The baby boomer generation (born between 1946 and 1964) will have a significant impact on the housing market over the next several years.
Baby boomers currently account for 40 percent of U.S. households but hold 54 percent of household wealth. Experts predict that this group will spend $1 out of every $4 on new home purchases or rent in the next five years.
According to research by The Demand Institute, two-thirds of baby boomers don’t plan to move anytime soon. Of those who are planning a move, 54 percent are looking to downsize, while 46 percent are looking to upsize and are looking for an ideal home for retirement.
Baby boomers who are thinking of moving are no doubt wondering how they can get top dollar for their current home. Whether they are retired and on a fixed income or experiencing sticker shock when shopping for a new property in the current market, they need to make every dollar count.
So one question they’ll be asking is, “Should we renovate before we sell?” It’s something to consider if the house is older and hasn’t been updated in awhile, but the short answer is: “It depends.”
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The case for renovating
All things being equal, it’s true that an updated home typically sells faster and is more likely to fetch top dollar. Many buyers today are putting all of their savings into the down payment and furnishings, so they prefer a move-in ready property that doesn’t need a lot of work.
Homes that aren’t updated can easily be passed over — or buyers might want to discount the price steeply because they consider it a fixer-upper.
Buyers often look for updates in the kitchen and bathrooms, but they can also be turned off by other things that make the property look dated, such as popcorn ceilings, wood paneling, worn or dated carpet, old doors and windows.
First impressions matter. A buyer who walks into an outdated kitchen or a dirty bathroom might not even want to see the rest of the house.
So if a renovated home sells faster and often brings in more money, what’s the downside?
Possible downsides
For one thing, major renovations can be expensive, and it’s unlikely that the homeowner will see a 100-percent return on their investment.
According to Remodeling Magazine, most standard renovations return an average of 50 percent to 80 percent. A higher return is certainly possible, depending on the neighborhood and the particular situation, but it’s not guaranteed.
Given the current market, homeowners also need to consider that they might need to spend more on a future home than they planned on. It’s a good idea to price-check homes in their preferred area before they decide how much money to spend on renovations or updates for their current home.
Plus, renovations can be messy. What’s their tolerance for noise, dust and workers tromping through their home for weeks?
Renovating also takes time — time to find a contractor, time to schedule and complete the work. If your clients are in a hurry to sell, renovations might not fit their timeline.
Best bang for the buck
Whether a boomer should renovate before putting their house on the market depends on many factors — including how much they are willing to spend. They should know that the ROI won’t likely be 100 percent. However, certain renovations have better ROI than others.
Kitchen and bath renovations are among the most frequent updates and some of the main areas that buyers consider.
According to Remodeling Magazine’s “2015 Cost vs. Value Report,” the average ROI for these types of projects is only 59 percent to 70 percent.
On the other hand, the report shows items such as steel front doors and stone veneer and siding are returning 80 percent to 100 percent of the investment.
Even if the homeowner is on a tight budget, don’t be afraid to suggest relatively simple and inexpensive updates such as painting, replacing the carpet, changing out hardware on cabinets, installing new faucets and so on.
These can typically be done rather cheaply and without too much disruption. The homeowners can probably do some of the work themselves, and they are worth doing if they make the property look less dated.
Bottom line, it’s important that agents work closely with clients to let them know what type of updates buyers expect in the neighborhood.
They don’t need expensive new flooring or granite countertops if simply upgrading the appliances or installing new windows will be enough to impress buyers.
Eddy Lang is the founder and CEO of Housefax. Follow Housefax on Twitter and Facebook.