One of the most common conversations I have with clients is related to the "improvements" they have done on their home. In some situations the improvements will make my clients money and in others, I know going in that the improvements made will out-pace the market, and end up being a financial burden. The key to avoiding the mistake of over-improving is knowing your market, and more specifically, knowing your neighborhood. #knowthenumbers
In the HGTV Era, we all want a "fixer-upper". It has become easier and more appealing to the general public to purchase homes knowing they will be immediately spending a lot of time and money to "make it their own". I am guilty of this myself, and catch myself constantly calculating whether or not a particular improvement will be worth it. Really what it boils down to, what any investment always boils down to, is the numbers. For me, an improvement has to fit in these criteria for it to be worth it (just a personal opinion):
1). Will this "project" improve on my families quality of life?
2). If we never got the money back out of this project would this hurt us financially or make us wish we had never done it?
3). What does the market say? Is there a trend of improvements happening in the neighborhood? Will my cost be absorbed quickly? (#3 with a 3 part question, and really the most important things to consider).
So how do you know what is going on in your neighborhood and whether an improvement will truly be an investment? There are several online sources that will help you to determine what homes are selling for in the neighborhood, you can also ask your favorite Realtor (wink wink). Determining your numbers may be a bit more difficult and time consuming depending on the personal financial factors involved. Here are the 3 basic things you will want to know:
1). What did I pay for my home?
2). What could I sell my home for? (This should be based off what homes are selling for in your neighborhood and how your home compares to the others, this is why all my market analysis are based off seeing a home in person).
3). What are similar homes currently selling for in my neighborhood? This will give you an idea of what you could reasonably sell your home for.
Based off of these questions and your own personal financial situation you can usually get a good grasp on whether that home improvement is worth your time and/or hard earned money. I always tell my clients that there are certain things you just do for yourself, and if your expectation is simply that you and your family enjoy an improvement and are fine with no return on investment, then by all means- knock yourself out, and ignore this post! Other clients get caught up in having all the best in their home and assume that when they go to sell, the general public will be willing to pay over market value because their home has all the "bells and whistles". Generally speaking there is a cap on what a buyer is willing to pay and in the case of a low appraisal- what they are even qualified to pay to purchase your home.
The key to not over-improving is spending the time to do a little research, know what things are selling for, and making sure your improvement will not out-pace the market. If you are concerned about over-improvement then have someone help you run the numbers and talk through this process with you! You may want to consult a financial adviser for some help.
If you are thinking about making improvements to sell your home please give me the opportunity to go over some general comparables in your neighborhood to help you through that process.
**I will make a disclosure here, which I hope has been made apparent throughout this post: I am not a financial adviser, (although I have some to refer if you are in need of detailed financial assistance) and certainly not an eloquent writer, I am a Realtor/Consultant/Business Owner who is learning based and cares about my clients (current and future!!) and since this is one topic that comes up weekly I thought I would give you my personal outlook on improvements! Please feel free to email me or contact me with any questions, comments or concerns!
Jamie Marchant
Homes By >>LEVEL405
(405) 514-7518
Keller Williams Elite
5629 N Classen
OKC, OK 73118
(405) 948-7500
