(This is an update, published May 2021, to an original blog post from October 2019.)
Did you know that about 80% of all owners complete at least one improvement project before closing the sale on their home?
Among the most common projects are a bathroom or kitchen renovation or full remodel, roof repair or replacement, and interior or exterior paint work. Those jobs don’t come cheap.
A kitchen upgrade can fall in a wide range of $8,000-$40,000, averaging $19,920 nationally for a complete renovation – almost double ($10,833) what a survey of consumers had estimated for the work (2019 data). A new bathroom could run about $10,000 but sellers estimated the remodel at $6,371. Many homeowners add a new roof – at about $10,000-$20,000 – before they sell. Paint work can be $2,000-$8,000, sometimes more.
Pick just one project and a seller can face a home-improvement expense of $7,570 on average – and easily more than that – based on national findings.
The price of lumber has soared by about 300% year-to-year (April 2021), sending some home renovation costs through the proverbial roof. If possible, owners should wait for prices to fall before embarking on a large wood-focused project or consider sourcing reclaimed lumber through Craigslist, eBay, Etsy, Facebook Marketplace or Nextdoor.
The average price of a newly constructed wood deck in Seattle is about $18/sq. ft. The cost of materials and labor could easily run $10,000 and as much as double that, according to local contractors (April 2021). A composite-wood deck may be a couple thousand more.
You’ve heard of “buyer beware.” Well, how about “seller be forewarned”?
Sellers typically face costs associated with the transaction that are about 8%-9% of the sales price, excluding home improvements, special assessments or the payoff of a mortgage. That percentage could be less if a seller wishes to compensate buyer brokers and their firms at a rate lower than the typical 3% of the sales price.
Let’s do some math: The median price of a Seattle home (single-family, townhomes and condos combined) is $750,000 (April 2021). And 8.5% of that figure is $63,750. Roughly, that can include $41,250 in commissions to the two real estate firms and their brokers working to bring buyers to see the home, market the listing and manage day-to-day efforts to sell the property (and much more behind the scenes); and about $22,500 in taxes and fees. (FYI: The state approved a revised excise tax on property sales in 2020.)
There are different approaches to the home-repair decision. If a seller makes a repair before listing the home, he/she can use the improvement as a selling point when marketing the property. Without the repair(s), a seller saves potentially thousands of dollars and can arguably put the home on the market sooner. But will the unimproved home sell in the same timeframe – and at what price? Have a discussion with your real estate professional (including having John L. Scott make advance payments on repairs) and possibly your financial advisor to weigh the options.
In my experience, there can be some uncertainty from homeowners as to who pays for the marketing and promotion of the sale. Listing agents usually cover these expenses, including professional photography/videography, custom website, print materials, signs and advertising costs. (The cost of staging the home can be paid by the broker, the seller or it is split.) All these costs should be discussed in advance between broker and seller.
Not to fear, a seller will learn the costs related to the closing. Known as a net proceeds (or settlement) statement, the document offers a line-by-line explanation of a seller’s credits and debits. A seller’s real estate and escrow agents will help explain the line items. (We covered this part of the process in a previous blog post.)
The numbers and scenarios mentioned above are simply a guide and not etched in stone. Every transaction is unique, with different numerical possibilities. Always speak with your escrow or real estate agent when you have a question.