The Real Story …
News & commentary about the real estate market and related topics.
Dave Parrish, ABR ®, CRSA, CSP, GRI, ePRO ®, REALTOR ®, RealtySouth
What adds value…
When it comes time to sell, owners will often look at items for which they may have spent sizable amounts of money as items that add value to the home. It is common to hear things like: “well we just replaced the roof, the air conditioner is only two years old, we have a new water heater, we have a pool, replaced the driveway last year … as items for which the owner/seller expects reimbursement in the sales price of a property. Regrettably, such expenditures do not always add value.
Maintenance vs. Improvement:
The first concept that any homeowner (myself included) has to come to grips with is that owning a home carries with it the obligation to maintain the home… failure to do so reduces property value and if ignored long enough can even fully eliminate property value. So money spent on maintenance items such as replacing the roof, air conditioner, water heater and any one of literally hundreds of other items is done so to maintain property value or perhaps better described as a means to reduce the depreciation of property value or more simply put to protect your investment.
Another way to look at such expenditures is to consider what happens if you don’t spend that time and money on maintenance. The aging roof that goes un-replaced may lead to leaks that damage ceilings, floors, interior belongings and indeed if left long enough the structural components of the house as well.
The fact of the matter is that when someone/anyone buys a home there are certain things that they absolutely expect: A roof that doesn’t leak and won’t have to be replaced for several years, working plumbing including hot water, in our part of the country air conditioning is no longer considered a luxury but a necessity, floors that don’t creak, carpets that aren’t worn or stained, and the list goes on.
So What Does Add Value…
First and foremost it is important to understand that what adds value is ultimately decided by the market … In this case the persons considering the purchase of a home in your price range and/or neighborhood. First and most important of all considerations of course is location … Hope you considered that when making your purchase. There’s not much that can be done to change the location. So let’s look at some items that can be changed or improved upon.
As any avid watcher of HGTV by now knows, updated kitchens and bathrooms are the target spot for most improvements and the improvements most likely to have a higher yield or return. Professional upgrades of this sort (and by this I mean those high quality upgrades performed by someone other than the homeowner) will usually yield somewhere between 75 and 90% return on investment. Yea … that’s right … not likely you’ll get a a full return on your investment. So, you will usually only do these kind of improvements well in advance of selling so that you get to enjoy them a bit yourself, as well. However, if your home is the only home in the neighborhood that doesn’t have an upgraded kitchen or bath, you could get forced into these upgrades just to stay in the market.
There is if course the DIY (Do It Yourself) improvement project, which “can” lower the costs of the improvement enough to yield a return. WARNING: Unprofessional quality can result in an outcome that not only doesn’t yield a positive return on investment but actually detracts from value.
Then there is the issue of “improvements” that aren’t viewed as improvement! First thing that pops to mind is the swimming pool! Sort of like boats and airplanes, the happiest days in your life is when you get them and when you get rid of them. No doubt there is a dream that many homeowners have of relaxing around their own pool. However, there is an even larger contingent that doesn’t want the hassle and see the pool as a $10,000 liability… that is the cost to fill it in! Hey don’t shoot me … I’m just the messenger!
Frankly, most improvements other than kitchen and bath updates have an even lower return on investment. So your best bet is usually to address past neglected maintenance items that are more obvious in nature and to address curb appeal issues.
Following is my list of items to consider:
- Pressure wash and re-paint the exterior as required (be aware of issues with masonite siding of EFIS/Dryvit)
- Paint the front door a contrasting (but tastefully bold) color
- Remove dead plants from the landscape & Trim shrubs
- Keep lawn neatly mowed and trimmed
- Add pots of color (flowers) near entrance
- Remove wall paper and re-paint as required using neutral to earth-tone colors (beige/khaki better than white)
- Clean-clean-clean — Windows in particular should sparkle!
- Professionally clean carpets and work on removing any stains
- De-clutter… de-clutter… de-clutter (if you don’t need it now, sell it, give it away or pack it)
- Check out major systems to know about possible issues ahead of time … Think about having a Pre-Sale Home Inspection performed and providing this information to the potential buyers
- Offer a Home Warranty to the Buyer
So why do maintenance now?
If maintenance items don’t add value why would you want to do them for the purchaser … Why not let the purchaser address those items and reflect the cost to do so in your purchase price? Experience shows that unaddressed maintenance items will generally detract from the final negotiated price by a factor of 2 to 1. That is the purchaser will want to deduct about twice the costs of the maintenance items as it would cost you the homeowner to do them ahead of marketing the property. The larger the list of items that need addressing, regardless of how minor they may seem, the larger this discount ratio grows. Enough unaddressed maintenance items and you will loose the part of the market willing to make you the better offers and be left to deal with only those folks wanting the “Deal!” Or even, worse have a home that doesn’t sell!
