Remodeling and selling a home in California’s current housing market can bring a mixed bag of results. On one hand, the renovations can increase your home’s value to help you make a bigger profit. On the other hand, the projects might backfire and delay your plans to sell.
Is remodeling your home before selling worth it? Or should you skip the remodeling projects and take what you can get? Here are some points to consider.
Housing Market in California
The housing market in California was thoroughly a seller’s market for most of the COVID-19 pandemic. However, that trend has started to slow down. With mortgage interest rates continuing to climb, home sales have slowed down in recent months and their average value has dipped as a consequence.
In the San Diego area, a single-income household’s average value has dropped to $969,000. That number is down 22% from June and down 43% from June 2021. The number of buyers in the area has also decreased because fewer people can afford to pay the higher monthly rates.
What does the latest market lull mean for sellers? For starters, you shouldn’t overreact and take the first offer from the first buyer. The housing market’s red-hot selling streak was bound to end at some point. The drop in sales over the last few months is a natural regression towards the mean. Market experts expect the decline to continue in 2023.
However, you should consider your real estate agent more carefully. Your agent should be a trusted source of knowledge and advice. They can help you determine whether a remodeling project is a good idea based on your budget, timeline, long-term plans, and the structure of the home itself. With those factors in mind, let’s break down the pros and cons of remodeling your home before selling.
PRO: Increases Your Home’s Value
The main reason to consider remodeling before selling is the chance of increasing your home’s value. A house with recent improvements is more likely to draw a high price than a house with existing problems. Some people even make a steady income out of buying and flipping cheap property.
Of course, your home’s potential price increase entirely depends on the scope of the remodeling project. What projects are you thinking about? Fixing infrastructural problems, redoing the kitchen, or building a garage can add tens of thousands of dollars to the final price.
Here are some other remodeling ideas that often lead to value increases:
- Fix broken appliances
- Replace outdated wiring
- Add a small deck
- Add ceiling fans
- Replace the garage door
- Deep clean the floors
- Repaint the exterior
- Spruce up the landscaping
The larger the project, the greater the potential return on investment (ROI) will be. However, larger projects also come with a higher degree of risk.
CON: Extends Your Timeline
Big remodeling projects are risky endeavors in declining housing markets. They can add months to your timeline and cause you to miss out on offers from buyers. Your home’s value will also continue to decrease as the market slows down. Even if your projects are successful, they might not see the same ROI as you had hoped simply because of external factors.
The poor state of the construction industry also plays a role. Labor and supply shortages can lead to long delays. Based on these factors, a big remodeling project might not be a wise investment right now. Whatever you do, create a detailed timeline and seek advice from your agent sooner rather than later.
PRO: Makes Your Home More Competitive
On the flip side, a remodeling project in a declining market can make your home one of the top competitors in the area. With fewer listings on the table, a home with fresh renovations will stand out more easily than it would in a crowded market.
This possibility could prove especially advantageous in San Diego’s market. Although fewer houses are being sold, the listings are still high in both number and quality. SoCal will always have an abundance of desirable homes because people want to live near the coast and enjoy the beautiful weather. It’s a great place to live, plain and simple.
CON: Tests Your Budget
If you have a tight budget, a remodeling project will test the limits of your wallet. Some projects require upfront payments in cash that you don’t have. Given the aforementioned state of the construction industry, a major renovation might be much more expensive than your initial estimates due to delays.
For those struggling to gather the funds for a remodel, some DIY projects to improve the house’s appearance might be your only options.
PRO: Reduces Buyer Objections
When prospective buyers inspect your home, you can be sure they’ll look for reasons not to buy around every corner. Every flaw might be a deal breaker, no matter how insignificant. Remodeling projects reduce buyer objections, helping the home sell faster for a seller-friendly price. With this benefit in mind, you might want to focus on infrastructural improvements like:
- Fill in cracks in the wall
- Clean up overgrown landscaping
- Repair damaged windows, doors, light fixtures, etc.
- Replace outdated flooring, vanities, and other decor
One low-cost fix isn’t that impactful on its own, but a dozen small projects here and there can make a world of difference when it comes time to sell.
CON: Doesn’t Guarantee a Full ROI
At the end of the day, there’s no guarantee that your remodeling efforts will yield a full ROI. Something might go wrong during the projects or you might just have bad timing with the housing market. Some buyers seek out homes with new renovations, while others are skeptical about how much the renovations add to the bottom line.
If you’re going to invest in a major remodeling project, you must be prepared to accept two negative outcomes: breaking even or losing money.
Every House Is Different
While the local housing market, construction industry, and buyer attitudes will no doubt impact the success of your renovations, your home is still the most important factor. Every house performs differently once it gets listed. Consult your real estate agent, research the performance of similar listings in your area, weigh your remodeling options, and make a timely decision.
