Thinking about doing some home improvements and worried you might be over-improving your home?
Upgrading and improving should definitely be taken into consideration when thinking about selling your home. But pulling out all the stops in your home renovation may not be the best choice.
When you sell, you won’t get 100% return on your remodeling investment, it can increase the value of the property and help your home sell faster, but it will rarely give you a dollar for dollar return.
It’s a good rule of thumb to make sure your renovations don’t put your home’s value any higher than 10% of the average cost of homes in your neighborhood.
Here are few tips to help you decide the best remodeling projects.
1.) How long do you plan on staying in your home?
In it for the Long Haul, Over-improving can be OK, if you plan on staying for many years. Improve to suit your own needs while, or because, you want to live in your home for many years… go for it and enjoy. Think of it in terms of getting value through enjoyment.
Short-timers, unless you purchased well below market, it’s best to limit your remodeling investment to smaller projects. Big improvements don’t necessarily yield big returns. Look at improvements through the lens of resale.
2.) Location? Do you own a $500,000 home in a $500,000 neighborhood? Doing a ton of renovations, then trying to sell for $800,000 would be an unrealistic strategy – you will over-improved and priced yourself out of your own neighborhood. Buyers get scared, they don’t want to buy the most expensive house on the street. If your renovation puts you at or above the highest price in the neighborhood, you’ll have a hard time at resale.
The opposite is true also, If your home is the shabbiest on a street of nicer homes, in this case, you do want to keep up with the Joneses.
Depending on your neighborhood and what buyers are looking for, you may need to do less – or potentially more – than you think.
3.) What market are you in? The first place to start when determining how much you should upgrade your house is the real estate market. Is it a Sellers Market or Buyers Market?
If there are a lot of nice homes for sale in your neighborhood and they’re not selling, it’s very likely a Buyer’s Market – which means home buyers have lots of homes to choose from. The homes with the nicest updates, lowest prices in better neighborhoods will go first. In a Buyer’s Market, you’ll likely need to do more to your home in order for it stand out and appeal to more buyers.
If you notice homes are selling quickly, then it’s likely a seller’s market. There aren’t as many homes for buyers to choose from so sellers can potentially get above asking with multiple offers. In this case, you can get away with doing fewer upgrades.
Knowing what market you’re in is an important factor when determining how much you need to upgrade your home.
4.) What does the neighborhood look like?
Are you in an older neighborhood? Doing renovations that make your home out of sync for the neighborhood, such as adding sleek contemporary renovations when the other homes are more traditional can make your home stand out the wrong way and can work against you
5.) What is the standard for the neighborhood?
If all of the homes in your neighborhood have updated Kitchen and Bathrooms and your home still has tile counters and aging appliances, both potential home Buyer’s and Appraisers will discount the value of your home based on what the standard is for the neighborhood. Look at what finishes the other homes have and try to emulate them as best you can while staying within your budget.