3 Tips to Consider Before Offering an Allowance
After years of living in your home, it can be difficult to get it in tip-top shape for the market. Although you might be used to your popcorn ceiling and wall-to-wall pine furniture, buyers today are looking for a clean, updated home that is move-in ready.
Instead of spending the time and money to update old or outdated flooring, wall paint or fixtures, you might be tempted to offer an allowance to a potential buyer for the cost of making these updates themselves. Here are our top tips on what to consider before offering an allowance.
An allowance is only good for reducing purchase price.
According to mortgage regulations, an allowance only allows the seller to lower the purchase price. Although this will reduce the buyer’s monthly payment on the home, there’s no way to actually give cash to a buyer to make the improvements the allowance originally stood for.
Think of it from the buyer’s perspective: between the down payment, closing costs, moving expenses and more, the buyer has cash going out in all different directions. The potential buyer might be thankful for the reduced listing price, but still might not be able to dish out the money actually required to complete the project. For this reason, a buyer would rather move in to a home that already has these basic updates.
There is no wrong choice.
Some sellers are afraid to make these improvements in their home, because they don’t know where to start. Good news – it’s not as complicated as it sounds. Any local hardware or big box stores will have experts to guide you through the process and ensure you choose a product most buyers will enjoy. Look for a selection that is in stock at an average price point. The risk is small in making the wrong decision.
Take a walk in the buyer’s shoes.
Take a tour of your home as if you were a potential buyer. If the first thing a buyer sees when walking into your home is stained or badly worn carpet or wall coverings, outdated colors or 20-30-year-old kitchen appliances, it is sure to leave a lasting impression. Buyers will evaluate the first three to four rooms they walk into – usually the living room, dining room, kitchen and family room. These areas should be your first priority in making home improvements.
If you are still on the fence about the benefits of home improvements or an allowance, there is one potential alternative to consider. The requested work on the house can be done just prior to closing, with the invoice paid at closing. In these situations, the work is done as the seller moves out, and must be paid at closing for the buyer to move in with. Although this is a convenient option for sellers, waiting until close still makes your home less marketable during the selling process.
We understand the hesitation with making home improvements before selling your home. After all, it’s a major move for the seller, but updating these features could make your home easier to sell and more competitive in the market.
If you are considering a home improvement allowance as you sell your home, we’d love to meet and talk with you through the process. Contact us to set up a meeting today.