Home Improvements and Home Value
Unless you've been hiding under a rock, you have heard about the insanity that is the Denver Real Estate market. Whether you're buying, renting or selling--there is no denying the strength of the market. Home values are at record setting highs leaving many homeowners contemplating selling their homes.
When selling your home, most homeowners understand the value of making a few home improvements and updates before listing their home, however; knowing which improvements are necessary and will bring the most value is one of the questions that comes to mind. You might be looking for an exact formula on which home improvements will bring the highest return-on-investment--unfortunately, it's not that easy but our friend, PJ Magin of Keller Williams Integrity Real Estate has provided a few pieces of advice as far as home improvements to make before selling.
"If you want top dollar, it's got to look top dollar. Carpet and paint is where you will see the most bang for your buck. They are less expensive than most other improvements, and make a significant impact to the value of your home.
Kitchens and bathrooms are upgrades that sellers are always eager make and while you will make a portion of your investment back, there are no guarantees. If you do make these improvements be sure not to make them too personal or individualized in order to attract mass audiences."
While those are some quick and dirty tips regarding home improvements before selling, below are some other considerations to contemplate. Are you sure you want to move? Why are you making these improvements? Will they actually make a difference on your home's value?
Try these filters when considering making home improvements:
Home Improvement Filters
Filter #1 - Love it or leave it! This is really the operative question when it comes to major home improvements because no matter how much money you put into your home, it will not change the basics of the home. So if you don’t love your home and its location, move. If you do love your home and its location, then make sensible improvements and enjoy your lovely home. The money issue? It really doesn’t matter because in the end it’s more economical to change your existing space than to move. It’s expensive to pay people like us, real estate agents, and movers. Not only that but you’ll probably change the next house too - it’s part of the human condition.
Filter #2 - Don’t do it for the money! It’s best not to do any kind of major home improvement for a nice rate-of-return on your money. You must do it because you want a nicer living space, you need the third garage, finished basement, or more space. However, there’s a good chance you’ll be saying goodbye to some of that money.
Filter #3 - Location determines value! Further, location comes down to what part of town, what neighborhood, what street and which side of the street - location determines value. Condition is a huge factor in value and salability - but location will always be the number one duck in that formation. So, rule #4 applies.
Filter #4 - The street test! If you want to make major improvements and retention of capital is your principle consideration - go outside and look at your street. Ask yourself - what will this street bring in the marketplace - be realistic!
Filter #5 - If you dislike it, delay it or move! If you don’t like your home but you can’t move, then do cosmetic improvements like floor coverings, removing old wallpaper, window coverings and countertops. You’ll almost always get your money back on those items. Then move when it makes sense for you.
Filter #6 - It never ends! The problem with remodeling or updating a home is that one thing leads to another and it never really ends. Example: Say you want to replace countertops in a 30-year-old kitchen. Countertops lead to sinks, then faucets which lead to cabinets, then appliances and then floors. But now you have a new $30,000 kitchen with 30-year-old windows -- do you replace just the kitchen windows and doors? Now your kitchen’s done but how does that impact the family room and the rest of the home? It never really ends so you better really love your home and its location.
Filter #7 - Less is best! It’s ironic that the least expensive items reap the biggest rewards. Cheap things like paint, removing old wallpaper, new carpet and window coverings, redoing hardwood floors, painting paneling and updating countertops, sinks, light fixtures and stools pay huge dividends - more than cost. Why? Because of the street test.
Filter #8 - Most pays least! Again, it’s ironic that the most expensive and intensive efforts pay the worst returns. Let’s be candid. The singular improvement of adding a $30,000 third-car garage is not going to increase a home’s value by $30,000. The operative word here is singular.
Filter #9 - Lots of dichotomies! There are a lot of dichotomies involved in the decision to remodel because we all look at and use our homes differently. When my wife and I decided to do our remodeling we knew that money-wise it wasn’t the smartest thing to do. But we loved our home, its location and our neighbors. Lots of family memories - so for us it made sense to make major but sensible home improvements and we were willing to take the dollar hit.
Filter #10 - Beware! Beware of people giving you advice. There are dozens of variables involved in any decision. The person giving you advice knows only 5% of those variables - you know them all. Trust you instincts - people are so smart when it comes to parting with their money. They think decisions through looking at all the variables and they always know what’s best for their situation. You’re no different.
Overall, when making home improvements it seems the best course of action is to make improvements you would enjoy--make them for yourself not what you would expect to make off of the investment since there are no guarantees.