Helping Sellers in Northern Virginia Improve Home Condition for Maximum Proceeds

Using My Knowledge of Property Value & Home Improvements for Seller Benefit
My overarching goal when working with my sellers is to sell their home at maximum price, in the shortest time frame, and do it in the most professional and efficient manner while safeguarding their best interests at all times. Two components of my guiding principle involve price and time on market and that’s by design. The price at which the home sells and the length of time in which it takes to receive a ratified contract are of utmost importance to almost all sellers. It’s my job to explore all options that maximizes price and reduces time on market.

In terms of price, highly effective real estate agents must have a deep understanding of property value and specifically what goes into determining property value. There’s a Big 6 in real estate when determining property value – Market, Location, Neighborhood, Age, Condition and Improvements. Combined, these six factors represent nearly 100% of everything tangible and intangible that goes into assessing a home’s value. The two most important micro-factors intrinsically tied to a home’s selling price and time on market are Condition and Improvements.

The dynamics of Condition and Improvements as it relates to price and time on market is often underappreciated by some sellers. In fact, Condition and Improvements is the Holy Grail when helping a seller determine price and the anticipated time it will take to sell their home. Think about it for a moment – what decision points are left for buyers after first coming into contact with a seller’s home? Buyers have already agreed with the Market component of property value by virtue of being in the market actively searching for a home to purchase. Buyers also have already agreed with Location and Neighborhood since that’s part of the MLS search criterion they established which produced the seller’s home as a possible match to their needs. So what’s left in the buyer’s decision-making process before the critical next step to ask their agent to schedule a showing? The Condition and Improvements they see showcased in the listing photos.

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The Price and Value Proposition
There is a truth in real estate when it comes to the selling price of a home – sellers determine price and buyers determine value. There is another truth that condition and improvements rule price and value. The wide majority of buyers desire homes that have move-in ready conditions and they are willing to pay a premium for that comfort. Homes that are in excellent condition and appropriately priced receive maximum buyer interest. These homes also tend to capture the highest price and sell in the shortest time frame. Excellent condition is usually associated with fresh neutral paint, newly replaced neutral carpet, updated kitchen and bathrooms outfitted with the latest trends, new fixtures, well-cared for equipment and systems and a well landscaped yard.

The seller controls price and condition of the home, which means the seller also generally controls the existence of the Price & Value Gap. This gap is the difference between seller price and buyer value points. In a relatively fast moving home sale, the gap is generally indistinguishable, while at other times when a listing languishes on the market because of condition, mis-pricing, or both, the gap can be quite large. There are multiple factors that can give rise to the gap, but an unimproved home condition is among the most common. By the seller improving condition, he takes the home to a place where seller price and buyer value are relatively close to being equal – effectively closing the Price & Value GapIt’s usually in the seller’s best financial interests to eliminate the elements that can create a Price and Value Gap if he is willing and able to do so.

How to Close the Price and Value Gap for a Seller’s Benefit?
As part of my Comparative Market Analysis (CMA), one of the important assessments that I perform for my sellers in certain situations is an Improved Market Analysis (IMA). The IMA calculates the current value of the home in its present condition and estimates the time on market to sell in that condition. I then perform a separate calculation estimating the cost of strategic improvements against the likelihood of a higher net selling price and faster selling time that will be achieved based on neighborhood comps. This information becomes illuminating to my sellers.

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For example, I had a recent experience with a seller who decided to sell his rental investment property much in need of improvements. My CMA showed the seller the value of his home in its current unimproved condition was $310,000 to 320,000 and that it may take up to four months to sell in its present condition. I then showed the seller my IMA case. I presented how a strategic package of improvements at an estimated cost of $20,000 including painting the home, replacing the carpeting, installing new kitchen appliances, and performing other minor improvements would likely yield a selling price in the $350,000 to 360,000 range based on comps. In other words, it would cost the seller $20,000 to close a $40,000 Price & Value Gap – yielding an additional $20,000 in seller net proceeds. Additionally, in this seller’s case the home was vacant exacerbating his carrying costs. The improved case was projected to sell as quickly as 30 days eliminating potentially three months of carrying costs, which equaled another $6,000 in seller benefit. All told, this meant the seller’s $20,000 investment would yield an estimated $46,000 to in additional proceeds (a return of 130% in just a few months).

Even better, I introduced my seller to large, qualified Class A general contractors for his choosing who could perform the work and defer payment to settlement when he sells the home. The complete improvements scope is managed and performed by a team who works quickly, helps the seller select all the trendy finishings buyers love, and importantly, the contractor will defer payment to settlement when the home sells, requiring no payment, money down, finance charges – absolutely nothing out-of-pocket from the seller.

Through my Comparative Market Analysis and Improved Market Analysis a seller will be able to easily determine what level of improvements make sense for their situation, if at all. My assessment is not a one size fits all approach, but in certain seller situations there is abundant prudence in exploring my Improved Market Analysis. What’s more, the seller can have the work completed and defer payment to settlement. Depending on the seller’s situation and desired outcome, an improvements case can be an effective strategy to unlock trapped value for the direct benefit of the seller. Sellers leave an estimated $28 billion a year on the table for buyer benefit and forego even more net dollars in excessive carrying costs by either choosing not to perform, or not being properly counseled by their agent to perform certain relatively simple improvements prior to selling.

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