In the era of HGTV, potential home-buyers expectations have become extremely high. They want a home that is beautiful and problem-free. Buyers are willing to pay premium prices for the perfect home that is move-in ready.
The reality is that most homes on the market need some sort of repairs or upgrades in order to appeal to these sophisticated and demanding buyers. The question is, is it better to do the repairs and upgrades on your own, or give a buyers credit to address the issues.
Upgrades vs Buyer’s Credit
Once you decide that your home does need a facelift as compared to other options in the marketplace, the next decision is whether to do it before listing or offering the buyer a credit which allows them to remodel to their own taste. While it might seem like a good idea to give the buyer the ability to choose their own design, the truth is that if you can afford to do the work, you should get it done before listing. Here are a few reasons why offering a buyer’s credit has a downside:
•Buyer Impression: A dated home will look dated. Unless you’re offering a true “fixer-upper,” then buyers will evaluate your home based on its current appeal. Some will envision the potential, but many will find that too much work.
• Lower Offers: Offering a credit could be seen as seller motivation or desperation, which can lead to lower offers.
• Credit vs Value: You might feel an $8000 credit is reasonable for new kitchen counter-tops but your buyer might not. This can lead to additional negotiations which might reduce your profit.
• Home Condition: Buyers are hoping for a low-maintenance, low-repair property. If your home shows its age, buyers naturally wonder what else might be lurking beneath the surface.
• Loan Approval: Getting a home loan approved with a “carpet allowance” is all but impossible. To avoid this concern, most credits are labeled as “closing cost credit” instead, but there are limits to that also. If your buyers already are hoping for a closing cost credit, then they might not be able to accept your offer.
A dated home will always look dated. While you might find a buyer who can truly visualize the potential of your home, the truth is a home in need of updates will have a smaller buyer pool, and this reduces your chances of a good offer. If you can afford to make the updates before you list, you remove the opportunity for low-ball offers and put yourself in the best possible position to get a great offer.