Should you replace an old A/C on a flip?

Question

Hey guys, I have a fix and flip deal I am working on and I’m torn as to if I should replace the A/C. It is fully functioning but is very old.

Jesse Rivera · Answer

Let the buyer call it out during inspection.

I’ve listed hundreds of properties, as an agent and investor, and have learned a lot about buyer psychology. Buyers aren’t going to be happy unless they can ask for a big repair. Sounds funny, but I’ve come to believe it’s true. You would thing that they would want a clean inspection, but that’s not how we’re wired. Buyers are happiest when they get to negotiate and win. So give them a win. Especially if you were going to do the repair anyway, it will give you leverage to decline other things that you don’t want to repair.

If it were me, I would not replace it now. I would let the inspector call it out, and the buyer to ask for it to be replaced. I would first offer a home warranty, then negotiate some more and then replace.

Some don’t like this strategy, and that’s ok. We all have are own way of doing things. Some would thing I’m being disingenuous, but I disagree. I am creating a happy buyer that will move forward to close, instead of one that has a gnawing feeling that they didn’t get a good deal. It’s just an idiosyncrasy that we need to realize we all have, and use to create a win-win.

Brian Miller · Answer

@Ryan Nolan Hello Ryan, I would offer a home warranty with the purchase of the house. It would cost less than paying to replace the whole, especially if the unit is working. I believe that would show good faith.

Tchaka Owen · Answer

@Ryan Nolan - While I agree with much of what others have written above, I'm going to take a slightly different approach. You're in FL and unlike most of the US, FL burns through ACs - both because of usage and also salt (you're near the water so the latter affects you) . Life expectancy of ACs is 8-12 years. Anything beyond that is bonus. I agree with Gary that this is likely 15-20 years. If it is blowing cold, I'd leave it be with the expectation that you're likely going to give a credit of some sort. If it's not super cold, replace it - you're going to end up doing so anyway.

I understand Jesse's opinion on buyers needing a win, however I'm not convinced it applies to ACs in FL (particularly the Southern portion) because that's pretty much at the forefront when buying. Most investors go with Goodman, our supplier could get us Rheem for less than $200 more and we always upgraded. We were sure to let buyers know that they were getting a 5-year warranty and that was always met with approval. Good luck!

James Cox · Answer

@Ryan Nolan

I’d be inclined to leave it but that’s the appraiser in me talking. In all the appraisals we’ve performed the market doesn’t seem to react strongly to replaced/brand new mechanicals vs older functioning units. When a homeowner tells me about their new ac or water heater or roof, I think to myself, “congratulations on maintaining your home.” I note it in the report but it’s nearly impossible to line item for value and conveys a level of precision that doesn’t exist in an imperfect real estate market.

If you hold out and don’t touch it, then you can see at the time of negotiating if it even matters to the buyer.

Gary Siver · Answer

It depends.  You can get 10 different answers from 10 people.  Did you budget for it?  It so definitely help sell the home when buyers see that it is new.  To me that looks pretty old, maybe 15-20 years?  Does it currently work or does it have to be fixed?  You can use it while you rehab the home and see how good it works, then decide.  It also looks like a straight cool system and not a heat pump.  Is that correct? They are a pretty cheap expense for the return.  That’s a smaller unit, you should be able to get that replaced for about $2500-3,000.00 as an investor.

Share Ross · Answer

Hey Ryan! Congrats on the deal. What is 'very old'? Are you talking about 2003? Over 10 years? I would definitely look at what price to replace and what the overall value of the resale is. A new a/c can help sell it and most buyers will test with an inspection so it can add value. If you have any inspectors as friends, you could ask one to come out a test it. That would be helpful.

Look forward to seeing what others have to say!

Account Closed · Answer

Hey Ryan! Congrats on your new project!

Normally, I believe the main factor in this decision is whether or not you are planning to flip or rent it out. When renting out a property, you can get away with an older A/C. BUT- since you are flipping the house and want to maximize your profit, I would completely replace it.

Iggy Marques · Answer

One of my friends own a A.C company and when I purchased my last house I asked him to change my old --but functioning fine-- a.c unit (20+ yrs), he told me to hold my horses because older a.c's were made to last, and when they brake it, it is often times a simple inexpensive fix (unlikely the modern ones that are made to last 5 years and when it brakes it is better to change to a new one than fixing it). The same concept applies to refrigerators, washer/drier, etc. Now, I understand these other appliances have the aesthetic factor to be weighted in but when it comes to old A.C units I'll run them till the last breath from now on... This particular one lasted me another 5 years with just a couple of repairs until it finally died.

Matt MacDonald · Answer

There’s a lot of good advice on this thread. I agree it’s up to you, but I would leave it and wait to see what the buyer or inspector has to say. I could not believe it when I sold a house in Jacksonville a long time ago and it had an AC that was over 20 years old and we did not have to replace it. Usually from what I’ve seen in Jacksonville AC’s are lasting 10 years on the low side and around 15 years on the high side. It also depends on the maintenance/upkeep they have received and filters being changed on time, etc. I hope this helps.

Jesse Rivera · Answer

Very interesting point. I would love to hear from other appraisers on this.

Should you replace an old A/C on a flip?

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