Keeping up with the Joneses can be detrimental to one’s savings account.
Surpassing them can prove even more damaging when it comes time to sell.
Homeowners should be keenly aware of neighboring properties when remodeling their own in preparation for a sale. Pour too much money into a new bathroom or a kitchen upgrade, and suddenly your home stands apart from the pack.
And, as any appraiser will say, that doesn’t guarantee a higher selling price.
Michael Clarkson, broker/owner of Mile High Home Hunter Realty in Denver, said the market doesn’t care what a homeowner paid for the house, or what he or she invested in the property. It simply comes down to its value.
Some home sellers improve their homes to the point that they’re “pricing themselves out of their own home’s market,” Clarkson said.
Get a feel for market first
Clarkson said he has seen homeowners pour more than $40,000 into their existing homes only to see the property values drop $2,500 — or more — a month. These homeowners delude themselves into thinking they’ll get a solid return on investment for their troubles, he said.
Not every home seller will agree with their broker or Realtor about the market price of a newly remodeled home. That’s where diplomacy — and a few Realty 101 lessons — come into play, said Steve LaPorta with Denver-based Pinnacle Appraisals.
“You have to do your best to represent your client and educate them along the way,” LaPorta said. “The market always lets you know what something’s worth.”
LaPorta said a good way for potential sellers to get a feel for the market is to study the homes selling around them, both their square footage and the amenities they offer.
“It’s your first good value indicator,” he said. And some return on investment won’t come with the actual sale price. Over-remodeling a home might hurt a person’s wallet, but it could help spark a sale all the same.
“You will sell faster than somebody else, and that’s money in your pocket — the value (is brought) to your property in a different way,” said LaPorta, who also is a real estate broker. “Right now, in a competitive market, you need those things to be done to sell a house.”
Lisa Todd, a Realtor with the Todd Realty Group in Denver, recommends that potential home sellers check with an established Realtor before starting any home improvement projects.
“You could buy a top-of-the-line appliance because it matters to you. But that may not matter to the average buyer,” she said. “You could spend 20 to 30 grand on appliances alone, and you’re a gourmet chef. You won’t likely sell it to another gourmet chef.”
When green means “caution”
Another way remodeling money can yield little gain is by going green. A green remodeling project might reduce a home’s carbon footprint — and electric bills — but Todd said the return on investment isn’t impressive.
A green remodel can still attract buyers, but the seller would be dealing with a smaller subset of the house- buying public.
Stacie Ashley with Denver-based Ashley’s Real Estate Appraisals said the recent wave of fix-and-flip properties means some Denver neighborhoods might offer remodeled comparables that weren’t available a decade ago.
The rules of home appraisal implore home sellers to consider upgrades with caution, but for some, the upgrades in question will pay off no matter the eventual return on their outlay.
If a person finds a perfectly acceptable home in a welcoming neighborhood, and has no intentions of moving, then that return is no longer an issue.
“Some will say, ‘I won’t get my cost back, but so what?’ ” she said.
