If you’re looking to downsize or head off to a retirement destination, you’re not alone. Up to nine million Baby Boomers will put their homes on the market between now and 2030 in what demographers are beginning to call the Silver Tsunami.[1]
What’s more, the upcoming generation of buyers seeks homes that are move-in ready, not fixer-uppers in need of a dramatic makeover.
How can you make sure your home stands out? Or even holds its own in the volume of home inventory expected to hit the market in the year ahead? Chances are, if you want the most from your investment, you’ve got some work to do.
If a ‘for sale’ sign is in your future, then what upgrades make sense to help you get top dollar? And, just as importantly, how should you pay for them? Peter McCarthy, PNC Bank’s Head of Home Lending, has sound advice.
“If you’re preparing a home to sell, always keep in mind that your improvements should do one of two things: either increase value or bring your home up to expected standards for design and features.”
It’s a process that requires a little planning, a realistic time frame, and sometimes a little bit of financial savvy.
Are you ready to get the most out of your home? Let’s get started.
Renovating Is Marketing
Before you call the first contractor or look online for design ideas, one good first move may be to consult an experienced real estate agent. A professional who understands your market, what buyers want, and can help spot potential sticking points when it comes to selling.
Objectivity is key. Don’t take it personally if an agent thinks your kitchen needs help or the hardwood floors are looking a little shopworn. Remember that a real estate agent is on your side, thinking purely in dollars and cents.
The suggestions might prove little more than cosmetic—a coat of paint here, a power washing there. On the other hand, an agent might point out some issues in your house that, if left unaddressed, could hamper a sale or ultimately cost you money during the negotiations.
Which Renovations Pay?
Here are a few of the renovations that could put your best foot forward.
Hardwood flooring refinish – Nothing says ‘home sweet home’ better than pristine wood floors. After years of wear and tear, sprucing up your floors can make an instant difference. At the same time, replacing old floors with new wood floors makes a big difference, too.
New roofing – “How old is the roof?” is one of the first questions an experienced buyer asks. The newer the roof, the more confidence your buyer will have.
Insulation upgrade – Utility bills matter. Making your home snug from the elements means a big difference on the monthly power bill.
Basement conversion to living space – If your basement has been neglected, some drywall, carpeting, and other amenities can make things a good deal roomier. Plus, kids have a place to go on rainy days.
Closet renovation – Trust us. A buyer will snoop inside your closets. If they find a crowded mess, they’ll look elsewhere. Closet renovations make things tidier, potentially helping you clean up when it comes to a buyer’s offer.
Kitchen renovation/upgrade – No buyer wants to see a kitchen with old appliances and dingy countertops. An updated kitchen could have a big impact on appeal.
And that’s only a partial list of ways you could make potential buyers say, ‘Wow.’
In many cases, renovations may prove essential for a successful sale. After all, if a home is messy, has an outdated kitchen, or shows distinct signs of wear and tear, it signals the buyer that even bigger problems could lurk beneath the surface.
Which Renovations Don’t Necessarily Pay Off?
Vanity projects, wine cellars, quirky decorating ideas, and ultra high-end kitchens often actually deter buyers. Swimming pools, as another example, could be seen as an extra maintenance cost and even a potential hazard. A good rule of thumb on those kinds of overhauls? Don’t. Save it for your next dream home instead.
When Should I Get Started?
Timing is everything. If you have a date in mind for your sale, McCarthy offers that thinking ahead is key. “The early bird gets the worm. Renovations should begin a full six months ahead of your expected listing date to ensure your home is ready to market.”
That means planning and financing should start even earlier than that.
In fact, it’s not a bad idea to begin your planning process a full year prior to a target move date. That allows plenty of time to line up financing, hire contractors, and place orders for timely delivery of materials. This creates a more deliberate process rather than being forced to cut corners to meet an impossible deadline.
McCarthy has more advice when it comes to increasing your odds of a smooth process. “It’s critical to ensure financing as early as possible, especially for a more ambitious renovation project. That allows you to have a reality check, tossing out your less realistic ideas, and being as efficient as possible with contractors in terms of estimates and getting things done.”
PNC Bank’s Head of Personal Lending, Harjas Sidhu, couldn’t agree more. Securing financing provides structure to what can be a confusing process.
“It’s kind of Catch 22,” says Sidhu. “You need to know how much to borrow, but that means knowing how much the renovations will cost.”
So how do you get from initial idea to finished product in the fewest number of steps?
How Much Will It Cost?
Pricing a renovation depends on any number of factors, from the extent of the upgrades and repairs to the quality of the work and the finishes you choose.
There are tools available that can help you gain a basic understanding of what this kind of project will cost. As one example, PNC offers its home improvement calculator. With it, you can select among any number of potential home improvement projects, including options for the extent of the renovation.
“Everybody wants to think big. But knowledge is a good thing to have,” McCarthy states. “We encourage potential borrowers to use our home improvement calculator. Starting with a real-world number pays off in terms of less wasted time with contractors when developing an overall project budget.”
You Know The Price. Now, How To Finance It?
As the old adage goes, you have to spend money to make money. But what if the investment is more than you have in savings? That’s when financing the renovation can make sense.
PNC Bank offers a number of lending options, each one suited for a particular need. Here are options to consider:
Personal Loan/Line of Credit. A personal loan is a term loan with a fixed interest rate that is disbursed in a lump sum. Meanwhile, a personal line of credit allows you to draw funds as many times as needed, up to your credit limit, with a variable interest rate. Both personal loans and personal lines of credit are unsecured, meaning you don’t have to put up collateral to borrow the money.
As Sidhu explains, "These types of loans have a couple of distinct advantages. First, a potential borrower can expect an answer more quickly than other forms of credit such as a home equity loan, making it a good option if renovations need to be turned around quickly. This option is especially handy for any last-minute repairs requested in a buyer’s contract.”
In the case of a personal loan, the borrower receives all the money upfront and locks into a fixed rate with a defined repayment schedule. Meanwhile, a borrower can tap into a personal line of credit on an as-needed basis as long as the credit limit is not exceeded. However, the interest rate on a personal line of credit will vary over time according to changes in the prime rate.
Both personal loans and personal lines of credit will have a limitation on how much can be borrowed.
“At PNC, the current top limit for a personal loan or line of credit is $35,000 for qualified borrowers,” Sidhu adds. “So, it’s important to understand that a personal loan will not be the right option for more ambitious efforts such as a full-scale remodel. Instead, personal loans and lines of credit are more suited for small-scale projects.”
Home Equity Loan & Home Equity Line of Credit. This is, essentially, borrowing against your home. Equity is the difference between its market value and any balance you might have on your current mortgage. Many lenders offer calculators to help you get a rough idea of what your equity is.
“Especially with the uptick in home values over the past few years, many people don’t realize that home equity is a powerful financial tool,” states McCarthy. “With either a home equity loan or line of credit, homeowners can leverage their home’s value to fund more large-scale renovations.”
With a home equity loan, you receive the borrowed amount with a clear repayment schedule. Meanwhile, with a home equity line of credit (HELOC), you can access credit during a specified period time (Usually ten years) on an as-needed basis.
Much like a credit card, HELOC borrowers are approved for a maximum credit limit and can draw up to that limit. There are also potential tax advantages for home equity loans and HELOCs. However, consult with a tax adviser to learn if this is true in your unique circumstances.
As a caution, know that any kind of home equity loan is secured by your home as collateral. That means a default on the loan could result in property foreclosure, with the lender seizing possession of your home if you fail to make payments.
Where Should You Start?
The longest journey begins with a single step.
If you’re ready to take that step, visit us today. While upgrading your home can feel like a complicated process, a little knowledge can make the process feel a good deal less overwhelming. That means, with a little help from us, you’ll soon be ready to nail down all the details.
The property securing the CHELOC must be located in a state where PNC offers home equity products. PNC does not offer the CHELOC product in Alaska, Hawaii, Louisiana, Mississippi, Nevada and South Dakota.
