Cost-vs-value studies consistently reveal how you can use home improvements to boost or retain the value of your home, in just about any market, but not if you expect buyers to pay for them.
If you look close at the methodology in cost-vs-value studies you’ll find that the best value impact is based on, among other things, the job you choose to do, local market conditions, the condition and age of other similar homes in your neighborhood, and perhaps most importantly, holding onto your home for a while.
Even when you choose the best cost-vs-value job for the market and for the neighborhood, if you don’t give that improvement time to season and position your home as above par with other similar homes on the market, rather than a done deal, your home improvement could be a dumb deal.
Real estate experts say when its time to sell your home, it’s a better idea to leave the major improvements to the new buyer and concentrate on curb appeal, landscaping and interior work that transforms your home into a model home, rather than the Taj Mahal.
Here’s why, according to the experts.
Appraisers say, you may be ahead of the curve upgrading your home, but if your home improvement doesn’t reflect what’s been done to other homes in the neighborhood it may not pay off. If comparables don’t come with the work you performed on your home, the selling price isn’t going to fully reflect what you paid for the work. Not only can’t you increase your sales price enough to cover the cost of the work and time, second-guessing what the buyer will want in appliances, decor style and finishes could cost you the sale.
Staging experts say better ideas include cleaning up, removing the clutter, adding a new coat of paint, installing carpeting, manicuring landscaping and updating fixtures, windows, doors and other cosmetic touches to put your home in the best light at a small cost.
That also means completing deferred maintenance. Make repairs to fix or replace broken items and systems. Use your cash to put the home and its components in good working condition by replacing missing roof shingles and broken or cracked windows. Repair driveway cracks and straighten listing fences. Make sure doors, gates, lights, plumbing fixtures and other items are all working properly.
Beyond the cosmetic touches and functional upgrades, but far short of full-fledged alterations and additions, the best home improvements that help net sellers full market value include a new roof, kitchen and bath remodels and only those alterations and additions that brings your home in line with the others in the neighborhood.
You should, however, right wrongs — even if the work won’t garner you a full return on your dollar.
If you or the previous owner completed work on your home without a permit, make it right before you attempt to sell the home to comply with building code and disclosure requirements.
Ultimately, you could be required to have the local building officials inspect existing conditions to obtain a permit to correct any work that’s not to code. Otherwise, if the work doesn’t comply with building codes, especially if it’s a health or safety hazard, you could be forced to tear out the work.
And that’s not the worst of it.
If, after close of escrow, a buyer discovers work completed without a permit and the local building department decides not to approve the work, a chunk of the home’s value could become a legal issue. Any difference in value based on what was not permitted at the time of sale, could become a point of litigation.
Finally, it’s sometimes in your best interest to let the buyer take care of any necessary construction.
If an inspection or appraisal turns up the need for major corrective work, consider leaving money in escrow with instructions for the escrow officers to pay the contractors once they complete the work.
Let the buyer select the contractors based on several fair bids and have the work done after the close of escrow to avoid a construction zone in your home while you are trying to sell it. If the buyer supervises the work, you don’t incur any liability and the lender knows the property will be restored to its proper condition, which enhances loan value.
Written by Broderick Perkins