In today’s real estate world, the homes that sell the fastest and at the best prices are the ones that are updated and immaculately clean to give the impression they are in amazing condition, as well as showcase trends buyers are seeking out. Previous to listing a home many homeowners will do things to spruce up their property like give it a fresh coat of paint or even replace an outdated bathroom countertop. So what is a seller to do if they can’t afford to do needed updates or repairs before listing their home?
When a seller does not have the extra funds to spruce up their property prior to selling it is not uncommon to offer an allowance, also called a discount, on the final purchase price of the home to give buyers an extra incentive in considering the property. This means that when it comes to making an offer the seller would agree to give credit back to the seller for the estimated cost to make the repairs. This allowance is written into the purchase contract. (Make sure that the buyer has communicated the allowance clause in the contract with the lender, as sometimes a lender will not approve a loan with an allowance for repairs.)
Benefits of Offering an Allowance
Though the home is not updated you can communicate the allowance in a very positive light. You can let the buyers know that you are aware of things that need to be done. For example, if the kitchen has not been updated in about 40 or 50 years you can say something like we were planning to renovate the kitchen, but wanted to hold off to allow the buyer to choose how they would like the kitchen to look. Some buyers will get very excited about the chance to pick out a brand new kitchen because of an allowance.
Related: How to Price Your Home
Disadvantages of Offering an Allowance
Though it does sound like fun to pick out all of the finishes in a new kitchen, offering an allowance can come at a risk of losing buyers that just want a move-in ready home.
Having a home that is completely as you want it is great, but the hassle of getting it there (like the extra time and waiting and having to find contractors) can be a big turn off to many buyers that just want to be in a new home now.
In some cases, you may not even need to offer an allowance. If your home is in a very desirable area and the inventory is low, buyers may just be interested in finding a home in the neighborhood and not care about the outdated finishes or repairs.
Alternatively, even if you have no money to have professional repairs done, you can do some minor fixes with sweat equity. It costs nothing to clean up the landscaping, do a thorough scrub/ clean-up of the home, and/or maybe even hammer in some loose nails. You will be surprised at how much you can do to make the home look much better by giving it a very good clean.