My sole living parent has downsized into a condo and my childhood home is sitting empty but for some old clothes, furniture, and odds and ends. We are in the process of getting rid of everything inside the house.
The house has a great deal of deferred maintenance and has not been properly updated since being built in the 1960s. It is in a very nice neighborhood but it is one of the must rundown houses in the area. This is largely due to the fact that we have long known we would either sell it as is or fix it up to try to make a profit. Everything needs to be redone (floors, kitchens, bathrooms, and probably the roof). There may be additional repairs needed (HVAC, gas, plumbing, etc.). Cost of remodeling/updating would be about $250,000-$300,000 or more. It might sell for up to $1.1M in its current condition and possibly up to $1.5M if fixed nicely. However, there is always the risk that it will cost much more to remodel and that interest rates may spike during the time we are remodeling, and that we may enter a recession/dip in home prices in the meantime.
My ultimate questions to those who have been in this situation are:
Should we sell in its current condition to someone who will likley flip the house?
Should we fix it up first?
Whether we sell now or after fixing, should we use a full service broker, redfin, or another idea? How much should the commission/selling costs be?
/ 2. - How much energy do you want to put into it? Do you have enough time on your hands and energy to put all this money into the place, and enough cash to finance everything, knowing it’s just going to be sold as soon as its done? I’d personally say it’s not worth the time and energy. Remember, the more it sells for, the more you’ll shell out in taxes (if applicable), seller agent fees, etc, so that $400,000 you’ll potentially make will start shrinking quick once you factor in the 250-300K, additional agent fees on the $400K, additional taxes on $400K, etc.
On the broker front, it all depends on how hot the market is in the area. For hotter markets, I think lower end brokers work just fine. If the house practically sells itself, I don’t think a higher fee agent is necessarily worth it. In a slower / cooler market, knowing potential buyers, having people to reach out to is worth it with an experienced agent.
I would disagree. The logic is applicable only to typical house in a typical area.
The OP’s description of the house sounds like it’s at the coast at a very desirable neighborhood. I wouldn’t remodel unless you are certain to get a very good return on it as a lot of people in this price range would like to do a tear-down instead.
Another option and it’s something I’m considering for my parent’s place is to put less than $50k for a functional update then rent it out as a LLC controlled by myself and siblings.
I’d say that this does depend at least some on where you live specifically.
Typical commission % seems to vary some. Redfin or other rebating brokers will be more or less beneficial depending on the market. e.g. here in OR we outlawed rebating for some weird reason probably totally unrelated to the Realtor lobby
Disallowed rebates doesn’t make it not negotiable, just the seller/broker can refuse. You can make your offer contingent on the contract change to decrease the buyer’s agent commission and the sales price by 1.5%. Listing agents are generally required to present all offers.
They can outright lie but otherwise would have a hard time explaining why it’s not OK when both the seller’s and the listing agent’s cut is the same. Rebates are allowed in my state, but I still had to do similar to accommodate a negative-cost mortgage (There would have been no charges left to apply a “rebate” to on my purchase), it just took a contract amendment stating those changes and being agreed to. I doubt the seller’s actual contact with the broker even changed. It shouldn’t be a big deal at all. We have “standard” unrestricted option periods here (buyer can walk away for no reason and only loses ~$100) and it was just included on the same form at that stage along with the in-lieue of repair amount to end my option period early, not in the initial offer. So it could have had zero impact on whether or not my offer would have been accepted, only impact on whether **I ** would have unilaterally walked away.
Here’s redfin’s example write-up that explains how they were complying in Oregon but decided to not offer the option anymore. Redfin Ends Commission Savings for Oregon Homebuyers - Redfin Real Estate News It makes a broad assumption "Our Oregon homebuying customers want the house more than commission savings, which has made us hesitant to ask for any kind of accommodation in an offer. ". Emotional connections to buying a property always take away leverage.
An additional benefit to moving it to the purchase price is that the “sale price” is also lower so it may be easier to protest property tax assessments. My appraisal district just used the sale price the first year without any pushback (not automatically of course, but at the informal protest).
Edit:since op is asking about selling, I’m not sure “rebating” even comes into it. Just rates in the agreement with the broker they use (if not fsbo). Imo you can do best by looking for an independent broker/owner because they have no “split” to do with a separate broker office. If there’s one local, look up their current listings and see if they look well done or not.
If you have a price in mind, post a for sale by owner sign and see what happens. There are also services that you can pay to put your listing on the MLS, but not much more than that.
Sounds like you are in a hot market, and at that price point people will be desperate to find something that’s within their mortgage limits, even if it means they’ll have to fix things as they go. Since it is in a desired neighborhood, someone might just tear it down and rebuilt.
Just put out a sign and see what happens, you can always hire a rebate/regular realtor later.
If you’re not in the flipping business, it is unlikely that you will make enough money on the refurb for it to be worth your time. You have to consider that the people flipping houses and making money on it do it all the time, know all the right contractors to use, know all the popular and cost effective interior design selections, and can get it all done quickly. You don’t have any of that. Plus, add to that the risk of a downturn where no one will buy the house for $1.5 mil after all the work is done. And you have to shell out the $300k for several months. Way too many things in the negative column to take the risk
Thanks for all the replies. I believe I’m going to list it with a friend who is a broker. I have to figure out what terms to agree upon and what % to give. The headache of remodeling is probably too much for me to take on right now.