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Beware over improving - elegant kitchen and recessed lightsHome sellers know that certain fixes will give a good return on investment when selling. The risk, though, is in over improving your property.

Reasonable home sale prep will not over improve the home, but will include:

  • decluttering so that the home, garage, and yard all appear to offer enough comfortable space
  • deep cleaning, including the windows and  tracks
  • repairs to whatever is broken or not working properly, such as windows that don’t open and close smoothly, doorbells on the fritz, faucets that drip
  • often fresh paint and carpet are a good idea – case by case basis
  • frequently new light fixtures are helpful
  • sometimes removing window coverings to let more natural light in can be a good idea
  • sprucing up the yard, trimming bushes, planting something colorful near the front door

Strategic upgrades such as these prior to putting the home on the market will result in a faster sale at a better price in most markets.  Some sellers don’t want to do enough, whether it’s as basic as cleaning and decluttering or if it’s repairs that are imperative due to health or safety conditions.

Sometimes, though, we meet property owners with a bent toward the other extreme. When possible, we’ll do our best to get them to minimize their to do list since deep remodeling may cause a diminishing return, particularly when the market is soften and prices may be falling.

Over improving your property: how much is too much?

When the market is appreciating sharply, it may be possible to do a tremendous amount of work and get a fantastic return on it.

When the market is flat, that formula doesn’t make sense because of the holding costs as well as the stress and risk involved.

If the home values are falling, the phrase “time is money” kicks in. You want to do a reasonable amount and it needs to be fast. Drag your feet and it will cost you!

Even in a mildly appreciating market, the simple items listed above tend to get the most bang for the buck. Larger projects often don’t, but there are some exceptions.

Over improving may include luxury features inappropriate to the price point of the home, for example:

  • adding expensive luxury features such as heated bathroom floors and loads of crown molding and wood trim in a tiny, older house in a relatively inexpensive neighborhood
  • putting a $200,000 kitchen into a modest starter house or condo

Over improving: best not to be the biggest, most expensive home on the block

In the two examples listed above, the renovations to the property would make them the most expensive property on the block, most likely.

In real estate we have some key principles and understanding these will help with knowing when improving becomes over improving.

The principle of progression means that if your home is small and modest and is surrounded by more expensive homes, the more expensive ones will pull your home’s value up. You can make renovations and additions with less worry about being the most expensive or overbuilt home on the block.

The principle of regression means that if your home is the largest or most expensive and is surrounded by lesser valued homes, they will pull yours down. Here it can be quite risky to further improve your property since you may be throwing good money after bad.

To avoid over improving the house, pay attention to both the market conditions and to the principles of progression and regression when deciding what renovating you want to do.

Summary

Most of the time, your best investment will be in doing small, strategic repairs, renovating or improving.  You get a good return – even great – on things like paint, floor coverings and touching up the front landscaping.  Often even fresh sod can bring a good return because an attractive front yard will get home buyers to look inside, whereas really poor curb appeal may cause them to turn away. Counter tops, light fixtures, and maybe new interior doors can wow a buyer and give you a good bang for your buck.

Totally remodeling a kitchen (with new cabinets) or bathrooms may recoup you less than what you’re putting into it. Hire a great Realtor and then work with her or him to determine which improvements will net you the most. We don’t advise doing that in most cases.

Think of the pre sale home improvement like this: it’s lipstick and rouge, not cosmetic surgery.  Go too far and you not only won’t net the most from the sale, but you could actually lose money too.  “Balance in all things” applies to preparing your home to sell too.  Not too little, not too much.

 

Related reading on he risk of over improving one’s home

Myths and Misconceptions about Buying a New (or Newer) Home (this site)

How to take the headache out of home selling (this site)

Selling Your Home In Silicon Valley – 9 FAQs (on popehandy.com)

Presale inspections (on popehandy.com)

Author

  • Silicon Valley Realtor, selling homes in Los Gatos, Saratoga, San Jose, Silicon Valley, and nearby since 1993. Prolific blogger with a network of sites.