsletter is taking us back to the basics - as a seller do you fix up the place before you sell it? Most sellers do not want to leave the transaction feeling like they left money on the table. But, is fixing up the place before you sell going to leave you with the highest net proceeds - let's investigate.
Zillow put together an article recently that we have been leveraging to help explain to sellers the "value" of the work you want to do. Many homeowners in the Bay Area are Equity Rich and Cash Poor - so pumping $30K-$50K into the home before selling is not always your best option. In addition, their is a "new" buyer in today's market - the "Do-It-Yourselfer" that expects a discount on the property for the work that needs to be done, but not a steep enough discount in our opinions (with Zillow's research backing our assessment). When you take a look at the San Francisco market, there is a 9.5% Fixer-Upper Discount. Now, don't get me wrong, that is a lot of money. When you think about the property condition and the correlating discount, as well as the true cost to get the property above the fixer-upper condition (with permits for you handy people out there), the price you are paying is going to start creeping up to "non-fixer" status. But, and this is a huge but, you are almost certainly not getting an 80% loan for the costs at 3.75% over 30 years like you are when purchasing outright (you do get to save a tiny amount on your property taxes each year if you take the discount route though).
You might be asking yourself, "Ryan - when do I want to buy a fixer-upper?" Honestly, this answer varies by client and his/her needs. If you have the money, and can do the updates immediately after the sale (prior to moving in if you can), then grabbing a fixer might be beneficial. Or, if you are comfortable with the dated kitchen but don't mind it for the next 5 years, a fixer may be okay for you too. However, my favorite approach for fixers actually has to deal with the loan in the transaction. For a buyer, if they can now get the property into a conforming loan size, or if they can now qualify for the "A" location "C" property, you hit the jackpot.
As a result, today's seller is better off focusing on low-cost cosmetic updates 99% of the time (structural as well if not doing the work prevents buyers from being able to secure a mortgage for the property). If you go and pump money into the property, be very cautious! You need to remember Bay Area real estate is in a world of its own for pricing, so every $50K matters on the purchase price for buyers (let alone you being stuck in a situation where you end up selling for close to the same as 'As-Is' condition).
If you are a seller, this is when putting some money together to fix up the place makes sense. For you investors out there that read these articles, this is why you need to make sure you have sufficient cash reserves and money when thinking about selling one of your rentals. Stay tuned - I will send the "After" photos in the next article.
1) We are growing and are looking for new REALTORS to join the team. If you know anyone currently practicing or looking to get into the field, send them our way.
2) If you missed our last newsletter, take a look at our new website: New Website
If you ever have any questions, or anyone you know is interested in buying or selling a property, please do not hesitate to reach out or share our contact information. At MinnGo, we realize that real estate is not something our clients think about everyday. Lucky for you, that is what we live and breathe.
Until next time.