Remodeling a home is a great way to add value to a property, but unfortunately, it is also a great way to dig a financial black hole. In order to avoid the pitfalls of pending money that will never be recovered, keep a simple rule in mind. Focus on renovations that someone else will value. A renovation is valuable only if it is valuable to someone who will buy the house.
Keeping the Right Potential Buyer in Mind
Focusing on a potential buyer means understanding who the house would appeal to in the first place. Is it a smaller home in a community of smaller homes? Then imagine a first time home buyer who is starting a family. A household with a new baby may value a fence around the yard more than a whirlpool bathtub. Although a stressed out new mom might disagree.
Considering the needs and values of a potential buyer can be a difficult challenge, but it is the most vital touchstone a renovator can have. Defining the potential buyer involves understanding the home, the neighborhood and the greater metropolitan area. Great healthcare facilities appeal to a different demographic than a great school district. The same difference can be seen between a ranch style house and a two-story colonial.
Kitchen and Landscaping Renovations
While it is difficult to generalize, there are two areas where renovations are always well spent. The first of these is the kitchen, where most homeowners spend the majority of their time. Following the same basic rule of focusing on the potential buyer is critically important when renovating a kitchen. It is one room where it is far too easy to spend more than is necessary, to increase the appeal of a house due to personal preferences.
Landscaping is the other place where renovation dollars are wisely spent. Landscaping adds to curb appeal, which is the all important first impression a potential buyer gets when they pull up to the house. Perfection is not the goal. A nicely maintained lawn punctuated with colorful flower beds expresses a pride of ownership that conveys value to a potential buyer.
Appropriate Renovations for the Property
Personal taste makes a house a home, but it does not necessarily add to resale value. Putting knick-knack shelves up as a type of crown molding might appeal to someone who collects Precious Moments or Disney princess figurines. Many buyers would just see another place that needs dusting. This rule is particularly true when considering wallpaper or wall borders.
The other significant mistake that is easy to make is to put amenities into a house that aren’t necessary. Although upgrades can increase the sale price, expensive bathroom fixtures or high-end kitchen counters and appliances are not always economically rewarding. The worst case scenario is to add features that make the home overpriced for the neighborhood, known as the proverbial “white elephant”.
Of course, there are exceptions to every rule, and every buyer is unique. However, it is a safer economical proposition to appeal to the greatest number of buyers. Renovations that will be valued by a crowd of buyers are more rewarding financially than those that are targeted toward a particular niche, such as model railroaders. After all, the time it takes to find a buyer is a factor in the economics of selling a home.
