Reader Question: We are wondering about a kitchen remodel. My family is considering selling my mother’s home. The wood floors and bathrooms were recently redone; only the kitchen is old. Do you recommend putting $10,000 into replacing the kitchen cabinets and updating some of the appliances before selling? I have heard that the buyer often wants to personalize the kitchen, so updating it is not always the best idea. My brother heard that if we don’t refresh the kitchen, we will have to provide a $15,000 “kitchen credit.” Your advice would be appreciated.
Monty’s Answer: The answer to your question is lurking in the marketplace around the home. Or, you may find the answers in the circumstances with both the house and the market. There are few pat answers to many real estate questions because both the home and the market will have an impact on the best decisions.
Additional investment in a home for resale can be risky. The statement your brother heard should be investigated to determine its accuracy. The information you need comes from different sources, but investing the time to gather this additional data will clarify whether to spend another $15 thousand dollars. Follow this link to a remodeling article on Dear Monty that provides more detail on other factors to consider.
Seek professional help
If you are selling the home, you will want to interview three agents before making the decision on which agent to choose. You can leverage your time here by combining the agent interview process with evaluating the chances of selling the home for enough money to get more than the $15,000 back. It is called a “before and after” assessment.
Here are the three tips
- Ask several, not one, real estate agents to look at the house. Check out this article about how to select a real estate agent before you start your agent search. Tell them you want their opinion as to the “range of value” of the home in its current state. The range of value is the highest price you could expect to receive and the lowest price you should accept. The reason you should ask several agents is that they will not agree on value. Your job will be to determine which of the opinions makes the most sense. Have they considered the homes comparable to your mother’s home that has sold in the past year? Are they in similar neighborhoods? Have they adjusted for the differences between the comparables and your mom’s house? Even similar homes have differences. Here is an article at http://220.127.116.11/challenge-home-appraisers/ that demonstrates how to calculate the adjustments. The agents should be able to show you comparables of the home’s range of value without a new kitchen, and comparables with a new kitchen. Can you reasonably expect to get more than the extra $15,000 back?
- There is a broad range of options in a renovation regarding choices in undertaking the work. For example, do we install a granite counter top or a Formica top? Do we buy new high-end cabinets, inexpensive cabinets or just refinish or paint the cabinets (If you paint or stain the old cabinets – do not do it yourself). If it looks like the market will provide a return if you limit the cost to a certain amount, then you need to validate the estimates with contractor pricing. Here is an article about how to choose a contractor that may come in handy.
- The strategy or tactics can also be dictated by what is going on in the market. There will be competition with similar homes. The agents should also be prepared to demonstrate some options as to how to beat your competitors. Should it be a “remodel credit” or should it be a lower price? Should you be shooting to the top of the value range because the market at your price point is sizzling? Or, is it a buyer’s market that suggests some lower entry point. It is possible the tactic could be to test the market before committing to invest in renovation.
The answer should now be clear
You leveraged the tasks by making them one task. If you have selected three vetted agents, and each of them has viewed the home and provided you with their opinion about the range of value, you have gained a good perspective on which agent to choose. You also have a good idea of the best tactic to achieve the best price.