Dave Says: Rehabbing to Sell

These days it pays to be smart about money. That's why it's important to take this wise counsel from financial expert Dave Ramsey.

Dear Dave,

My husband and I recently inherited my parents' home. It's in a small, rural town with little industry, and we've been told that the place would be worth $85,000 if it's cleaned up, compared to $75,000 as-is. Should we spend about $10,000 to really clean it up, replace a few things and make it presentable to sell it faster?

Terri

Dear Terri,

It's really up to you guys, because both options — whether you're sitting on the house or rehabbing it — are going to take time and emotional energy. From a real estate person's perspective, houses always sell better when they're shined up and looking nice. When a prospective buyer walks in and sees and smells new carpet and fresh paint, they don't have strain their imaginations looking past everything. When you force potential buyers to look past things, it usually ends up costing you money.

In most cases, if you spend $10,000 you gain more than what you put into the house. Honestly, I think one of the numbers you've given me is wrong — either the $85,000, the $75,000 or the $10,000 you think it will take to fix up the place. In other words, if you spend $10,000 on a project like this, you'll usually gain $20,000 when you're talking about stuff like a thorough cleaning, new carpet and flooring, fresh paint and basics like that. My guess is if the place is worth $85,000 fixed up it'll probably bring about $65,000 as-is.

If it's me, I'm going to clean the place and fix it up. I've done hundreds, if not thousands, of these kinds of deals, and I can't stand to try and sell something that's dumpy, grungy and out of shape.

—Dave