Recently I met with a client who could not believe that the new carpet and windows they had installed in their home was not giving them an increase in their home’s value over the rest of the comparable sales in the neighborhood. I had to explain that routine home maintenance, such as replacing carpet, worn out plumbing, or staining on the deck are expected features within a home. I went on to describe how projects that add additional functional space can be a wise investment and often do add value to the home, however other projects allow little opportunity to recover the costs when it comes time to sell.
Even though you, as the current homeowner may love the improvements that you have spent time planning and paying for, a buyer could be unimpressed and unwilling to factor the upgrade into the purchase price. For this reason, you must be wise in how you plan to spend your money if you are expecting the investment to pay off. The list below gives a few improvements that you may think will add value to your home, but really do not.
Swimming Pools
In Utah, the outdoor swimming pool may only be used six months out of the year. Keep in mind, they are probably nice to visit at your friend’s home, but the actual maintenance can be a hassle to have at your home. Many homebuyers view pools as a dangerous and expensive potential lawsuit waiting to happen. I have actually had buyers tell me that they loved a particular home, but due to the pool, they were passing on the purchase because of the concerns they had.
Overbuilding in the Neighborhood
As you may be aware, I enjoy the home improvement and real estate shows on television. One of the great errors that the shows try to avoid is improving the home so much that it falls outside the norm for the neighborhood. While a large, expensive remodel such as adding a second story with two bedrooms and a bath might make a home fit your family’s needs without purchasing a new home, it will not add significant resale value if your home sits in the midst of a neighborhood of smaller, one-story homes.
Generally, a home buyer will not want to pay $300,000 for a house that resides in a neighborhood with average sales in the $200,000 range. This is because the home will seem overpriced – even if it is more desirable than the surrounding properties. If the buyer wants to spend $300,000, typically they will seek out a neighborhood with similar homes in size and value. This also becomes a factor when appraising the value of the home. Appraisers will have a limit of how far away from the subject property they can go to use comparable sales. If you overbuild your home, the appraiser may not be able to find similar homes that have sold in a close enough proximity to use for the appraisal. In turn, this causes problems for the buyer of your property who is counting on the appraised value to meet or exceed the agreed upon sales price of your home. If the appraisal comes in too low, the buyer will either have to come up with additional cash out of pocket, or cancel the purchase.
Landscaping
Landscaping adds creativity and curb appeal to your home, but don’t expect the home’s value to increase due to your investment in trees, bushes, curbing, and sidewalks. The attractiveness of your yard will encourage potential buyers to look at your property, but it will most likely not add to the selling price.
Think of it this way, if a buyer is not willing to put in the effort to maintain a garden, or hire a gardener, then weeds and shrubs will quickly overtake the yard and make the home an eyesore. With this said, buyers will think of the hours of work it will take every week to maintain the yard, and may pass on the purchase of your home. For this reason alone, the value of your home will most likely not be added to due to your landscaping.
High-End Upgrades
Imported tile, stainless steel appliances in your kitchens, upgraded sound systems, and theatre systems are once again features of your home that add comfort, but eventually can wear down and cause a cost for the potential buyer. These and other upgrades within the home can be a desirable feature that may lock in a buyer to wanting to purchase your home, but once again, do not expect that just because the home has upgrades, that the appraised value will include these luxuries.
Garage Conversions
Garage conversions can give you another living space, however, buyers like having garages, so converting the space will not increase the value.
Keeping Upgrades in Sync with the Home
On numerous occasions, I have seen a home where one room has been focused on (usually the master bedroom) and upgraded beautifully. Yet, the rest of the home was last updated in the 1980’s. This just made the rest of the home look even more out of date and conspicuous. This again does not add value, but in this case can actually detract from the value of the home.
Wall-to-Wall Carpeting
While home listings may still boast “new carpeting throughout” as a selling point, potential homebuyers today may cringe at the idea of having wall-to-wall carpeting. Carpeting is expensive to purchase and install. In addition, there is growing concern over the healthfulness of carpeting due to the amount of chemicals used in its processing and the potential for allergens (a serious concern for families with children). Add to that the probability that the carpet style and color that you thought was absolutely perfect might not be what someone else had in mind. Because of these hurdles, wall-to-wall carpet is something on which it’s difficult to recoup the costs.
Be realistic about the value of your home improvements. The real estate market always has its share of "flippers" -- real estate investors with varying levels of expertise who buy properties and fix them up, only to turn around and sell them for a profit a short while later. However, before you get dollar signs in your eyes, realize that it's mostly the pros who can make a living at this. They've got contractors on staff and a fine-tuned idea about how to get the highest return for the lowest project costs. And they're keenly aware that even projects with the highest resale return don't necessarily pay for themselves. To see what you can expect to recoup, visit Remodeling Online's Cost vs. Value Report at www.remodeling.hw.net/2009/costvsvalue/national.aspx. Then ask yourself how important it is to recoup your costs.
In conclusion, it is difficult to imagine spending thousands of dollars on a home-improvement project that will not be reflected in the home’s value when it comes time to sell. There is no simple equation for determining which projects will garner the highest return, or the most bang for your buck. Some of this depends on the local market and even the age and style of the house. Homeowners frequently must choose between an improvement that they would really love to have (the in-ground swimming pool) and one that would prove to be a better investment. A bit of research, or the advice of a qualified real estate professional, can help homeowners avoid costly projects that don’t really add value to a home.