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Reply to "HELOC for renovations - downsides? "

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[quote=Anonymous]Well, the concern about you taking a loan to do renovations in order to sell is that most renovations do not increase the value of the house commensurate with the cost of the renovation.  Kitchens and baths do the best and typically raise the value of the house about 80-95% of the cost.  But many others (including the hardscape you allude to) are doing well if they reap 75% of the cost back.  So, if you do $30K worth of renovations and it only raises the value of the house $25K will you be satisfied?  It will also cost you more than the difference as even if you pay off the loan quickly, you will still be responsible for a certain amount of interest payment which only adds on to the loss of real dollar value.

An additional concern is that you need to be realistic about your neighborhood and market.  If  you are not in a very hot neighborhood either with one of the very few homes available or with a home that is a good bang for the  buck, then you have the risk that you may end up with a low-ball offer being your only early offer.  Are you willing and interested in putting $30K into your house, then getting a lowball offer that may be 20% or so below your list price?  Are you willing to wait months or over a year to get a price closer to your asking?

I would definitely consult with a realtor (ideally one that you would end up using when the time came to finally list) and ask for a market analysis of the house as is.  Then ask the realtor to evaluate the proposed renovations and how it would affect the sales price of the house.  Pick a realtor who is very familiar with the neighborhood and you'll likely get an idea of the real return of renovations which, in my experience, rarely return as much as homeowners think they will.[/quote]

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