Thinking of Selling Your Home? Here's a few things to keep in mind.
Exactly how much of your home improvement dollar you'll recoup by selling your home depends on several factors. These include: the direction of the broader housing market, the value of the homes in your neighborhood, how soon you plan to sell the house and the nature of the improvement itself. And keep in mind that the longer you hold on to your home after a remodeling project is completed, the less likely you are to recoup its value. Design tastes can shift significantly over time. Remember when avocado green was all the rage?
1. Don't over-improve or under-improve. Any proposed renovations should take into account the neighborhood market. Just because you put $20,000 into your home doesn't mean that your house is worth $20,000 more. I had a client who invested $60,000 in a $140,000 home and lived there for four years. They put it on the market for $280,000. They were offered $180,000. Their mistake: over-improving their home without taking into consideration the neighborhood.
For example, a granite kitchen countertop in a starter community would be an over-improvement and therefore generate a lower payback. Conversely, a laminate countertop in an executive community may be an under-improvement. A prospective purchaser may view it as something they would have to upgrade, giving the new countertop little value.
2. Make basic improvements first. The biggest recoveries can be made by correcting deficiencies and performing required updates, like upgrading to an energy-efficient furnace, updating to 200 amp electrical service, or replacing the roof. It may not be enjoyable, but it's the basic improvements that may have the greatest return on your home's value. You may have a beautiful new kitchen, but if your roof is leaking, you have a real problem.
Keep in mind that items like a new roof, new furnace and central air, new hot water heater, and other mechanical systems will not pay you back dollar-for-dollar. These are considered maintenance items. Replacing them will, however, give your home a distinct advantage when comparing to other homes. Plus, you have the advantage of enjoying these improvements!
So, if you're thinking of putting your house on the market in the next year or so, be sure to tackle any problems with the home's structure or mechanical systems before you, say, install that hot tub you've always dreamed of.
3. Do-it-yourself vs. Professional contractor. Depending on your area, a renovation completed by the homeowner may not be considered worth as much as one done by a professional contractor, due to the quality of the finish or materials.
4. Average Paybacks. Recouping your remodeling investment may be your goal when you sell your house. But when it comes to resale value, all home improvements are not created equal. As a rule, kitchen remodeling projects and bathroom additions almost always pay back 90% or more of their costs. However, finishing a basement or adding a room usually pays back less than 50%.
Most home purchasers do not want to tackle large projects, or if they do, they want a discount on the asking price to make it worth their while. You don't need to make your house look like a showcase. New carpets, paint, and good maintenance are the best ways to enhance your home's salability. And be sure to fix that broken light fixture or loose doorknob. If you haven't addressed these little problems, a purchaser might wonder how many significant items have been overlooked that may not be apparent.
Remember, how much of your investment you can recoup should be only one factor in any renovation plans. It's hard to guess what will appeal to a potential buyer, so make sure that the renovations suit your own wants, needs and tastes first. Who knows? You may end up staying longer than you think!
Exactly how much of your home improvement dollar you'll recoup by selling your home depends on several factors. These include: the direction of the broader housing market, the value of the homes in your neighborhood, how soon you plan to sell the house and the nature of the improvement itself. And keep in mind that the longer you hold on to your home after a remodeling project is completed, the less likely you are to recoup its value. Design tastes can shift significantly over time. Remember when avocado green was all the rage?
1. Don't over-improve or under-improve. Any proposed renovations should take into account the neighborhood market. Just because you put $20,000 into your home doesn't mean that your house is worth $20,000 more. I had a client who invested $60,000 in a $140,000 home and lived there for four years. They put it on the market for $280,000. They were offered $180,000. Their mistake: over-improving their home without taking into consideration the neighborhood.
For example, a granite kitchen countertop in a starter community would be an over-improvement and therefore generate a lower payback. Conversely, a laminate countertop in an executive community may be an under-improvement. A prospective purchaser may view it as something they would have to upgrade, giving the new countertop little value.
2. Make basic improvements first. The biggest recoveries can be made by correcting deficiencies and performing required updates, like upgrading to an energy-efficient furnace, updating to 200 amp electrical service, or replacing the roof. It may not be enjoyable, but it's the basic improvements that may have the greatest return on your home's value. You may have a beautiful new kitchen, but if your roof is leaking, you have a real problem.
Keep in mind that items like a new roof, new furnace and central air, new hot water heater, and other mechanical systems will not pay you back dollar-for-dollar. These are considered maintenance items. Replacing them will, however, give your home a distinct advantage when comparing to other homes. Plus, you have the advantage of enjoying these improvements!
So, if you're thinking of putting your house on the market in the next year or so, be sure to tackle any problems with the home's structure or mechanical systems before you, say, install that hot tub you've always dreamed of.
3. Do-it-yourself vs. Professional contractor. Depending on your area, a renovation completed by the homeowner may not be considered worth as much as one done by a professional contractor, due to the quality of the finish or materials.
4. Average Paybacks. Recouping your remodeling investment may be your goal when you sell your house. But when it comes to resale value, all home improvements are not created equal. As a rule, kitchen remodeling projects and bathroom additions almost always pay back 90% or more of their costs. However, finishing a basement or adding a room usually pays back less than 50%.
Most home purchasers do not want to tackle large projects, or if they do, they want a discount on the asking price to make it worth their while. You don't need to make your house look like a showcase. New carpets, paint, and good maintenance are the best ways to enhance your home's salability. And be sure to fix that broken light fixture or loose doorknob. If you haven't addressed these little problems, a purchaser might wonder how many significant items have been overlooked that may not be apparent.
Remember, how much of your investment you can recoup should be only one factor in any renovation plans. It's hard to guess what will appeal to a potential buyer, so make sure that the renovations suit your own wants, needs and tastes first. Who knows? You may end up staying longer than you think!
