The decisions you are faced with are quite common: Does one sell it as is and let a buyer level the place and rebuild? Or does one spend some money to remodel hoping to capture a buyer who wants to live in it as is? There is no set answer as each place has its own particular circumstances. I have spent the last 20 years fixing up places to sell and it comes down to optimizing the dollars spent versus the time required to remodel versus the timing of the market. And if you remodel in the wrong direction, then it is all for nothing.
One general rule of thumb is that you can sell a place for more if you sell it to someone who wants to live in the place versus tear it down. The key is to remodel smartly and cost effectively. Often this turns into only a $1.00 gain for every $1.00 spent, but it also ensures the speed of sale. Selling it as a "tear down" may get you a faster sale but certainly for $100,000 to $200,000 less.
The best places to spend money on a remodel are as follows:
1. Exterior painting ($4,000)
2. Landscaping and cleanup ($3,000)
3. Interior painting ($3,000)
4. Home inspection services ($450)
5. Repairs required by inspection ($2,000)
6. Replace floors ($8,000)
7. Bathrooms, replace toilets, sinks, tile, floors. ($4,000 each)
8. Kitchen. Often this can be a can of worms and depends on the situation. Spending money in the wrong direction can be expensive and wasteful. Kitchens can cost anywhere from $10,000 to $50,000, so this will have to be analyzed thoroughly.
9. Structural pest inspection ($350)
10. Repair work for termite work ($4,000)
In summary, we typically spend around $24,000 to bring a house up to sellable condition. I have spent as much as $240,000 to remodel, but that is very rare.
The best plan is to thoroughly clean the place, empty it of all belongings, and have a structural pest report and a home inspection report done to see the level of repair work that will be required. Then the optimization process can occur to determine the feasibility of remodeling.
The typical entry level house in Los Altos sells for $1,350,000 right now. A nicely remodeled home sells for $1,650,000 and a newer home sells for $2,200,000. Remodeling typically costs about $40 per square foot of area. New construction costs $210 per square foot for just the construction without all of the "soft" costs.
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