The Reemergence of the Housing Market
Six years after the collapse of the housing market, green shoots are beginning to appear on the home front. Historically low interest rates and rising home prices are giving potential sellers optimism for the first time in years. If you have been waiting to sell, you want to make sure that your home stands out from the competition. But you also want to be careful that you don’t put more in than you will recoup. Whether you are planning to list your home now, or a few years down the road, it is good to know which home improvements offer the best return on your investment
Enjoyment vs. Profit
Whenever a homeowner decides to remodel, it is done for the pure enjoyment of owning an improved or updated home. But if you are ready to sell now, it is important to make sound fiscal decisions that justify the investment. You want your home to sell fast, and you want it to stand out from similar homes, but ultimately you will only recoup what the market, or neighborhood, will bear. Putting money into a large project for someone else’s enjoyment doesn’t make sense if your particular neighborhood currently has a set sales cap. A home is a place to love and build memories, but it is also an investment. And like any investment, it must be managed to the homeowner’s advantage.
Basic maintenance, such as a roof or exterior painting, is important if you hope to sell your home quickly. No one is going to admire the money spent on the latest and greatest kitchen if your roof has a leak. Make sure that the basics are in place or you will risk driving away potential buyers. The next thing a seller needs to address is curb appeal. If the outside is clean, well maintained and inviting, it will keep potential buyers from crossing it off their list before they make it through the door. Inside the home, small fixes make a big difference. A very clean home, with fresh neutral paint and no clutter shows best. Putting extra furniture or belongings into storage can help open up a room. It also helps to stage furniture to make rooms seem more spacious. Finally, make sure the windows are clean and window treatments allow for the most light to show through. And always address any structural, plumbing and electrical problems that could affect the outcome of a home inspection or overwhelm a buyer who may not want to deal with repairs.
Listing Down the Road
If your plan to put your home up for sale sometime down the road, then putting money into a larger renovation that you and your family will enjoy could be a good plan. But realize that putting $30,000 in doesn’t necessarily mean getting $30,000 back. How much you will recoup depends on a number of factors. Some of these factors include the rate at which home prices are rising in your area, home values in your neighborhood, the time frame in which you plan to sell, and the scope of the project itself. This will help determine if putting a $70,000 kitchen in a $200,000 home is worth it. Also, keep in mind that the further out you plan to list your home; the less likely you are to recoup the expenditure. Wear and tear, as well as changing styles, makes even the most high end project appear worn and dated.
Improvements that Make a Difference
Kitchens are the heart of the home. Keeping the style fresh, open, and in line with the latest trends is always desirable to a buyer. Whether you do a complete kitchen overhaul or merely refresh the cabinets and replace outdated flooring and hardware, kitchen updates tend to be a good investment. Kitchen updates average about a 75 percent recovery value if the project is gauged appropriately for the neighborhood. An extra bathroom is also a good investment. On average the addition of a second bathroom recoups 65 to 75 percent of the remodeling costs. Decks add extra living space to a home. A beautiful deck can recoup 85 percent of its installation value. Other investments that pay dividends are landscaped yards and well maintained homes. Roofs, windows, HVAC units, water heaters, plumbing and electrical should be in good order.
Updates that Don’t Always Pay
Who doesn’t like a cool dip on a warm day? However, adding a $30,000 pool will not add $30,000 to the value of the home. In many cases the opposite is true. If a buyer loves the house, but doesn’t want the responsibility or liability of a pool, they actually think about the cost of filling it in. Very expensive stonework walls or other elaborate adornments, usually doesn’t raise a home beyond what a neighborhood will bear. Also, a potential homebuyer loves to see a well maintained and attractive yard. But very expensive landscaping won’t recoup the price paid. A buyer will always find it attractive, or even decide to choose your home over your neighbors, but don’t plan on them paying you back for it.
Your home is one of the biggest investments a person will make in their lifetime. Whether you have the desire to sell your home is in the near future, or sometime down the road, remember that all home improvements don’t pay off. The return on your investment depends on the housing market in your area and what the best maintained homes in your neighborhood are valued at. A home should be a warm and nurturing place. But if managed properly, it can also be a great investment for both you and your family.