Selling Strategies for a Soft Market #5

Home Improvements

There is a general rule in real estate that says, ìProperty will always gain value while the structures on it will always diminish in value over time.î But no matter the age of a Traverse City home, no matter its location, regardless of its style of construction and decoration, as time goes by property owners have to continue to update and maintain their homes in order to maximize their real estate investment. How much of a return on your investment can you expect to glean from various remodeling projects, and what affect can they have on your Selling Success?

Key #5 - Return on Remodeling Investment & Competitive Edge

You will not glean a dollar-for-dollar return on your investment from remodeling and updating projects.

There, I said it.

Almost without exception, the money you spend on your home is not recouped in full when you sell it. Yes, a propertyís value is maximized when it is in great shape and reflects the current trends in design, amenities, and layout. Yes, spending time and money upgrading and updating your home produces positive benefits in addition to the fact that you are living in a nicer home (donít forget that part). But certain remodels, replacements, and additions generate a greater return on investment at resale than others.

Real estate industry lore says start with kitchens and bathrooms ó that is what people care about the most and where you will gain the most bang for your buck when it is time to sell.

Not necessarily, says the analysis done by Hanley Wood LLC for the National Association of Realtors this last year. According to their study, upscale siding replacement earned the largest return on investment in the Great Lakes region, just over 82 percent of the job cost recouped.

Talk about unsexy! Most of us would much rather be picking out gorgeous granite countertops and hip appliances, or luxurious claw foot bathtubs. Next on the list is a kitchen remodel at (73 percent) return on investment, followed by adding a deck (72 percent), and replacing windows (71 percent).

Two additions that are commonly suggested in the Grand Traverse area as excellent addition investments for a home recoup a surprisingly low percentage of the job cost, according to the study: adding a garage (59 percent), and adding another bathroom (58 percent). Curiously, adding a garage on a Pacific coast home recouped 88 percent of the job cost. I donít think anyone from Hanley Wood has recently had to broom 10 inches of snow off of their car and scrape the ice off of their windshield before heading in to work on a frigid morning, in the dark.

Remember to put costs and values into context. Seemingly small differences in project scope or material quality can dramatically affect the final costs. It is also important to consider whether a remodeled space reduces the perceived number of rooms or the available finished square footage of a home. A small bedroom converted into a home office, or cannibalized for your cavernous new master bathroom, while a positive development in many respects, may reduce the number of bedrooms below the minimum expectations of prospective buyers, for example. Carving a half-bath out of unused storage space under a staircase, or over a garage, is an obvious gain.

Also, the older the remodeling project, the smaller the recouped job cost, but the longer a home owner gets to enjoy the benefits of the project. If you are getting ready to list your home on the Grand Traverse real estate market, consider what your job costs will be, how long you will get to enjoy those home amenities, and what affect those improvements will have on the sale price of your property and its time on the market. A good real estate agent can help you with these questions a lot.

Finally, all other things being equal (read: asking price), the newer, nicer home sells first. Exterior projects seem to have the greatest affect and are the best value. Remember our discussions about the importance of Buyerís first impressions? While some prospective Buyers seek properties that have remodeling needs, what many of us refer to as ìfixer-uppers,î they are seeking properties whose asking prices are below the Traverse City real estate market averages. The possibility of sweat equity can be a selling point, but the sale price will be negatively affected from the Sellers standpoint.

Stay tuned as we round out our 8 Keys to Selling Success - Strategies for our ìsoftî market by discussing #6 - Sales Incentives & Marketing Extras, #7 - Power Pricing, and #8 - The ìItî Factor.

Remember to leave your question as a comment below, or e-mail MikeGaines@C21Northland.com or Mike.Annelin@C21Northland.com.

All the Best,


TEAM MIKE



Last Updated: January 22, 2008