WWYD? Selling a home that needs work

[KTP]

As the day of our "sell everything and go homeless" approaches (late 2015), I am bogged down by the state of our home. It is a big home with a lot of frontage on an excellent salmon/steelhead river. It had an indoor pool that we covered with floor joists (very solid) with the plans to turn that basketball court sized area into another 2000 to 3000 sq-ft of living area. Right now the house not counting that room is 3bd 3 bath and 2600 sq-ft with a huge 5 car garage. I estimate it would cost $40,000 to do a basic sheetrock/carpet framing of the pool room and maybe $100,000 to do it the way we initially envisioned (theater room, loft library, and game room).

The yard needs work (it does flood occasionally but the house is on a 6 foot concrete foundation and never floods). A lot of silt near the river area around the gazebo from a big flood several years ago. Estimate $3,000 of yardwork including renting a small bobcat.

The roof is concrete tile and is in fair condition. Some chips but no leaks...a lot of moss though. I am scared to get it cleaned because the risk of them breaking tiles and causing many leaks. The gutters and face boards probably need replacing. House could use painting. $30,000 to $50,000 could be spent on all of this pretty easy.

Inside needs new carpet and one bathroom needs refinishing (started). $10,000 should get this done.

We paid $300,000 and owe $50,000 (just sent in a $40,000 payment). I do plan on paying off the whole loan later this year when some stocks are called away. Zillow gives varying figures around $350,000 but very hard to compare as there are not many houses on the river in our area...probably can't even build a new home on the river without mucho permits and hassle. We did add a very nice 12 foot by 40 foot cedar deck since we bought the house, with massive concrete footings. We did the work ourselves (except pouring the concrete) but still spent around $12,000 on it.

I only need about $250,000 out of the house to meet our retirement numbers. I am quite reluctant to sink money into the house and spend 2 years trying to sell it at a high price while we are traveling the country. I have zero motivation to put a lot of sweat equity into the house since I like to do a good job and that takes time I don't have.

What would you do? I was thinking of giving the house a good cleaning, fix up the yard and show it to a real estate agent to see what they think. If they say it needs all the other things fixed, I might consider selling it by owner for a reduced price.

The other alternative would be to spend $100,000 to $150,000 and really turn it into a show property....and then end up still selling it for $300,000 in a soft market.

The back yard looks nice. If I could just keep prospective buyers out here, it might not be so bad.

[lorraineb]

You might want to invite several real estate agents over and without giving any hints, ask them what they would do to the house to increase it's value within your budget. Knowing better what buyers are currently looking for might give them better insight as to what improvements will get you the most money for the sale.

Once they have given their opinions, you can also run your ideas by them and see their opinion. You can also do this with a remodel/flip company (pay them a fee) if you have a good one in your area.

[Retired To Win]

I faced the same question 3 years ago. I called in a couple of real estate agents for input. They gave me possible selling prices based on the as-is condition of the house, and based on doing specific repairs/improvements. With that data in hand, I was able to decide what tasks merited investing money and/or time and which did not. The sale was a success.

Good luck!

[ua_guy]

KTP, I've enjoyed some of your posts. My honest thoughts on this one-

If the place was mine, I'd fix the pressing issues like the roof and other maintenance items that could become a problem and I'd retire there. But, that's because I enjoy legacy-type properties like that. To live on river footage in a nice home is an unmatched status in the rest of the US. If you haven't traveled the US but are planning to as part of your retirement plans, you'll see what I mean. It makes me wonder why you'd want to leave it. But, I don't understand the conventional wisdom around being financially independent just for the sake of being debt-free or retiring early. I know, strange...we probably have different perspectives on that. Maybe I'm barking up the wrong tree here, but that's what I'd do.

If I were selling the place, I'd still take care of the roof. That's an area of fear for inexperienced buyers, and I'd also complete the refresh of the bathroom, new carpet, and cleanup of the yard. The real-estate market is still a bit soft; if the home is not in financial distress, the expectation is that it should be in good maintenance, and buyers do love the smell of fresh carpet and new paint when they walk in a home. You want to keep the buyer's potential list of feared "projects" to a minimum, preferably to appearance and preferential items so that you can negotiate for top-dollar. I would not do a showroom-type remodel of the home unless you planned to stay there.

[KTP]

Thanks all.

ua_guy, I can see why someone might want to retire in our location on the river, but we are ready for a change. You only get one go around and there is so much of the USA to see, much less the rest of the world. I want to walk through a town and make discoveries instead of seeing the same thing every day.

I think we will talk with an agent soon and see what they think we could sell the house for, with and without repairs. Obviously since they get 6% of the price, they would want you to put $100,000 into the house and sell it for $100,000 more.

[riverwed070707]

Just curious, why pay off the house if you're looking to sell it next year? I feel like that cash could be better used sprucing it up or even just kept liquid. No reason to have the bank hold the money for you.

[KTP]

Just curious, why pay off the house if you're looking to sell it next year? I feel like that cash could be better used sprucing it up or even just kept liquid. No reason to have the bank hold the money for you.

I had $70,000 sitting in a brokerage account earning 0.01% so decided to put $40,000 on the house loan for a guaranteed 3.625% return.

I can come up with money for sprucing up the house and I keep a large emergency fund (plus I guess I could sell $20,000 of I-bonds if I had to...they are only earning 1.something %).

I really don't want to sink more than $10,000 to $15,000 into the house before selling it because it seems a risky investment. I think buying Apple stock is a much lower risk than investing in our house to try and get a higher selling price. Commissions on Apple stock are $3 vs 6% on real estate.

[ua_guy]

Thanks all.

ua_guy, I can see why someone might want to retire in our location on the river, but we are ready for a change. You only get one go around and there is so much of the USA to see, much less the rest of the world. I want to walk through a town and make discoveries instead of seeing the same thing every day.

I think we will talk with an agent soon and see what they think we could sell the house for, with and without repairs. Obviously since they get 6% of the price, they would want you to put $100,000 into the house and sell it for $100,000 more.

I'd try to negotiate the commission. I did on our last house.

I'd also caution taking a realtor's advice for what a home is worth. Remember, if they want you to start $50,000 less on your asking price, you lose $50k but they only lose $1500, and if it gets the home to sell 3 weeks sooner, it was worth it for them. For you, you just gave away a US median household income for a year.

[sniper260]

god I wish I could live there and make good money somehow lol Id buy it then!! $300,000 is cheap for something like that where I am!!

[snafu]

I'm not sure I understand your retirement plan. Will you buy a RV and tour the country followed up with cruise to a specific foreign destination for part of the year? When this segment of retirement gets old, will you buy a condo & where will you live? Is your retirement plan and departure date predicated on the house being sold first? Can you back up your departure plan by a year to be your own contractor and hire tradesmen one by one to carry out the tasks that are identified as critical to selling? Who do you and the 4 or so realtors you select for possible listing agent, see as your target market [young couple, move-up status, folks with lots of extended family or]?

Is the interior mostly high end finishing or is it dated or just in need of paint and builder's level carpeting? Hardwood and quality wood laminate are preferred flooring just now. If the bthrm has been started it needs to be finished because it's very difficult to take over someone else's project.

I'd go to any Realtor 'Open House' in your community to see for yourself what is being offered at what price per sf.