Home Improvement?

Today there seems to be a rather large number of shows on cable dealing with home improvement, and many seem to imply that if you just put a little money into sprucing up, you’ll reap giant profits on the resale of the property. So I think it’s time to clear up a few of these misconceptions. I am frequently asked if this or that “improvement” will increase the value of the home. The answer nearly always must be, “it depends”.

First let’s consider improvements and increased home value. Folks often wonder if they will be able to recapture the cost of improvements they have made. That will depend upon the improvement. We often hear from home sellers that they need to realize an additional X dollars from the sale because they just put on a new roof. There are certain improvements that add little if any value to the home. A house is expected to have a functional roof, therefore, no added value. How about windows? There is a good chance there will be some addition to value, but probably not the full cost. Once again, a home is expected to have windows, but if the new windows are a serious upgrade then no doubt you will recover some of the expense in a resale.

So let’s have a rule of thumb. Generally, if you replace an existing component of the home the impact on value will be negligible. Roofs, furnaces, carpet etc. these things don’t ordinarily add value. How about kitchens and bathrooms, you say? Well now there you have something, of course homes are expected to have kitchens and baths, but an upgrade in these areas will often result in a significant increase in value as these are the two most important rooms in the house upon which the decision to purchase is based.

The best way to increase value is to add square footage. This can add value dollar for dollar. Add an attached family room and you may recover the cost and then some. Build a detached garage, probably the same outcome. Finish the basement or attic and you will likely increase your home’s value although not to the same extent perhaps, as adding a complete new room.

There must be a caution here though. It is important to consider the concept of over improvement. Neighborhoods have a reasonable range of value and there comes a point at which further improvement of a home becomes counter productive. If your home is at the top of the value range for your neighborhood then every dollar you spend improving the property is wasted. In other words if $150,000 is the most any home in your neighborhood has sold for and you have the nicest house, then adding a $30,000 addition doesn’t mean you will be able to get $180,000, it means you will get $150,000 and your buyer gets a house with a really nice addition.

Many of the improvements we make to our home won’t increase its value, but they can increase the home’s salability. And increased salability can equal more dollars in your pocket, even if it doesn’t mean increased value. Your Realtor will likely give you a list of ideas when you are preparing to put your house on the market. Pay attention to what they say – they understand what turns buyers off and what improves your chances for a quick sale.

Not all of these tips could be considered home improvements, for sometimes they are as simple as removing the clutter. If your house is full of junk, it is extremely difficult for a perspective purchaser to focus on the home. Something as easy as refinishing the front door can be very impactful. It’s the first thing the buyers see as they approach the home and no doubt rather than thinking, “well I can refinish that,” the thought is usually, “WOW, this place has really been let go.” Many of these items are things that you don’t even notice anymore, as you’ve been living with them too long. So, clean the carpet, trim the hedges, scrape and paint areas that need scraped and painted. Repair the handrail, fix dripping faucets, do some general cleaning. Don’t rationalize that you are leaving the 30-year-old rusted yard swing just in case your buyers have children. Chances are really good that they won’t want it. Foggy thermo pane windows are a real eye sore and may cost you more than organizing your closets, but the repair will be well worth it. Use a critical eye when evaluating your property, try to look at it as though you were seeing it for the first time. What would you be thinking if you were a buyer? Whatever you see and aren’t impressed with, fix, clean or straighten.

Now, I said doing these things don’t increase value but will put money in your pocket. How so? Making these changes will reduce your marketing time (increase salability) and shorter time on the market means fewer mortgage payments, utility payments, tax payments etc., that you will have to make, allowing you to divert your cash to your new purchase.