Don’t Overpay for Home Features and Extra
When a real estate agent sits down with sellers to discuss the value of their home, the conversation inevitably turns to the home;s features extensive decor, a converted garage workspace or perhaps a one-of-a-kind pool or patio.
While those features might be selling points, the truth is potential buyers may not value them nearly as much as the seller. Some buyers will see the garage workspace as a liability and an expense to undo. And while beautiful to the seller, the decor they chose may not appeal to a buyer.
A home may go on the market with what real estate agents call seller pricing, which is based more on the seller’s perceived property value than on actual market conditions. Inevitably, after some time on the market, the price eventually gets reduced.
Here are strategies for Buyer to avoid overpaying for home upgrades.
Don’t get emotionally attached
As the market continues picking up, stories of multiple offers are everywhere, in places such as Indianapolis, Raleigh, Sacramento and South Florida. With such little inventory, buyers are forced to compete for the limited goods. This competition, which we’ve seen before, creates a frenzy, causing some buyers to make an emotional purchase based on their attachment to a potential home, its features or location. This results in a quick increase in home values what some might call a bubble.
Make no mistake: This is a great time to buy, especially if you have a down payment, a stable job and good credit, and you’re committed to the community for the next five years. In most areas, it’s cheaper to buy than rent. Just make sure to always think like a seller, not just a buyer, as you move ahead on a particular property. Weigh the potential market value of its amenities five years down the road, when you may turn around and sell. To achieve the maximum equity, try not to overpay for those features, either for competitive or emotional reasons.
Think like a Seller:
View the property as if you will need to turn around and sell it in a few years time. Do the features of the home still hold as much appeal? Will they be quickly dated or require a significant expense to maintain? Will these features continue to appeal to a broad based market of potential buyers or are they only appealing for your lifestyle?
While an upstairs master bedroom may be great for you at this time in your life while the kids are small, it has limited appeal to empty nesters, retirees, or parents of teenagers. You may love beautiful showers, but if the home is lacking a tub this is a real issue for families with small children. An historic home may be appealing, but are you prepared to invest in the higher utility bills because it does not have thermal paned windows and adequate insulation?
Features that are irreplaceable or provide safety of savings such as a great view or lot, ideal location for commuting, energy efficient features, security features definitely add value to a home over a comparable sale and should be valued accordingly.
Home Improvements that are Valuable:
According to Remodeling Magazine (www.remodelingmagazine.com) you’re less likely to recoup your investment in a major kitchen or bathroom remodel than you are to get back what you spend on basic home maintenance such as new siding, roof, or exterior painting. Siding replacement recouped 92.8 percent of its cost, according to the study. The only home improvement likely to return more at resale was a minor (roughly $15,000) kitchen remodel, which returned 92.9 percent. Replacing roofs and windows were also high on the list, returning 80 percent or more at resale.
Remember that improvements do depreciate. An updated kitchen that was installed 5 years ago will not be valued the same as a newly updated kitchen. Just like a new car, you recover everything you spent on a new feature and Buyers should consider depreciation when they are valuing a home’s features.