Cost of home improvement projects and their return at sale

Cost of home improvement projects and their return at sale

A question that comes up often when a client is considering placing their home on the market is should something be replaced or renovated in the home to improve the selling price? The answer in the short run is yes; replace a broken or worn out item, certainly make the cosmetic improvements, but don’t renovate the kitchen or bath just to sell the home.

If the water heater is making noises, if the garage door is bent and off track or, if the faucet in the bathroom is leaking then repair or replace it.  If something is broken when buyers walk through the home during a showing, it will pull down the price of the home when an offer is made and provide a negotiating edge to the buyer.  Keep in mind, even if the buyer didn't notice it when they made the offer, the home inspector will pick it up - or at least should.  This will give the buyer a chance to submit a lower offer, or back out of the agreement altogether.  

But, when it comes to renovating, don’t.  As you can see from the graph linked here, (Cost of improved compared to return on sale - table) the only thing that returns 100% of the investment is replacing the front door.  

If you do make large improvements, make those renovations a few years before you are going to sell.  Living in the home for about five years after you complete the project, you can consider the difference between the cost of the renovation and the resulting effect on selling price as your enjoyment return.  Living with the improvement makes for a better living space for the time that you stay.  Then, when you sell the home, the additional value makes sense, or in this case, dollars. 

In the near future, "Ten things you can do to make your home appealing on the market".

Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan.  He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods.  Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce.  You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.

13 new (and strange) rules for surviving the real estate market

After combing through a massive amount of data, Zillow has put together a compendium of housing market wisdom. Here are the most useful, or just plain entertaining, lessons.

1 Buy a house close to Starbucks

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While it's true that homes close to a Starbucks cost more than the national average, it's also true that they appreciate faster than the average home. Rascoff and Humphries hypothesize that this might be the result of the great work of Starbucks' 20-person location analytics team, which pores over data on traffic patterns and business density to pick the best places for their stores. If Starbucks' comes to a neighborhood, it's got a good chance of being the next up-and-coming spot.

2 Don't buy the worst house in the best neighborhood

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The old saying goes, "real estate is about location, location, location." And if neighborhoods are what drive real estate prices, then following the oft-repeated advice of buying the worst house in the best neighborhood makes sense. After all, you can always fix up a house, but you can't move your house to a new neighborhood.

In fact, the folks at Zillow found that "the more affluent a neighborhood is . . . the worse that homes in its bottom 10 percent tend to perform." They hypothesize that this is because people who look for houses in expensive neighborhoods tend not to be cheap, and will overlook your house when they are shopping for a new home.

3 It's not impossible to find an affordable house in a good school district

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School quality can vary widely from neighborhood to neighborhood, a dynamic that is reinforced by the fact that schools are largely funded by local property taxes.

That's why home values can vary so much between neighborhoods that are otherwise very similar. But by doing a bit of homework, you can find good schools at a great value. Rascoff and Humphries give the examples of Dublin, Ohio and Greer, South Carolina as towns where you can buy affordable housing in great school districts.

4 Foreclosed homes don't offer good value

Photograph by Joe Raedle — Getty Images

Following the housing bust, the media was awash with stories of homes that could be had at rock-bottom prices. But looking at the data, Zillow found that there were good reasons why these homes were inexpensive. First of all, foreclosed homes tend to be smaller than other homes nearby, and banks often require purchasers to buy without a home inspection.

5 When selling your home, don't describe it as "unique"

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Analysis of online real estate listings show that the language used to describe a home for sale is incredibly important. Homes that are described thoroughly and honestly sell for higher prices than comparable homes that aren't, and Zillow was actually able to zero in on a few words that usually drive demand way down.

If you are selling, stay away from "unique." Homes that are described as such, "can sell for as much as 30 to 50 percent less than expected," Rascoff and Humphries write.

6 If you want to increase your homes value, remodel your bathroom

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Investing in your home through maintenance or remodeling almost always increases its value, but some projects pay off a lot more than others. For instance, "a $3,000 mid-range bathroom model ... replacing the toilet and light fixtures, adding a double sink, and adding some wallpaper--would result in a $1.71 increase in home value for every $1.00 you spent on the renovation," Rascoff and Humphries write.

In comparison, a pricier bathroom remodeling will likely return less in home value than you spend, while basement renovations tend to do the least in terms of increasing a homes resale value.

7 When listing your home, "The Price is Right"

Photoby David Ryder — Bloomberg via Getty Images

Many people tend to shoot for the moon when selling a home. After all, if selling a home is a negotiation process, why not start high and come down from there, right? But the reality is that homes listed for close to their market value actually end up selling for 4% higher than homes that are initially overpriced.

That's because pricing a home at its fair value will attract more demand, and sometimes even start a bidding war.

8 The best time to list your home? Late March

Brian Kersey Getty Images

Most homebuyers begin contacting agents in May and June, so it's good to get your home listed in late March on average. That's enough time to make realtors aware of your listing, but not too much time that the home appears to have been langusihing by the time peak buying season begins.

However, this rule is a national average, and in colder locales like Boston, the best time to list is in early April, while places farther South call for listings a bit earlier. On average, homes listed in late March sell faster and for 2% more than comparable homes that are listed at other times.

9 Homebuyers can be really superstitious

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It's no secret that people can be really superstitious, but it might be surprising to hear that this can affect the real estate market in a big way. One example? Homes with the number 666 (the number of the beast, according to the Book of Revelations) somewhere in the listing sell for 3.2% less than expected.

10 Cool street names will cost you

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If you want to live on Penny Lane or Thunder Road, it's going to cost you. Houses on streets with these names sell for 53% and 46% higher than the median home, respectively.

11 Manhattan isn't being overrun by emerging-market emigrants

George Rose — Getty Images

Many think that foreign buyers of Manhattan real estate are mostly Russian and Chinese nouveau-riche looking for a place to stash their exorbitant wealth. But Zillow's data show that "Canadians and Brits are actually the foreigners flocking in greatest numbers to New York City."

12 Homeowners don't see as much action as renters

Justin Sullivan Getty Images

Using Zillow data in conjunction with the General Social Survey, Rascoff and Humphries found that there are significant differences between the behavior of renters and owners. One fun fact: "In every age group, the percentage of renters engaging in sexual activity at least once a week is greater or equal to the percentage of owners knocking boots."

13 Homeownership isn't always the best way to climb out of the lower class

David McNew Getty Images

Homeownership has a storied history in this country, and promoting it is a bipartisan cause. But as the real estate bubble showed us, owning a home can just as easily be a financial burden as it can help build wealth.

This is especially true for lower-class people, who typically cannot afford significant down payments and tend to live in neighborhoods where home values are most volatile. Homeownership should be the result of increased wealth rather than the thing that propels a person up the socioeconomic ladder.

Published online by Fortune on January 28, 2015 and written by Chris Matthews

Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan.  He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods.  Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce.  You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.

These interior design trends turn off buyers

By: Patricia-Anne Tom

You want your home to look its best, and maybe you’ve been inspired by the interior design trends you’ve seen in magazines, on TV or on design websites.

But following some of the hottest home remodeling and interior design trends can backfire when it comes time to sell your home.

Buyers want to picture themselves in a home, and highly individualistic touches can get in the way of that.

When you’re ready to sell your home, it’s best to put things in pristine, move-in condition and remove all of the individual touches that made your house a home.

After all, your goal is to get potential buyers to picture themselves in the home—and they won’t be able to do that if your decorating style still dominates.

Check out the caveats that go along with these home interior design trends.

1. Boldly Painted Walls

Decorators often tout black or another bold paint color as the perfect backdrop to metallic accessories or appliances in modern home design.

The reality is that people prefer the exterior and interior walls of a home to be neutral. Even though repainting is cheap and relatively easy to do, it’s still a pain and buyers might not want to bother.

When decorating, your best bet is to stick to an appeasing hue for the walls and use accessories to provide pops of color.

2. Wallpaper

Bold, graphic patterns increasingly are being incorporated into interior design, often in the form of wallpaper.

But wallpaper—even if it’s only on one wall—is an extremely personal choice and time-consuming to remove if it doesn’t appeal to the buyer

Consider replacing wallpaper with a neutral paint for broader appeal.

3. Lavish Light Fixtures

While potential buyers want rooms that seem airy and bright, beware of installing a showpiece light fixture that is too modern or ornate.

Fixtures should enhance your home—not steal the spotlight.

4. Gleaming Gold

Designers may be mixing silver and gold to give homes star quality, but it might be wise to change out fixtures if they have the wrong metallic sheen.

Gold can give a home an outdated, ’80s feel. Switching out the faucet and door handles with a more appealing finish—such as brushed nickel—is relatively inexpensive and can help make your home appear sleek rather than out of style.

5. Converted Garages

People want a covered parking space so that they have a safe place for their car—especially in areas where street parking is at a premium. Additionally, people often use their garage as storage space.

If you convert your garage into a space tailored your specific needs, such as a music practice room, it may not suit your potential buyers.

6. Converted Bedrooms

Like with the garage, people want rooms built for their original purpose.

If you’ve converted an unused bedroom to an office, walk-in closet, or a game room, make sure you can easily convert it back to a bedroom when you’re ready to sell.

7. Carpets

While designers love to play with the texture of shag carpeting as it feels soft underfoot, the majority of home buyers prefer hardwood floors.

People assume carpets trap dirt, germs and odors, and they don’t want to go through the hassle of steam cleaning their home before they can move in. Potential buyers also don’t want to spend time removing carpet to expose hardwood floors.

If someone really loves carpet, it’s much easier for them to add it themselves—after the purchase.

8. Too-Lush Landscaping

The “outdoor living room” is all the rage, and you may be tempted to build out your backyard into a lavish wilderness of flowers.

But potential buyers may be hesitant to buy a home with an overly landscaped property requiring a lot of maintenance.

Focus on creating or maintaining a nice and neat outdoor space that people can enjoy without too much fuss.

9. Pools and Hot Tubs

A pool may seem like a luxurious feature, but it can be a big turnoff for buyers.

Pools are perceived to be expensive to maintain and potential safety hazards, especially for families with children. Above-ground pools are eyesores and can leave a dead spot in the backyard.

These sentiments extend to hot tubs, too. Many people see hot tubs as breeding grounds for bacteria, and they are not a feature easily removed from the deck or back yard.

10. Fancy (or Not) Pet Products

Sales of pet products are expected to increase nearly $3 billion from last year, and there’s an increasing market for luxury pet items.

But even animal lovers don’t want to see another family’s pet paraphernalia in a potential home. Even if your home is immaculate, the presence of pet-related items will give the impression that it’s dirty.

Be sure to remove all traces of your pet—including toys, food dishes and photos—before listing your home for sale.

Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan.  He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods.  Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce.  You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.