OfflineIf you are thinking about renovating your home, you may want to think twice before you start your project. Many projects will not increase the value of your home, and oftentimes they will decrease the marketability of your house.
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The following are 10 ways that can actually lower the value of your home:
Overbuilding the area. Yes, you can improve your home too much. No matter what you do, your home is only going to be worth so much in the location that it is in. Make sure that you pay very close attention to the values in your neighborhood. Look at the common features of homes in your area. Talk to a trusted real-estate agent or an appraiser, and ask for an appraisal without improvements and another with them. If it doesn't pay off, then it's not worth it.
Overbuilding a certain room in your house. If you put $40K into your kitchen without remodeling the rest of your home, the house will not sell because it is inconsistent with the other rooms of the home. Find out what's the baseline in your particular neighborhood — and anything you can do to bring your home up to that baseline … is probably an investment worth doing,"
Making the “White Elephant”. If you remodel your home, and eliminate common features simply because you do not use them, you could be killing your re-sell value. It's fine to add a personal touch to your remodel, but remember that you likely won't live in your home forever. Remember that your changes need to speak to a future homeowner. Or be prepared to eat your additional investment — and possibly more.
Messing up the floor plan. Too many people aren't careful when they add square footage to a home. Adding a bedroom where there is a walk through to the laundry room creates 'functional obsolescence,'" Another example: adding a bedroom on the one side of the house when the bathrooms are on the other side of the house. Keep in mind the functional integrity of the floor plan and stick with it.
Above ground pools. No need to say any more. If you want to sell your home, take it out.
Remodeling yourself without any previous skills. You can see a self-improved remodel from a mile away. Prospective buyers will run. It pays to use a licensed and bonded contractor. You get what you pay for. It’s an investment.
Remodeling areas that do not have space for the items that you are planning on putting into the room. Oftentimes when homeowners remodel a kitchen or a bathroom, they “put bigger items in there than neccessary. For example, homeowners will remodel and place a giant piece of furniture that includes a built-in sink and cabinetry that overwhelms the bathroom. The space ends up feeling cramped, and future homebuyers will pick up on that.
Getting too trendy. Styles change over time, avoid putting things that are too trendy and non-standard. You may regret it in a few years.
Converting the Garage. You can create 'functional obsolescence' because you've removed covered parking. When you sell your home, buyers will see that the rest of the neighborhood has parking, while you don't. You might have spent $10,000 to convert a garage into a living room or a man cave and the appraiser might turn around and say "the additional $10,000 is lost because of the impact of not having covered parking." Don't turn the garage into a living space. If you really need additional space, consider an addition to the home.
Not getting a permit. This can not only blow up your potential buyers financing, but it also creates problems with identifying the number of bedrooms and bathrooms that are on record with the county. The permitting agencies may require you to undo all of your work after the fact. dZaremba
The article above offers some really solid advice to rehabbers. The suggestions are simple, yet quite often some of them are ignored, and the results can be disastrous. I have a friend who really overdid his rehabbing on 6 different properties before he finally learned that creating the nicest house in the neighborhood never pays off to really cover the costs.
But I'd like to also differentiate between overbuilding, as described above, and installing some "wow" factors in a house. Being able to sell a property in a timely fashion and at the best price is always a bit of a challenge unless you are in a market where there are bidding wars. Under normal circumstances, we want to create a competitive advantage in selling a property, if at all possible. There are multiple methods of creating a competitive advantage, but not all of them are appealing to an investor:
1) Seller offers lower price than the competition;
2) Property offers a natural location feature that is advantageous;
3) Seller offers special purchase terms;
4) Property offers more desirable features than competition;
Creating a competitive advantage that will cause property to sell more rapidly or for more money through adding some "wow" features could be money well spent. It is advisable to go visit the competing properties during rehab to see what the competition looks like, and then consider what may improve curb appeal, or interior features that will help build competitive advantage. I have found that really good lighting is one of those things that is worth a little extra money, and some little added feature in a kitchen or bathroom that adds convenience can fit in that category as well.
Dallin Wall
Real Estate Training Team
Forum Blog Location--A collection of my
"Best of" posts:
http://www.deangraziosi.com/blogs/dwall
Thanks for sharing this article, tons of information.
Reynold Orozco
One thing we found to put the "wow" in a property was to have a good yard on the approach to the house. Once sold a house in 15 min, at over the list price, due to the landscape and primarily pastel colors throughout. Have now done 9 houses and all viewed very favorable especially when compared to others for sale at the same time. Also agree with the good suggestions above on prepping for sale.
I have to report on a personal experience with curb appeal. I had a property that had some of the most drab paint I have ever seen. The front of the house reminded me of oatmeal. I wanted to get into marketing the property, so I repainted the front of the house ONLY with a warmer color and some accents, and put a new storm door on the front and a couple of baskets of flowers. I also trimmed some bushes, so the front of the house looked really good. I did not do anything with the sides or back of the house.
People would pull up to see the property, and were drawn to the improved appearance, but if they looked very closely they would see that the sides and back were not attractive. At that point, I would walk out and identify myself as the crazy person who just painted the front, and then explain that I ran out of time. I would then tell them that if they buy the house, I'll finish the job, or give them a discount if they want to do it. Guess which way I sold that house? I'm sure you guessed it, people love a discount, and they now knew exactly how to finish off the house, so it was a slam dunk for me, got the house sold really fast and didn't have to paint 3/4 of it. By the way, the price I sold it for was what I had originally planned to sell the property for, the quoted price for me to finish the painting was actually $1500 higher than I had planned to sell it for, so I got FULL PRICE!
Dallin Wall
Real Estate Training Team
Forum Blog Location--A collection of my
"Best of" posts:
http://www.deangraziosi.com/blogs/dwall
Another quick story, a friend of mine rehabs and resells properties. He buys the property, then moves in while he is doing the remodel. He has hardly made any money on 6 different remodels. The problem is that when he is not working, he is walking around the house looking at the work that he has done, and comes up with more projects.
The properties he rehabs are always beautifully done, and match what he likes in a property, but they have had too much time and money put into them to match the selling price and he always has to go through a few price reductions which eat up his profits.
We cannot rehab properties to match what we would like to live in, nor can we overthink what will get the property sold. Create your formula, and live by it--no big extras or you will price yourself out of the market.
Dallin Wall
Real Estate Training Team
Forum Blog Location--A collection of my
"Best of" posts:
http://www.deangraziosi.com/blogs/dwall
Hi Coachs thanks for the wonderful info, Jim
jbischoff