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Remodel or Not |
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For most of us, homes are not
only where we live, but also our single biggest investment. As a living
space, a home's design and condition impact our lives day in and day
out. As an investment, we seek to preserve and enhance value in the
marketplace.
When considering remodeling and improvement projects, we must consider
both roles. In general, a well-maintained home yields better day-to-day
service and long-term financial returns. Taking care of repairs as they
arise makes sense, so problems are solved while still small, and the
home remains a safe and comfortable place in which to live.
Renovations, remodeling and other major home improvements are more
complex.
The best starting point is your own home improvement needs. How much
more do you think you will enjoy your home if you remodel or put in an
addition? How long do you think you'll stay in the house?
If you are planning to stay in the house ten years or more, most of
your decision should be made based on how much the enhancements will
improve your lifestyle.
If your length of stay is shorter, uncertain, or a contemplated project
is quite large, you have to pay more attention to the improvement's
impact on probable resale value.
While every real estate market is different, you probably already know
quite a bit about your area's real estate market simply because you
live there. With that knowledge and an understanding of the 5 D's of
remodeling, you should be in a position to sort out all the advice
you'll get from general contractors, neighbors, home magazines and
family members. The five D's are:
- Distance
- Deficiency
- Distinctiveness
- Demand
- Degree
Remodeling Factor #1: Distance
Distance,
or curb appeal, has to do with how well the property looks
from the street before a person gets out of a car and takes a closer
look. If someone doesn't have any interest at first glance, you'll
never get them inside.
Things that give your home
better curb appeal generally have a high
rate of return. Landscaping, the front entrance, and the condition of
the paint or siding are the biggest factors in curb appeal.
When it comes to landscaping,
nothing elaborate is necessary.
Well-trimmed foundation plantings, potted plants at the corners of the
front porch, a groomed lawn and mulched flower beds all contribute to
the house's appeal. Flowers certainly add to curb appeal, but it may be
better to add them at the last minute depending on seasonal
considerations.
The front entrance can be a
big draw and seems to play a large role in
curb appeal. The door should be in good shape with a fresh coat of
paint. New hardware can also upgrade its appearance. If the houses on
your street look alike, it might be worth adding more elaborate door
trim, flanking windows, and/or a sharp looking stoop or porch.
The paint should be in good
shape. Sometimes a thorough washing can
freshen the look of paint or siding. Also, make sure the shutters are
in good shape and hung straight.
Remodeling Factor #2: Deficiency
Deficiency
has to do with whether or not your house is flawed compared
to nearby homes.
If you have one bath, for
example, and everyone else in the
neighborhood has three, adding a bath is likely to have a relatively
high return.
Obvious deficiencies
substantially reduce the value of the home. People
tend to lower the offering price by an amount greater than the actual
cost of the remodel or addition. Taking care of such problems not only
makes sense in terms of resale value, but also will make your stay in
the home more pleasant.
Remodeling Factor #3: Distinctiveness
Distinctiveness
is the one thing most people talk about. In fact, it's
what you and your realtor talk about when you describe the house to
others.
When people buy a house, they
tend to buy on emotion and then back up
the decision with rational considerations. A key to selling a house at
a good price is to get the buyer emotionally interested in the home.
Homes generally sell better if
they have two or three special or
distinctive features. A walk-in closet, a whirlpool bath, a fireplace,
attractive landscaping or a grand foyer can separate your home from the
crowd and stir interest for buyers. These special features become very
important in a competitive real estate market where a lot of similar
homes are on the market.
Remodeling Factor #4: Demand
While
the special features that make up distinctiveness are important,
they are of no help and can even lower the value if these features are
not widely in demand.
You may think a whirlpool in
the living room will give your home a
terrifically distinctive character, but if those looking to buy your
house don't see that as valuable, you may actually reduce the value of
your home by adding the feature.
Anything zany or out of
character with the neighborhood should be
avoided. For example, an ornate fireplace with a sculpted marble mantel
may add plenty of value in an upscale neighborhood of $500,000 homes.
But the same fireplace may be seen as difficult to clean and not energy
efficient in a working class neighborhood.
Limit improvements to those
for which there is documented demand.
Look at new model homes to
verify that features you're considering
adding are present in those homes. If the builders, with all their
market research and surveys, aren't including the feature, you can bet
that the market for it is limited.
Remodeling Factor #5: Degree
Remember
things need to be done by degrees. No matter what you do,
don't overdo it. If the front entrance is attractive already,
renovating it in a new color will rarely be worth the cost.
Whether enhancing how your
home looks from a distance, adding
distinctiveness, or addressing deficiencies, one can usually get a
fairly high rate of return up to some point. After that the rate of
return drops off markedly.
If your house is the only one
on the street with only one bath,
spending $4,000 on adding a new bath might yield a return of $6,000 to
$8,000 in terms of resale value. However, adding a bath that costs
$15,000 may also yield an increased value of only $6,000 to $8,000.
If the house already has a
number of special features, each added one
would have a relatively smaller impact on resale value.
The best resource for getting
more information on how various
improvements might affect resale value is a real estate professional
who knows the market in your neighborhood. Discuss the five D's with
them, and you should come away with a pretty good idea of where you
stand.
Just keep in mind that only you can determine what the improvement
means in terms of your enjoyment of the house while you continue to
live there.
David
Hollies is a remodeling industry educator and consultant. He is also
the founder of Washington D.C.-based Home Connections, Inc.
As a member of the Beaverhead County MLS,
we can work with you on buying or selling any property in the area.
Note:
All information is from reliable sources but not guaranteed by Best of
the West Properties, Inc., seller, or agent. Offerings are
subject to error, omissions, prior sale, change or withdrawal without
notice, and approval of the purchase by owner. We urge
independent verification of each and every item submitted, to the
satisfaction of any prospective purchaser.
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