Should You Remodel Anything Before Selling?

Should You Remodel Anything Before Selling?

Episode Transcript

Speaker 1 (00:02):
Hey, it's Michael Blaze. Welcome to Your Home three sixty,
the show where we talk about everything to do with
your home. I'm glad that you were listening today. On
today's show, we're going to talk about is it worth
it to remodel before a sale? And we'll also talk
about a lawsuit against a realtor and whether they want
or not regarding a new build new construction sales contract,

(00:27):
So that'll be coming up a little bit later in
the show. First, I wanted to talk about the market
a little bit. So you hear on the news how
it's turning into a buyer's market. Well, all real estate
is local, and there are still certainly pockets of areas
where they're in demand. And I just had one the

(00:50):
other day where the property had been on the market
for a little bit. They had recently lowered the price
a bit because a lot of people are still, you know,
trying to get the highest amount they can get and
they're overpricing a little bit. So honestly, I'm like, Okay,
this one's perfect. You know, we're going to go for
this and we're going to come in lower. And I

(01:11):
call them and they're like, well, we do have an
offer already, and I'm like, okay, So we put an
offer in and then I got notified that they received
another offer. So then we increased our offer, and then
I got notified that they had another offer. So we
end up in a multiple offer situation. We had to
come up on the price. We had to make some

(01:31):
other concessions. One was something that I would never tell
anybody to do normally, but sometimes if the client really
wants the house, you know, you have to do everything
you can to get it for them. And so in
this case, I suggested something that, like I said, normally,
I would never tell anybody to do this, but sometimes

(01:52):
if you want the house, it's necessary. We removed the
due diligence contingency, so in essence, the only contingencies left
on it were the financing contingency and the CL one hundred,
you know, the termite letter contingency. And I really don't
like doing that. It makes me uncomfortable because you should

(02:13):
have your house inspected. We inspected it anyway, but there
was really nothing we could do. You know, we could
if we found any problems. Thankfully we did not, but
if we would have, you know, we could have asked
them in good faith to do something about it, but
contractually we were bound. So that's why I don't like

(02:33):
doing that, but sometimes that's what you have to do. Now.
I bring this up because one of the things that
made me feel a whole lot better about it was
they had just purchased the house back towards the end
of twenty twenty two, and they shared the inspection report
from when they bought it, and they also had a big, long,
detailed list, line item of everything that they addressed and

(02:57):
fixed that was wrong with it on that inspection report,
and also indicated the things that they had not fixed,
so we pretty much knew the condition of the house.
You know, things can change over a few years, but
that indicated to me that they took good care of
the house, that they were acting in good faith, and
that made it easier to accept saying, Okay, you know,

(03:21):
we're in multiple offers here and we really want this house.
My client really wanted it, and so I'm like, Okay,
here's what we're going to do. We're going to have
to go in higher on the price and we'll remove
the due diligence contingency. And we can feel a little
better about that because of this inspection report and the
repair list that they had, you know, the repairs that

(03:41):
included the repairs they had conducted. So it worked and
we got the house. In case you don't know what
due diligence is, I'll explain a little bit. And we
used to not do it this way. We used to
do things differently. The contract gave you, this was in
the past, a couple of different choices. You could do
it diligence period, or you could do a repair procedure

(04:04):
contingency on the contract. Under due diligence, you can back
out for virtually any reason you want for the period
of due diligence. And it used to be you didn't
have to check that. You could check repair procedure and
you could inspect and if there were a certain number
of things that were stipulated that were wrong with it,

(04:25):
you could renegotiate the contract at that point, either take
some money off the price, request repairs. I mean, there
were several different ways that you could proceed under that
repair procedure, but you couldn't just back out because you
decided to and under due diligence. That's the way we
do things now. We follow the South Carolina Association of

(04:47):
Realtor's standardized contract, and all of those contracts are due
diligence now, so virtually every deal is due diligence contingent
upon due diligence, which allows you to back out for
whatever reason you want. That's not very appealing to a seller,
so there's a couple of ways around that. By removing

(05:09):
due diligence, you really don't remove it. What you do
is put a date that it's going to expire so
quickly you can't back out right so you know, in
this case, you know, I put the date of like
right after ratification, so we ratified, and then due diligence expired,
so for all intents and purposes, there was no due

(05:31):
diligence period. There's not a way to remove it from
the contract. But what you do is use a very
aggressive date where there's just a short time in between
you know, the contract being ratified and when the due
diligence expires. I've even had some in some cases where
the due diligence expires before the contract is even ratified.

(05:52):
So that's how you remove that due diligence period. Now,
another way to do it is to offer a big
old chunk of money. You know, it's negotiable how much
money you're going to pay for that due diligence period.
You can offer zero, but certainly, like in a multiple
offer situation or something like that, that's not going to
get you very far. So you can offer up a

(06:14):
chunk of money saying, if I exercise due diligence and
back out of this thing at that point, I owe
you X amount of dollars. Of course, the buyer doesn't
like that very much, so you kind of have to
balance it, find something that's comfortable for both parties and
fair for both parties. And I have to say, I mean,
I really don't like this new due diligence contract and

(06:36):
being locked into having to have a due diligence period
or find a way around it, like I was talking
about with the dates. I'd much rather go back to
the repair procedure. And I think there's a lot of
realtors that would agree with me. There's probably some that wouldn't,
but you know, I preferred the old way better. But hey,
things change. But it goes to show you sometimes you

(06:58):
can't listen to what the media is telling you because
they're like, oh, yes, buyer's market. Well in some areas maybe,
but in high demand areas it's still sort of a
seller's market, not as much as it was not to
the extreme that it was, say, you know, through COVID
and up to I don't know, a year ago or so.

(07:19):
But it's still a healthy real estate market. And sometimes
you have to be willing to bite the bullet and
do what you need to do if you really want
to get that house, and you have to put things
in perspective too, you know, and if it means coming
up five or ten grand, nobody wants to do that.
In five or ten grands a lot of money. But
if you look at it, if you're going to be

(07:41):
in that house long term, over thirty years, it's really
not that much. So you just have to, you know,
set your proper mind frame about it. So I wanted
to bring that up. Hey, I want to remind you
before we jump into this. If you want to hear
today's episode again or any past episodes, I have them
all up as a You can go to the iHeartRadio

(08:02):
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three sixty and they're all there online, right at your
fingertips for you. So should you remodel before you sell

(08:23):
your house? I get a lot of questions. I usually
start the show by answering a listener's question, but this
week I'm going to compile a bunch of questions all
into one. I get asked constantly, should I fix this?
Should I fix this up before I sell my house?
Should I remodel the kitchen? Should I remodel the bathroom?
Should I replace the flooring? Should I do whatever? In

(08:45):
most cases, the answer is probably no. You know, you
want to make the house look as best as you
can without spending a ton of money, because the buyer
is likely to come in there and want to make
it their own, and you don't want to go in
there and totally remodel your kitchen and then have someone
you know the buyer come in and saying, man, I
really don't like this, so I'm not going to buy
the house, or I'm gonna end up tearing all this

(09:06):
up anyway, And the bottom line is you're not going
to make your money back anyway, and I read an
interesting article in the news last week.

Speaker 2 (09:15):
I saved it, but I don't know where I.

Speaker 1 (09:17):
Well, I thought I saved it, let's put it that way,
but I can't find it. But anyway, this article totally
missed the mark on how to read return on investment
on home remodels. So the articles going on like, oh,
you know, there's a and I don't remember the exact numbers,

(09:37):
so I'm just going to make some numbers up here,
but say it was sixty five percent for a remodeled.

Speaker 2 (09:44):
Kitchen return on investment.

Speaker 1 (09:47):
See the articles like, so you can make sixty five percent.
So if you spend one hundred thousand dollars on a kitchen,
you're going to pocket an extra sixty five grand by
remodeling that kitchen. That's not what the that means. That's
not how you read these numbers. And it makes me wonder,
you know, where do they hire these these so called

(10:07):
journalists now, or you know, or at least authors of
these articles, where do they come from? Are they fresh
out of school and don't know a damn thing? It
appears so a lot of times, or maybe it's just
AI writing the articles. Who knows but it's amazing to
me how far off the mark they get it more
often than not a lot of times these days. So

(10:29):
it really irked me when I saw this article, just
totally misleading people. Yeah, go ahead and remodel your house
and pocket a bunch of money. Almost virtually every remodel
you do is going to lose you money if you
put your house on the market. So when the article
said you get a sixty five percent return on investment
on a remodeled kitchen, it means that you only make

(10:50):
sixty five percent of the money back that you spent
remodeling it, meaning you lost thirty five percent. And that
goes for most remodeling. If you're about to put your
house on the market, do not remodel it. And I
would even say, you know, should I replace the floors, Well,
you know what, if they're worn out and the carpet's
all raggedy, stained up and all of that, then yeah,

(11:13):
go ahead and replace that, But otherwise leave it alone.
Same thing with the walls. You know, fresh coat of
paint will do. Wonders do you have to paint it
necessarily if your walls are in good shape and they're
not all marked up and it still looks decent. Leave
it alone. It's expensive to paint a home. Now, if
you're going to do the work yourself, you know, I'll

(11:35):
leave that up to you. Yeah, fresh coat of paint
would help, although it's not necessary, especially if the walls
are in good shape like I said, and they're not
all marked up and they're not some wild color. You know,
if you have a bunch of pinks and greens and reds,
you might want to pick some grays or some more
neutral tones, you know, just to not turn off potential buyers.

(11:57):
But there's not many projects. If I remember correctly, the
last two things that I ever saw that were positive
on making improvements to your home for sale was a
new front door. And I'm not telling you to go
ahead and do this. I'm just saying that makes sense

(12:19):
because you know, it has to do with the curb
appeal of your home. And why is curb appeals so important?
Because first of all, I can't tell you how many
houses we've pulled up to where I go to show
houses and you know what the house looks like crap,
and people who are like I don't even want to
go in there, just onto the next one. So curb
appeal is important. It's also important because it gives you

(12:40):
a good feeling as you walk through that front door,
so you walk in with a positive attitude and feeling
good about the property. So I can see where you know,
a front door would be helpful. And then the other
one was a deck. Now, I'm not going to say
in all cases you're going to get your money back
or make money on a deck, but you're expanding the

(13:00):
liveability of the home. You're expanding your outdoor livability and
therefore your lifestyle. So you know, an outdoor deck or
a patio or something like that, you know might be
able to get your money back. I wouldn't go out
of my way to do it, you know. I would
never walk in there and say what this house needs
before you put it on the market's or deck so

(13:24):
you know, come up with fifty grand or whatever and
put a new deck on this thing and we'll get
it sold like that. You know, I would never say that.
What I tell people is, you know, get the house
into the best shape you can. Make sure it's clean,
make sure it doesn't stink. There's so many houses that
go in that have pets, especially cats, or it's just

(13:45):
awful walking in there. You don't want that. You want
to smell nice and inviting, and you want it to
be clean and uncluttered, and don't have a bunch of
pictures of you and your family up all over the place.
Has a psychological effect on people when they walk in there,
and you're taking away their ability to envision that home

(14:07):
being theirs because you're right in their face with a
bunch of pictures showing them. But it's not theirs. So
take down all your personal pictures and all of that stuff.
Make sure that the home's uncluttered. Make sure it smells good,
make sure it's clean. Like I said, a little paint
and some lipstick goes a long way. And when I

(14:28):
say lipstick, I don't mean cover anything up, don't lie,
but make it presented in it, just like you would yourself.
When you're going out in public, or you're going to
a wedding, are you going to a job interview, or
whatever it might be. You want to put on your
best face and put on some nice clothes, and you
want to look respectable.

Speaker 2 (14:47):
Right.

Speaker 1 (14:47):
Your house is the same way, and that goes through
your yard too. Make sure the grass is cut, make
sure the bushes, shrubs, trees are trimmed. Maybe add some
And I do suggest this a lot, you know, add
some moltz, clean up the yard, make it look pretty
and inviting. And I should add this too. Now, most
of the time I do not recommend remodeling. But you

(15:12):
know what, if you have a kitchen where the countertops
are falling apart, and the doors are missing off the
cabinets and the appliances are old and banged up and
filthy and all that, yes, I mean maybe you want
to do something about that. And the same thing goes
for repairs. If there's something that needs repair, go ahead

(15:33):
and do that before you put it on the market,
and then it won't come up in inspection. It'll be repaired.
And the more things that need repair have the potential
to put a bad taste in people's mouths about their
purchase or their potential purchase. So I put this house

(15:53):
under contract, I have a due diligence period. I get
it inspected, and even if they're little things, if there's
a million little things on there, you start thinking, well,
was this house really well taken care of? And if
there's so many things wrong with it, I guess I
can request that they repair these items, and we can
negotiate that.

Speaker 2 (16:12):
But what else is wrong with it that I don't
even know about.

Speaker 1 (16:15):
It might hit me in the face down the road
because it's not very well taken care of, because it
needs all these repairs. So that kind of stuff, take
care of before you put it on the market. Make
those small repairs. And if the if the paint is
all marred up and all that, put some paint on it.
And you know, as I said, this presented in the
best light possible, But you don't need to come out

(16:37):
of pocket with a ton of money and remodel your
house in order to get it sold, especially in today's market.

Speaker 2 (16:43):
So I came.

Speaker 1 (16:44):
Across an interesting article that was discussing a lawsuit where
a realtor in North Carolina was sued by their own
client after buying a defective home. So this buyer client
hired the real t and then went and looked at
some new homes and ended up signing a purchase agreement

(17:07):
for a new home. So that's the crux of their relationship. Now,
after the purchase, they discovered defects including foundation cracks, electrical issues,
and water problems, requiring repairs. Estimated between eighty five and
ninety one thousand dollars. So the buyers sued all parties
involved in that purchase, including the realtor who represented her,

(17:32):
for breach of fiduciary duty. So was this realtor guilty
of breaching his fiduciary duty? Did he fail to disclose
any latent defects? What was the extent of his failure
of this fiduciary duty? That's what the court had to decide. Now,
the buyer client said that because the realtor when they

(17:53):
were reviewing this third party contract, so in other words,
it was a contract provided by the builder and that
the buyer signed that when she reviewed it from the realtor,
the realtor said, well, it's pretty much a standard builder contract.
So she argued that by calling the developers contract standard

(18:15):
and not explicitly advising her to seek legal advice, that
the realtor had breached his fraduciary duty and engaged in
an unfair and deceptive practice. Did the court agree? They
did not. The court pointed to a paragraph in their
exclusive buyer agency contract that advised the buyer to seek

(18:39):
professional advice in matters outside of strictly real estate. So
in other words, and matters of law, taxation, financing, insurance, surveying,
and so on and so forth. So the court found
that the agent did not breach his fraduciary duty. Now,

(19:00):
contracts are a little bit different in South Carolina than
they are in North Carolina, but it brings up a
good point to always read the contract and seek advice
from qualified people.

Speaker 2 (19:13):
In that area.

Speaker 1 (19:15):
So, if it's a contract with your realtor, if they're
hiring them to be you know, whether it's exclusive right
to buy or exclusive agency or whatever kind of agency
agreement you have with your realtor, read the contract when
you sign it, and make sure you understand the contract
when you sign it. Now ours under our buyer agency

(19:37):
contract exclusive right to buy. There's a line that says
professional counsel. Buyer acknowledges that brokers being retained solely as
a real estate agent and not as an attorney, tax advisor, lender, appraiser, surveyor,
structural engineer, home inspector, or other professional service provider. Buyer

(19:58):
agrees to seek professional ice concerning the condition of the property, legal, tax,
and other professional service matters. And then there's also an
indemnification clause that protects the broker. So that's simply just
the relationship between the purchaser and the real estate agent
that's representing them in the purchase. And then there's another

(20:22):
step usually in the sales contract called a non reliance clause.
When we find that and i'll read it to you
real quick, paragraph twenty five of the agreement to buy
and sell real estate. So the non reliance clause states,
parties execute this contract freely, involuntarily, without reliance upon any statements, representations, inducements, promises,

(20:47):
or agreements by brokers or parties, except as expressly stipulated
or set forth in this contract. If not contained herein
such statements, representations, inducements, promises, or agreements shall be of
no force or effect. Parties acknowledge that brokers are being
retained solely as licensed real estate agents and not as

(21:09):
an attorney, tax, financial advisor, appraiser, surveyor, engineer, molder, air
quality expert, home inspector, or other professional service provider. And
then it goes even one step further in paragraph twenty six,
which is the broker disclaimer, which says parties acknowledge that
brokers give no warranties or representations of any kind expressed

(21:32):
or implied as to one. Condition of the property, including
but not limited to, termites, radon, mold, asbestos, moisture, environmental issues,
water waste, air quality, HVAC, utilities, plumbing, electrical or structure, etc.
Two Condition of the property survey or legal matters square footage,

(21:53):
three off site conditions, four schools. Five title, including but
not limited to, easys, encroachments, projections, encumbrances, restrictions, covenants, setbacks,
and the like. Six fitness for a particular purpose of
the property or the improvements. Seven zoning, ordinances and restrictions.

(22:14):
Eight projected income value, marketability, taxes, insurance or other possible
benefits to buyer parties, consent that their brokers may communicate
with them via any means, and user disclosed information not
made confidential by written instruction of parties. So there's several
steps in this process where you can see why the

(22:34):
court ruled in the realtor's favor and not in the
buyer's favor where she said that he breached his fiduciary duty. Now,
I will say this, I don't know all of the
details of that particular case that I was talking about.
The I always tell my clients on new construction, I'm like,

(22:57):
the builder writes this contract. Normally they will not let you.
I've tried, believe me, change the language of the contract.
Now you can do addendums to the contract, you know,
if you want to add some items, or especially if
it comes to added features or amenities for the property

(23:18):
that you want to include in things like that. But
I come across the language all the time that I
don't like in their contract, and I tell them outright,
I don't like the way that this is written. But
you know, we'll try to change it. Most of the time,
they will not let you amend the contract to change
that language. So buy or beware when it comes to

(23:41):
these developer builder contracts. And I'll tell you this also,
there are some real estate brokerages that do not use
the standardized contract, So we use the standardized contract as
set forth by the South Carolina Association of Realtors. Some

(24:01):
of these brokerages do not, and the builders and developers
do not. Now it might have much of the same language,
but you have to be real careful in reading it
and see where it's different and how that may apply
to you. But it goes straight to the point of
read the contract. So through the whole process. First, you're

(24:25):
going to sign an agency agreement slash a contract with
your real estate agent, you know, whether they're like I said,
there's different types of agency. But you're going to sign
a representation agreement and it will probably spell out those
same things I just read to you. You know that

(24:46):
you're hiring them for their expertise in real estate, not
in you know, home inspection or structural engineering or you
know any I won't read you the whole list again,
but you get the cruxt of what I'm saying. And
you have to be careful when you sign these other
contracts that are not standardized contracts. And especially this goes

(25:08):
for even realtors, you know, because you're used to what's
in that standardized contract and sometimes you'll come across a
contract that's not standardized like that, so you have to
really get down to the nitty gritty and see where
it's different. And another couple points about this also, like
I said, I'm not familiar with, you know, all the

(25:29):
details of this case. So maybe this realtor did everything
that they were supposed to do. Obviously the court found
in their favor, but maybe to prevent being named in
that suit in the first place. The realtor should have
gone a step further and said, look, the same thing
I just said. You have to be careful when you're

(25:49):
signing these builder contracts. A lot of times they're different
than a standardized well, they're almost always.

Speaker 2 (25:55):
Different than a standardized contract.

Speaker 1 (25:57):
And you have to explain how that might affect the
buyer in their ability to do anything about problems like this.
And it also calls in the question the builder warranty
and all of these other things. Like I said, I
don't have enough details to discuss this case in greater detail,

(26:18):
but you have to beware when you not only to
read the contract, but what it means to you. So
get the opinion of your realtor on what it means,
and then take it one step further. And if there's
any questions at all, if you have any questions at all,
have a lawyer review that contract before you sign it

(26:39):
and execute it, or you could end up in some
unfortunate circumstances like this particular buyer found themselves. And I'll
also say this now, if the realtor knew of any
of those problems, it did not disclose them to the
buyer beforehand. Then there would have been a different outcome.

(27:03):
He would have preached his fiduciary duty because it is
your duty to explain any kind of latent defects in
A latent defect is a defect that's there, but it
might not be noticeable at first look. I always think
of like foundation issues or structural issues. That's the first
thing that comes to mind, but it can be anything,

(27:23):
and that's why we always tell you to get an inspection.
And sometimes even inspectors can miss these issues. But that's
a subject for another show. We're talking about a realtor's
duty here. So no matter who you represent in the deal,
if you learn as a realtor of a latent defect
in your deal, you're required to disclose it, even if
it's to the detriment of your client and to the

(27:45):
benefit of the other side of the deal. So I
wish I had more time to get further into this.
We'll talk about this on another show, but the bottom
line is, buyer, beware, read the contract. I'm out of time.
Thanks for listening to your Home three sixty. If you've
missed any part of the show or you want to
hear it again. Go to ninety four to threews dot
com and click on podcasts. You can find it there,
or search the iHeartRadio app for your home. Three sixty

(28:08):
with Michael Blaze. Thanks for listening and I will talk
to you again soon