To start, the seller must come to terms that his or her home is a “fixer upper” and is in need of a remodel. If your home has not been renovated within the last 15 years, then there is a good chance it is out of date.
Formica counter tops, wood paneling, parquet floors, popcorn ceilings, sunken living rooms - no matter what condition they are in - are just a few examples of outdated features of a home, that without question, will need remodeling.
Additionally, if your home is NOT an open concept, unfortunately this too will most likely fall into the category of a “fixer upper”.
Once the seller has come to terms that his or her home is a “fixer, upper” the seller must set a logical price for the home. This is a relatively easy process to determine.
Please note: Buyers do not want walk into a home without any equity after the laborious task of remodeling. They would rather wait for an already updated home, if there were no sweat equity to be obtained.
To determine the sale price of a “fixer upper” home, determine what the house would sell for if it were remodeled. Back out the construction cost to remodel as well as 6% (of the total remodeled value) for sweat equity.
Example # 1 : If a remodeled house that would normally sell for $600,000 needs $150,000 worth of work, simply: $600,000 - $150,000 - $36,000 ($600,000 x .06) = $414,000 House Value
Example # 2: If a remodeled house that would normally sell for $450,000 but needs $75,000 worth of work, simply: $450,000 - $75,000 - $27,000 ($450,000 x .06) = $348,000 House Value
To set a dollar figure for a remodel project, the seller needs to call a contractor for an approximate, realistic dollar amount. The seller and contractor need to look at the house through a buyer’s eyes.
It is of the utmost importance to price a “fixer upper” at a realistic price because there are a limited number of potential buyers that want partial “fixers uppers”, and even less that want “total” “fixer uppers”. Finally in regard to “fixer uppers”, financing and/or insurance could also be roadblocks when selling a “fixer upper”, so your potential pool of buyers might be further limited.
The bottom line is when selling a “fixer upper”, you need to be realistic about the overall picture of the home. Evaluate it properly, and act accordingly.