Friday, January 15, 2010

Getting Bang for Your Buck - The Value of Home Improvements

With this post, I begin a little mini series on how to spend your home improvement dollars wisely.  While buyers may enjoy these posts, they are targeted toward current home owners who eventually - tomorrow, next year or in 5 years, expect to sell. 

The number one thing I want to tell you is this:  If you're thinking of selling in the next year, DO NOT do home improvements - it will return you less than 100% of your dollars.  It's a poor investment. 

That does not mean not to do maintenance.  Sellers, when they are looking for dollars in their house, get confused as to what is improvement and what is maintenance.  Here's a rule of thumb - if the house should have those things, then it's not an improvement.

Replaced your roof last year?  Good for you, and good for your buyers, too.  But, SURPRISE! the buyers expected your home to have a roof - one that doesn't leak and isn't requiring immediate replacement.  New mechanics - like HVAC or water heater?  Nope, not an improvement.  Your buyer was looking for a house with heat and hot water - it was "assumed" that those things would come with the house. 

Please don't get me wrong - these things have value.  Look at your comps, is everything original, or do they all have replaced systems, too?  That's how you determine if yours might bring you extra dollars.  If you are just keeping up with the Jones's then your home value will be approximately the same as the Jones' home.

Of course, if you replaced 20 year asphault shingles with 40 year architectural shingles... well, that is an improvement.  If you now have a tankless water heater that saves hundreds a year in utility bills and never requires a waiting period to get more hot water, this, too would be an improvement.  If your HVAC was one zone (as are all of those in your competitor's homes) and your's is now a 2-3 zone, energy star certified system with an electronic air filter and built in humidifier - NOW we're talking improvement.  Did you replace your vinyl siding with Hardi plank last year and add stone accents.... cha-ching!  (You're still likely to recoup less than you actually spent, but you will see some added home price value.)

Many of these things may be invisible when someone is breezing through your home taking a quick look, so make sure that you are listing both major maintenance and home improvements when you're agent is preparing the marketing materials. And, remember, good bones and systems will not always equal the highest price. 

Buyers buy emotionally and justify logically.  Never once have I been showing a home and had a buyer just become awe-struck by a water heater and stare.  This is NOT where they fall in love with your home.

I am going to continue this series, in which I will discuss home improvements and the expected return for your investment based on a recent study by the National Association of REALTORS. 

I will also address how buyers will assess your home.  You may be surprised.  So, stay tuned for more.....

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