Step 2: Home improvements to increase value
There are two reasons for pursuing home improvement projects:
- Just Want To Do It — You want some new features in a home to improve your
family's quality of life, but you don't want to leave your current home.
- Really Need To Do It — You want to make your home more marketable to maximize
return (or minimize loss) and speed up the sale process.
In the right market conditions, a project might fit into both categories. Other
times, though, the two approaches will conflict:
Just Want To Do It —
In situation A, the project is perceived as a necessary or worthwhile improvement
to your family's lifestyle. Say you have two or three teenagers in the family and
the morning bathroom situation is completely out of control. It doesn't matter if
an additional bath generates a 150 percent return on investment or actually
decreases the value of the home (unlikely, unless you're a completely incompetent
do-it-yourselfer with a bizarre design sense). The economic impact just doesn't
matter. If you have the money for a new bath and you don't want to move — you add
the bath. It's that simple.
Or say you're a barbecue fiend and the only feature missing from the dream home
you've just purchased is a sprawling backyard patio with a natural-gas grill
custom-built with flagstone and river rock. Again, return on investment just
isn't going to be a critical question. The improvement becomes more comparable to
purchasing a depreciating asset that you feel is a necessity for your lifestyle —
such as an automobile. When the barbecue aficionado adds a deluxe patio to a home
that's already the most expensive property in the neighborhood — perhaps
destroying the entire backyard in the process — there's a good chance that very
little of the cost will be recouped in a subsequent sale.
An even better example might be a pool. If you're a person who simply has to have
one — fine. Put in a pool. But it's probably worth checking with a real estate
professional first, just to make sure you fully understand that adding the pool
might actually lessen the property's value and make it more difficult to sell
should you later decide to move. That's the reality in many markets. That doesn't
necessarily mean you shouldn't do it, especially if you're planning to live in
the home for the rest of your life. It just means it's worth knowing the cost and
salability impacts at the front end — even if they're not going to deter you from
pursuing the project.
Really Need To Do It —
The "type-B" home improvement project is pursued primarily to increase the
property's salability. In turn, this often increases your return on investment. A
good real estate agent can advise you of possible improvements that will attract
more potential buyers and also pay for themselves either through increasing the
home's value or through shortening the time it takes to sell the home.
Here we're typically talking about projects such as: painting — either because
the existing paint is in bad shape or is an unusual color; replacing carpets —
again because of age, color or style; repairing or resurfacing a cracked driveway
or sidewalk; refacing kitchen cabinets; and trimming or removing overgrown or
unattractive landscaping.
While spending several thousand dollars on your home right before you sell it
might not sound very appealing, it's not uncommon for the right work to more than
pay for itself in a higher selling price and shorter marketing time.
Consult with an experienced real estate agent to learn what improvements will
make your home more marketable in comparison to similar properties that are now —
or recently have been — on the market in your area.
