Home Improvement Return on Sale

Home improvements continue to generate high interest from home owners, sellers, and the entire real estate industry.  Condition of the homes we are representing our sellers and buyers on is an extremely important piece of the sale.  How updated the home is drives not only the price, but how quickly it sells.

Given the high profile of this topic, I am frequently asked the following questions from owners and potential sellers:  Will I get my money back on this improvement? and; What needs to be done to this home to have it ready for market?

First, it is misleading to look at a chart that provides an average return on money spent.  There are many variables that will affect this amount, such as:

• Current condition – Installing a new kitchen in a 7 year old home adds much less value than if it were 35 years old.
• Quality of work done – If it does not look professional, you are not doing yourself any favors.
• Time between completion of work and sale – Selling in the first 5 years after a major improvement will net you much more than 20 years later.
• Amount spent – Putting $50,000 into the basement of a $200,000 house gives you a poor return.  Taking a set of average criteria from this paragraph, you may only get $20,000 back (40%); while on a reasonable $20,000 spent (I recommend 10-12% of home value max on a basement or kitchen; 3-5% max on siding or windows) you may get $15,000 back (75%).  For the one who is able to find cheap but quality labor and spend only $10,000, they may get $12,000 back (120%).
• How the improvement fits the home style – If the style and colors match or accentuate the other finish, you can expect a higher return; and vice versa.  This really comes into play when you do minor renovations, replacing less expensive materials like fixtures, lighting, counters and paint.
• Condition of other rooms – It doesn’t make any sense to put a new kitchen into an as-is sale where everything else needs work.  This takes a sense of balance.  By experience, I can walk thru a home and give the owners the items that make sense to repair/improve, and what does not.  It may come down to what stands out the most.
• Home value in relation to neighbors – If you have lots of square foot and are on the low end of the neighborhood, update away!  If you are already on the high end and you want to finish the lower level and add a pool, be prepared to eat most of the expense.

On the second question, you do not HAVE to do anything to sell the home.  You just need to match the price to the condition and location.  This then reverts back to the first question on return and if you have the time and money for completion of repairs/improvements, and it takes a customized walk-thru of the home to determine those recommendations.  There are times it only takes $2000 to bring an as-is sale to a functional home and sell for $15,000 more.

Here’s to Home Work!

 

Gary Hoeferkamp, Coldwell Banker Gundaker

314-440-2400 cell; 314-821-5885 office

garyhoeferkamp@gmail.com

 

Swimming Pools and Home Sales – Benefit or Hindrance?

Greetings, and a Salute to our Veterans!

I have many clients ask me when they purchase a home or during their ownership, if installing a pool will help or hurt the future sale, and if they will get any of their money back.  Like many answers in real estate – It Depends!

Now pools may be the last thing on your mind as you are prepping for the holidays, but if you are going to have one put in for next summer, you should be getting bids and start planning this winter.  First question is will you use it enough, and are you OK with the necessary time and money for maintenance and repairs.  Second, do you have room for one without losing your yard.  Third, what is the approximate value of your home.

Main answer is that pools are an improvement to be enjoyed by you, family and friends.  You will most likely not recoup the full cost, and may not even get back half.  In some instances owners will actually hurt the resale value and realize a negative return.  Main factors for how much money the owners will get back at time of sale are:

1. How much are you spending vs. How well designed is the pool/ how does it fit the lot.  I have seen some gorgeous pools (and surrounding decking/landscaping/hardscaping) that make the backyard a true oasis and was worth every penny, and others that should never have been put in.  These things can hit $100,000 quickly with lots of bling, or it can be a lower budget $20,000 small fiberglass type.  Above ground pools will cost much less, but are uncommon now, and I may even recommend that they be removed prior to selling as they hurt value more times than not.

2. What value is your home.  It makes no sense financially to place a high end pool with a low end house anymore than doing a high end kitchen in a low end house.  At $200,000, buyers expect certain house amenities, size and condition, so adding a $70,000 pool brings a low percent back on resale as they will choose the house that feels like $270,000 without the pool.  However, at $900,000 that $70,000 pool could make financial sense, especially if your lot holds it well and has yard leftover for other things.  I see the natural tipping points in St Louis around $400,000 on pools, where under that you tend to get a lower percent back, and over that a better return; and $700,000 is about the point where buyers start to look for pools as an amenity and is much more common.  A rough rule of thumb is no more than 10% of home value should be spent on a pool, or kitchen for that matter.  Also consider where you are in relation to the homes around you – are you near the bottom of values or near the top already?

3. Condition, age, construction type and features all play into how much eventual return you will see.  A 3 year old concrete/gunite pool with spa and stone waterfalls is a real plus on a summer day, while a 25 year old worn vinyl liner pool with cracked decking is a real concern and a deterrent.  Pools are similar to other home improvements in this regard:  the newer it is, the more desirable it is, especially when it has today’s features and colors (saltwater is hot right now vs chlorine).  The older it is, the more drag on resale it has.

One more thing…if you plan to sell your home when the pool is closed, have paperwork handy from the company that opens and closes it.  If you do it yourself, consider having an inspection performed before closing it.  Photos help immensely.  Offering home protection plan coverage helps too.  Best advice is sell your home with the pool open.  If it’s closed during swimming season, be prepared to knock alot off the price – better to pay for opening and repairs, or even have it torn out.

Have a Happy Thanksgiving!