Remodel and Upgrade Modestly- Tighten the Real Estate Belt
Ari Roy | June 25th, 2009Sometimes I think that show “Flip This House” is the biggest fraud ever perpetrated on the American public. What really disturbs me the most that people actually take these things to heart and then apply them to their own life. As a real estate appraiser I see people putting their heart and soul into upgrading or remodeling their house and then being devastated when they don’t make double their money back when it comes time to sell. With credit being harder to obtain for buyers, smart choices for home sellers becomes of paramount importance.
The reality is this: People make the mistake of trying to sell the upgrades on the home as opposed to just selling the home. Maybe in the past, when easy credit was available to spur “home flipping”, but not now.
People will need to remodel their homes from time to time and keep up with their maintenance. But don’t overdo it. You will never get back the full value of what you spend on upgrades on the home. The main reason is this…upgrades and improvements depreciate. Home values appreciate because land appreciates. So over-upgrading the house in order to turn a profit is sort of like putting spinning rims on your car to try and make a profit. Are you going to get back the $10,000 you spent on the rims? No, of course not, at best if you find the right buyer you might get $2000 more for the car. If someone really wants spinning rims, then they will buy the car without the rims and put new rims on themselves.
Well, granite countertops and Jacuzzi tubs work the same way. Do they increase the value of your house? Sure. But you will never get back what you spend putting them in. So better not to do them in the first place unless you need to, or unless everyone else in your neighborhood is doing it.
So how do you upgrade and remodel the house to maximize its value? The solution is real simple. Take a look at what your neighbors are doing. Are they ALL remodeling their entire kitchen and bathrooms so it looks like a model home in Better Homes and Gardens? If you live in a modest home in a modest neighborhood, more than likely, the answer is NO. So remodel your house so it can be considered average for your neighborhood in terms of upgrades. That way you don’t overspend on upgrades and get maximum return. Let your property’s land value do the work for you. If potential buyers don’t like your kitchen or your countertops they can always put new ones in. In general, uniformity brings in maximum value. That is why so many newer homes are in PUD complexes where many exterior upgrades are regulated by a HOA. Uniformity protects values across the board in the neighborhood. Sort of like a herd of cattle protecting themselves against the wolves who are circling, looking for that one stray cow that has drifted away from the others.
In terms of specifics, here’s what I would recommend. For your average home, it is ok to remodel the kitchen. That area brings maximum value. Granite countertops are ok, but lower end or run of the mill countertops available. Your average appliance available at Best Buy is good enough. Bathroom, new ceramic tile in shower and countertops is good enough. New shower doors, toilets, and faucets are ok, but no need to put in a brand new shower and tub, unless the old one has deteriorated badly.
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Tags: ari roy, buyers market, flip this house, home improvements, housing depreciation, housing market, housing value, increase homes value, locodog, real estate, sell your home, sellers market
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