Your in the process of listing your home for sale. You want top dollar but you’re not quite sure what to upgrade and what to fix before listing your home for sale. Unless you have the tool belt of Scott McGillivray, the skills of Bryan Baeumler, and the design acumen of Joanna Gaines, this process of renovating, updating, and prepping your home before selling can be daunting. Are all those repairs necessary? Do I really need to upgrade those appliances? When is it too much?
To help, here’s a simple three-step process that quickly allows you to determine what to fix and what not to fix before selling your home. If it turns out you do need to upgrade your home before selling, not to worry, we walk through the best upgrades and renovations to tackle before listing your home for sale.
How to Decide if You Should Renovate Before You Sell?
In 2021, North Americans spent $433 billion improving and maintaining their homes. It would be fantastic if homeowners recouped this money when they sold their home—but that’s not always the case.
While there are plenty of examples of homeowners spending on the right upgrades there are also plenty of anecdotes and statistics to prove that fixing a home before selling doesn’t always pay off.
To end up on the winning end of this equation, go through the process of answering these three critical questions. In the end, the answer to these questions will guide you to the right decision.
#1. What’s the Condition of Competing Homes for Sale?
Are all homes in your area similar? Have they been updated, remodelled, or completely renovated? When determining whether or not to renovate before listing your home for sale, you should first consider how similar homes in your area will compare. If you’re willing to go a step further, consider the advantages of your area and what type of buyer this would attract.
In this stage of the decision-making process, you are thinking strategically about what the buyer wants and whether or not properties listed in the area meet those needs.
For example, let’s assume you are listing your starter home for sale. It’s a detached house that offers just a little under 2,000 square feet of living space. You know from your research that there are great schools in the neighbourhood and that the street your house is located on is quiet and family-friendly. From scanning MLS, you also know that similar homes in the area have not had many upgrades or updates; maybe a fresh coat of paint and new floors, but that’s about it.
Should You Renovate?
- Yes, You Should Renovate: If you want top dollar, and you’re comfortable with taking on a bit of risk, you may consider a few updates, such as new kitchen countertops (and cabinets), time and money spent on landscaping, painting inside and out, and updates to the bathrooms. Why? Because new families—your ideal buyer—typically want move-in-ready homes. Young families often choose to pay a little extra for a turnkey home, then a home that requires updates and renovations.
- No, Don’t Renovate: The good news is that the current state of homes in your area allows you to skip the cost and stress of renovating before you sell. Since your home won’t be an outlier—a property that differs significantly from others in the area—buyers won’t notice the lack of updates. Instead, consider tackling repairs and making small updates, such as fresh paint and new flowers.
Using MLS or your real estate agent’s guidance, go through comparable properties in your area and make a list of all the common or standard upgrades homeowners have accomplished. Use this list to compare your home with others on the market. If you’re still not sure, like in the example above, move on to the next stage in this process.
#2. What Is the State of the Real Estate Market?
Deciding whether or not to renovate before you sell really does depend on the current state of the real estate market in your area. That last statement is key. Deciding to blow big bucks on a home upgrade because overall real estate demand is high in Canada can really backfire if your particular neighbourhood, community, or city is going through a slump.
Look at sold data and talk to your real estate agent to determine the current state of home buying and selling in your community; ask what’s in demand and what’s not; finally, keep abreast of economic situations that could impact the overall market.
Should You Renovate?
- Yes, You Should Renovate: If there are relatively few listings in your area, a shortage of properties, or more buyers than inventory, then you may want to take on the financial risk of renovating before you sell, in order to increase the value (and desirability) of your property.
- No, Don’t Renovate: If homes are sitting on the market for longer and longer; if the number of buyers is starting to dry up or bidding wars are starting to disappear, you’ll probably need to think twice about taking the time and money to upgrade our home.
Use real state statistics and Realtor insight to determine the state of the market in your area. If you’re still not sure, move on to the next stage in this process.
#3. What is the State of Your Home?
We all want to add a little and get a lot, but if your property requires a lot of modernization, then think twice before renovating—unless you’ve got deep pockets and an appetite for risk.
It’s not enough to blindly follow current design trends or stick to cliché reno rules, such as updating the bathroom or kitchen before listing a home for sale. We all want to add a little and get a lot, this knee-jerk approach to property upgrades won’t get you a lot if your property requires a lot of modernization.
As a general rule of thumb, smart renovation decisions factor in the entire home, not just a fragment, and in almost every situation, a smart renovation will end up fixing a universal problem.
Ask yourself the following questions when considering a specific home renovation:
- Does it increase your home’s functionality (and/or desirability)?
- Will you have to take on expensive debt?
- Does it meet your family’s current needs and goals?
- Does it have a strong possibility of meeting your family’s future needs and goals?
Obviously, the answer to the last two questions has little bearing on whether or not to renovate before you sell, since it doesn’t matter if the upgrade meets your family’s needs; however, the answer to the first two questions is critical. These answers help you narrow down whether or not the money spent on updating your home before selling is an expense or an investment. (It will also go a long way in determine what to not fix before selling your home!)
If your home requires a complete overhaul — new kitchen, new bathrooms, new floors — along with the standard updates (like new paint, updated landscaping in order to improve curb appeal) — then chances are you shouldn’t renovate before selling.
To illustrate, let’s consider the sale of House A, which is updated, and House B, which is not. As we would expect, House A sells for a much higher price but that doesn’t mean the sellers made more money. To understand what I mean, let’s assume that both homes were bought 10 years ago, each for $200,000. Over the years, homeowners in Home A spent $75,000 on home renovations and upgrades; eventually, they sell their home for $357,500. In that same time frame, Home B’s homeowner spends nothing on upgrades and sells the unrenovated home for $280,000.
Based on the math, Homeowner A earned a return of 30% on their “investment” (home price + reno costs). Pretty good. Homeowner B, however, earned a return of 40% (just their purchase price). Mathematically, Homeowner B did better. Of course, this example omits some big mitigating factors like the cost of mortgage debt, annual property taxes, price appreciation and increase in maintenance costs due to a lack of upgrades and improvements. It also ignores Homeowner A’s 10 years of enjoyment from their upgrade but based purely on the math, it paid off not to renovate the home.
Finally, there’s a quick rule of thumb when it comes to upgrades and renovations, particularly for the more expensive rooms in the home, like the kitchen or bathroom.
- Kitchen: Don’t spend more than 15% of the current market value of your home on a kitchen renovation;
- Bathroom: Don’t spend more than 5% of the current market value of your home on bathroom upgrades;
- Don’t spend more than 2% of the current market value of your home on additional upgrades, such as new flooring.
On a $350,000 home, this works out to a maximum total renovation budget of $77,000.
Should You Renovate?
- Yes, You Should Renovate: Is it a relatively short list of improvements required to make your home stand? It might be a good idea to renovate. Just be sure you have the financial flexibility and the mental fortitude!
- No, Don’t Renovate: If you’ve not completed updates in the past, it’s probably not worth it to update before listing your home for sale. One easy way to decide is to list all the upgrades required and then calculate a ballpark cost. If you can’t keep this home improvement budget under the suggested guidelines, it’s best not to do renos.
How to Increase The Value of Your Home with Renovations
Renovating a property in order to enjoy it for years to come can be smart. It’s often cheaper than moving; you end up getting exactly what you want, and the update is in a style that you most prefer. Better still, the upgrade has the potential of adding value to your home, although, this benefit is often a secondary consideration.
Alternatively, spending money on home improvements right before you move is an entirely different process. You can’t rely on your needs or preference, because very shortly, you won’t be living in the home.
If the home’s design and decor aren’t too dated, consider cheaper, less intrusive updates, first. If your home is really dated but you’re confident you can stick to a budget and schedule, then tackling a complete home upgrade can pay off—just be sure to really do your research.
Here are some general tips to help you make smart choices on larger scale design upgrades:
1. Make Modern Updates to High-Traffic Areas
For the highest possible return, choose finishes that are contemporary and neutral. Look in decor magazines for inspiration.
2. Don’t Underestimate the Inexpensive Remodel Plans
It’s easy to focus on the major stuff, like kitchens or bathrooms, particularly when prepping a home to sell. Yet, smaller, less-expensive upgrades, like painting your home neutral colours or replacing the entry door, can really make a difference.
3. Consider Energy Efficiency
Energy-efficient upgrades are fantastic if you’re staying in the home. But hidden updates, like a new high-efficiency furnace, won’t move the sales needle. Instead, consider highly visible energy efficiency upgrades, such as new stainless steel appliances with the EnergyStar certification.
4. Always Match the Upgrade to Your Area
The key with any home upgrade or renovation is to add value that fits in with the surrounding neighbourhood expectations. Adding a $12,000 bathroom sink to a middle-income neighbourhood home probably won’t add that much overall value to the home!
Got a grasp on the general tips? Great! Now, to help you determine what should be on your list, here’s a cheat sheet on what to upgrade and what not to fix before selling your home.
What to Fix Before Selling Your Home?
You don’t have to spend a lot to get your home ready to sell. Focus on relatively small home improvements that can yield big returns on closing day.
Updated Light Fixtures
Replace lighting throughout a home; it’s a simple and cost-effective update with a dramatic impact. That’s because more light helps a home appear bigger and more spacious—and leaves potential buyers with a great impression of your home.
Stick to fixtures that match your home’s current hardware and colours—in other words, don’t add a matte black pendant light to a room with chrome doorknobs. For homes with very dated fixtures—such as brass lamps or pendents—focus on a complete replacement, as these tend to date a place quickly, even if other home upgrades have been completed.
Updated Flooring
If you’ve got lots of rooms with many types of flooring, you might want to bite the bullet and invest in new flooring for all, to create a unified, seamless feel throughout the house. Hardwood, or even faux-wood floors, are preferable to carpeting, although they are certainly more expensive to buy and install. Always stick to neutral colours.
New Paint
Painting is one of the cheapest home improvements but with the highest rate of return. For that reason, it should be on every home seller’s list of updates to make before they sell.
Stick to neutral paint colours and, where possible, consider getting colour recommendations from a trained professional, since lighting and accompanying features, such as cabinet or counter colours, can have a big impact.
Landscaping
The first impression potential buyers get is the outside of your home. If these buyers are greeted with a patchy or overgrown yard, broken fences or burned out bulbs, it can be a major turn-off. To stop this negative first impression be sure to do the following:
- Remove dead and decaying debris from yards, planters and walkways.
- Cut back overgrown bushes and trees.
- Refresh the yard, either by resodding or, if you have time, reseeding.
- Edge your lawn, so it looks clean and well-kept and helps define your home’s outdoor spaces.
- Add a pop of colour with annuals in planters or flower beds leading up to the front door.
Updated Bathroom
A bathroom that looks old can really date a house. This doesn’t mean a full gut and renovation, although that can be a good idea if you’ve done your research and crunched the numbers.
For those looking for a few lower-cost bathroom updates, consider the following:
- Replace vanity counter tops
- Replace floor or wall tiles
- Add a frameless glass shower door (and remove brass or metal hardware and sliding door tracks)
- Add a new vanity or cabinets
- Swap out old fixtures in the sinks and tub.
What Not to Fix Before Selling Your Home?
- Skip major lifestyle or luxury upgrades, like adding a pool or hot tub. Evidence shows these home additions rarely adds enough value to the home to justify their steep price tag.
- Skip major updates to one room or one section of your home, if all other areas are outdated or unrenovated. A new kitchen is appealing but when added to a home with outdated bathrooms, it only attracts questions and concerns. The most common assumption from potential buyers to this mismatched update is that the home is a work in progress. It’s the following questions — What else needs to be done? What haven’t the homeowners completed? — that can prompt concerns and even buyer hesitancy, which is not good during sale time.
- Don’t upgrade or improve invisible components. Don’t expect much return when spending money updating silent home features, such as the furnace, plumbing or electrical components. Most buyers expect these systems to be in good working order and won’t pay extra just because you recently upgraded.
What’s the Likelihood of a Return on Your Investment?
There is no clear-cut answer to this question. Every home is different, every neighbourhood is different and every buyer is different
To help, however, there is a common rule of thumb that most house-flippers use:
For every $1 you spend on home upgrades, expect to add $1.50 to your home’s value.
Using this rule of thumb, and the reno budget guidelines outlined above, we should spend no more than $77,000 to upgrade a home with a current market value of $350,000. Once complete, we should feel confident about listing that same home for at least $465,500 or more.
If you do your research, use the simple three-stage research process outlined above, and stick to budget guidelines, you can make smart renovations decisions before listing your home for sale. Do this and you have a much greater chance of adding value, rather than sinking money, into a home you’re about to sell.
