Tips to Avoid Over-Improving Your Home

Can your house ever be too nice? The answer is yes. Unfortunately, there’s no simple measure to determine what constitutes an over improvement.

How much is too much, depends a lot on what improvements you undertake, what’s happening in your neighborhood and, in the end, your personal reasons for improving.

That said, when you sell a home, you never get a dollar for dollar return on your investment, no matter what the improvement.

That means homeowners need to be careful when they plan home improvements and additions.

Remodeling Online’s Cost vs. Value Report indicates which larger jobs provide the most return. Take note: the percentage return is a national average based on selling your home within one year of the home improvement job. After a year, returns diminish. The Remodeling Impact Report is another source of useful information.

The Bottom Line

If it’s for your own use, or if it allows you to stretch out your stay in the house (for example finishing the basement to add an office or to create additional living space, or adding a first-floor master suite that allows family members to spend their golden years in comfort and to delay downsizing to a single story home), that’s smart. But if your sole purpose is to increase your home’s value and your expectation is to re-coupe your investment in full, forget it.

It’s hard to believe, but the average American moves 11.4 times, and according to the data-crunchers at FiveThirtyEight, most 25-year-olds still have more than six moves (!) remaining. So, statistically speaking, you’re going to move.

And you’ll need to sell your house when you do. Which means you should think about how any project will affect your home’s value. It’s not as simple as you think. Just because you improve, doesn’t mean you recoup (more details on that coming up – just watch for the tables).

On the other hand, you may truly plan to stay put. Newer studies find that today’s first-time buyers want to stay in their first homes longer than previous generations. So if you’re one of the ones bucking tradition, then by all means, do what you want to do without regard to resale value.

If you want to be wise with your renovation dollars? Here are six points to consider.

Over-improve for Yourself

Are you over-improving to suit your own needs? This is perfectly acceptable and quite common however, homeowners should consider how long they intend to stay in the home and be aware of the cost of the improvements and how they will impact the home’s market value and potential resale value.

In this instance homeowners are encouraged to think in terms of getting value through enjoyment of the project, not exclusively through the increase in their homes value.

In short, if you’re planning to over-improve the home for yourself and your family, be cognizant of how long you’re planning to stay in the home.

Short-Timers Should Keep it As-Is

If you just bought the house of your dreams and you’re planning to stay there for the next 10-20 years, do it and fully enjoy it. However, if you’re planning to move in the next three to five years, bite your tongue and bide your time.

Again over-improving can be OK, if you plan on staying there, or “you don’t care if you get it back when you sell.”

Big Improvements Don’t Always Yield Big Returns

There’s one in every neighborhood: the owner who is convinced if he adds enough granite, hardwood and molding to his modest house, he can get palace prices when he sells.

While an appraiser will consider the new kitchen and updated master bath and assign a premium to their valuation to account for these improvements, however, it will not be on a dollar to dollar basis. Appraisers will compare your home to those that have recently sold in the community with comparable square footage, and make adjustments to their opinion of value based on factors including the home’s condition and level of finish. Appraisers have to be able to support these adjustments and any premiums they assign and they will be extremely cautious and a bit hesitant to exceed the value range supported by homes in the community. If the subject property has been over-improved and is substantially superior to the neighboring properties, these surrounding properties will negatively impact the value of the subject. This is known as the Principle of Regression.

If you purchased a $325,000 house in a $400,000 neighborhood and you do $100,000 in renovations and additions you might have a $400,000 home however, an appraiser is not going to give you a dollar for dollar $425,000 valuation.

While you might have done an outstanding job making desirable improvements to your home, listing the home at $500,000 would be unrealistic and a misguided strategy and the home is over-improved for the location.

We run into this all the time, and while over-improved homes often sell faster, they still DO NOT provide a 100% return on the money invested into them.

Even in the rooms that are renovated most often and which tend to provide the best returns on investment — kitchens and bathrooms — it is possible to over-improve. Save the million-dollar kitchen for a million-dollar home.

Good home improvement bets include:

Project Median Cost  Recoup in $
New Roofing $7,600 $8,000
Hardwood Flooring Refinish $2,500 $2,500
Insulation Upgrade $2,100 $2,000
New Wood Flooring $5,500 $5,000
New Garage Door $2,300 $2,000
New Vinyl Siding $12,000 $10,000

Here are some popular projects and their typical costs. But your REALTOR® will know what’s ultimately best in your neighborhood.

Project  Median Cost  Recoup in $ 
New Vinyl Windows $15,000 $12,000
New Fiber Cement Siding $19,100 $15,000
New Steel Front Door $2,000 $1,500
HVAC Replacement $7,000 $5,000
Basement Conversion to Living Area $36,000 $25,000
Kitchen Upgrade $30,000 $20,000
Complete Kitchen Renovation $60,000 $40,000
Attic Conversion to Living Area $65,000 $40,000
New Fiberglass Front Door $2,500 $1,500
Bathroom Renovation $26,000 $15,000
New Wood Windows $26,000 $15,000
Closet Renovation $3,500 $2,000
New Master Suite $112,500 $60,000
Add New Bathroom $50,000 $26,000

Over-Improving Scares Buyers

You’ve done it all: turned that master bedroom into a haven for relaxation with an lavish en suite bath with heated floors and a steam shower, finished the basement to include a full bar and a state of the art theater room, and added a fully equipped outdoor kitchen. Or maybe you upgraded the kitchen to include top of the line cabinets, professional grade appliances and premium grade granite counters.

If your house is the most expensive home in the neighborhood (based on its size), that scares buyers. Buyers are apprehensive about buying the most expensive house on the street and most buyer’s agents are hesitant to sell it to them!

If your improvements put you at, or over the highest prices in the neighborhood, you’ll have a hard time at resale.

Too Little Yard

While more square footage often equals higher home value, pay attention to how an addition affects the yard.

Stand on the sidewalk and look at the other houses, is what you’re planning consistent with the scale of the other houses?

The size of the yard is a major factor for buyers, and if the house crowds the yard, for many buyers it simply doesn’t matter how upgraded the inside is.

Time to trade up?

One of the most financially dangerous over-improvements is outsized additions that are either too big for the neighborhood or too large for the lot.

While a kitchen/family room combo is a great idea, there is a point where it’s better to sell and trade up.

Count the Bedrooms

It’s not always the major renovations that cause problems at resale. One thing to watch: the number of bedrooms, relative to the rest of the neighborhood. If you have four or fewer bedrooms, then converting one into a walk-in closet or taking that space to add on to an adjoining room could make your house worth significantly less when you sell.

Keep enough bedrooms

Demographically, Americans are having fewer children, for the most part, buyers don’t need these six- and seven-bedroom houses anymore and depending on the price point a 4 bedroom home is enough for the vast majority of buyers.

It would be wise for homeowners to keep at least four bedrooms. If you want to style any of them as hobby rooms or man caves, that’s fine, just avoid changes that require actual renovations — like knocking out or moving walls.

Renovation = Personalization

You want a swimming pool. The next buyer? Not so much. With every renovation you make, you personalize your house and customize it for your own use. And that’s one more reason to improve — and over-improve — for yourself alone. Special amenities that you consider an upgrade may not have any value for the next buyer and in fact they may even have a negative impact. Some will see your sparkling pool as luxurious, even glamorous. Others will view it as a maintenance hassle and a liability.

And it’s not just pools… the same often goes for elaborate landscaping, or top-of-the-line kitchen appliances. (Price point does play a major factor here and what a buyer will desire and expect.)

Tread carefully when your home is already one of the most expensive in the neighborhood. That’s the time to look at improvements strictly through the lens of what they do for you.

You Are What You Improve

Again whether or not you over-improve is relative. If remodeling is a lifestyle choice rather than an investment decision, you can stretch. If you have no intention of moving, then over-improve to your heart’s delight. If it puts a smile on your face, if it makes you happy, then it’s not money… it’s quality of life.

If you’re planning to sell in the next three to five years? Keep your improvements neutral, with an eye to resale. In this instance the best home improvements are deferred maintenance issues – replacing a roof that is beyond its life as well as cosmetics – painting, carpeting, minor kitchen and bath re-dos, and only those alterations and additions that brings your home in-line with others in the neighborhood.

If you, or someone you know is considering Buying or Selling a Home in Columbus, Ohio please contact The Opland Group. We offer professional real estate advice and look forward to helping you achieve your real estate goals!

The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Hilliard 43026 Lewis Center 43035 New Albany 43054 Pickerington Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235

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