The most common way to sell a house is by listing it cleaned, prepped, and ready for buyers to move in. Most people think that’s how it’s done, no question. But when you take a closer look at what it actually costs to get a house ready for market, and then factor in what buyers are deducting from their offer to account for those repairs and updates, the as-is option begins to look a whole lot more appealing.
The renovation payback myth
Homeowners often have the illusion that if they invest $20,000 in a new kitchen, the home will sell for $20,000 more. The reality is different. Remodeling Magazine’s Cost vs. Value Report has been comparing average costs for 21 popular remodeling projects with the value those projects retain at resale in 102 U.S. markets. Major kitchen remodels, for example, typically recoup only 30-40% of their cost at resale, while even the top-performing minor kitchen remodels only recoup 80.5%.
It may be that only about $10,000 of that $25,000 kitchen spend will translate into value added to your home.
One repair leads to three more
Another issue with the “just fix a few things” strategy is that repairs seldom remain isolated. A worker removes the floor and uncovers subfloor damage. A roofer climbs up to the roof to fix a leak and determines that the decking must be replaced. An electrician modernizes a panel and finds faulty wiring.
What was intended to be a minor two-week renovation becomes a long six-week structural one. The seller is now covering expenses they didn’t anticipate and dealing with extra work, and on top of that, the delays from the contractor are extending the deadline.
Holding costs quietly eat your profit
Throughout this entire process, the mortgage payments persist. Property taxes, insurance, and utilities also need to be covered. If a house remains unlisted due to repairs, or if it is listed but doesn’t sell, the seller will still need to cover holding costs every month.
Unfortunately, sellers don’t often consider this aspect of the deal. While they factor in the costs of repairs and the selling price, they tend to overlook the four to five months of expenses associated with the property during that period. If you add these costs to a relatively low renovation budget, the amount you expect to earn from the house improvements could be significantly reduced if not eliminated.
Buyer due diligence doesn’t care how nice it looks
This part is often overlooked by many people selling their homes: even if they invest money in repairs, the property must still pass inspection and an appraisal. The buyer’s inspector will likely discover issues overlooked by the seller. If the buyer is using an FHA or USDA loan, the property must meet minimum safety and structural criteria, or the purchase will be put on hold until they are met.
In addition, there is the appraisal gap risk, meaning that even after the renovation, the property may not be appraised for the agreed sale price, resulting in the collapse of financing. Finally, according to disclosure laws, any known defect must be reported, regardless of whether it has been repaired. A buyer can come back to the negotiation table and request a reduction in price, or the seller may offer concessions in order to close the gap.
Running the actual comparison
The more important question is not “will repairs get me a higher sale price” but rather “which option will result in me taking home more money with fewer headaches”? To determine that, you need to add up two sums:
- Repair-and-list path: sale price – repairs – staging – agent commission – holding costs during the listing period – post-inspection concessions.
- As-is path: cash offer – nothing – closing literally within days or a week or two, not months.
If you’re in the second situation, look to companies like Amy and Dave Buy Homes who make cash offers and close on the date of the seller’s choosing. No staging, no renegotiating to do additional repairs, no waiting on an appraiser to decide whether the new roof was worth what it cost.
The best way to get a firm grasp on the repair and listing costs you might face is to get a pre-inspection before contacting an agent. It gives you a no-nonsense number to plug into the above two-column list. Usually, that makes the decision an easy one, but not always.
When as-is is the clear winner
Sometimes, circumstances dictate what you should do. For instance, if you’re dealing with a home with major systems issues (roof, foundation, HVAC, electrical), you probably shouldn’t invest any renovation funds in it before selling anyway. And sellers in a relocation situation, facing financial pressures, or with an inherited property they just want to unload don’t have the time or money to spend months dealing with contractors.
And if your primary goal is to take advantage of the capital gains exclusion, what’s truly relevant is the amount you receive in that check when escrow closes, not the sales price. A quicker, more straightforward transaction that minimizes both repairs and holding costs might leave you with more equity in the end, even if the final number is lower. After all, equity is only valuable when you pocket it.
The bottom line on the decision
Selling as-is isn’t giving up on getting a fair price. It’s recognizing that repairs cost money, take time, and don’t reliably pay for themselves, while every month on the market costs money too. Once a seller runs the real comparison instead of assuming renovation equals profit, the as-is path often turns out to be the one that protects their equity instead of quietly draining it.
