Friday, February 7, 2014

To Renovate or Not To Renovate?

One of the issues I am running into with my Louisville clients who want to upgrade but stay in the city is that they have nowhere to go - the low inventory keeping them from finding a replacement home is also keeping them from listing their own house and perpetuating - yes, the low inventory.  I am not above knocking on stranger's doors and asking them if they are willing to sell, and have created several letter-writing campaigns to ferret out dormant sellers.

At some point in the house search, potential buyers have to decide if it's worth it to keep going or stay where they are.  I always advise my clients to seriously consider their best alternative to the desired solution - if you can't find a new place, what are you really willing to live with instead?  I also give this advice when we are knee-deep in negotiations.  It's easy to get emotional and upset with the other side, sometimes digging into a position.  But if you're alternatives are worse than the offer on the table, it's important to revisit your goals and not cut off your nose to spite your face.

One solution to the low inventory is renovating a current property.  This can make your home meet your family's needs better, even temporarily, and also add sweat equity for when you can finally make that move.  Potential sellers always want to know which improvements will give the most bang for their buck - what makes their home more marketable, and which renovations actually recoup the most for their investment?

Check online or design books for current color trends.
At the inexpensive end, paint can make the biggest impact for the least cost.  While it won't add dollars to the price of the home, it will make it more attractive to buyers.  Replacing hardware on cabinets and doors is another small investment that refreshes the space and gives the impression that the house has been maintained and updated.  Spending a few bucks on the front landscaping is generally a good idea, as well.  Improving the curb appeal doesn't have to be expensive and is important for getting people in the door - they won't buy if they don't go in.

For bigger projects, the answer will depend to some degree on the specifics of the particular house - the location, the price range, the market trends.  For instance, if you have an older home that only has one bathroom, figuring out how to construct even another half bath is a smart investment; many people won't even bother to look at homes with only one bath.  But if you already have three bathrooms, adding a 5-piece luxury master bath may not be the best place to put your bucks.  

An expensive upgrade may be overkill
when a gas insert will do the trick.
There are some guidelines to help you decide which projects are worth tackling.  For a midrange home in the Denver metro area, the renovations that will give you the biggest return for your money are kitchen remodels, basement remodels, deck additions, window replacements and garage door replacements.  Generally speaking, these improvements will recoup 70% or more of their initial investment upon resale, not counting any energy savings that might be realized through replacing low-efficiency materials and appliances with high-efficiency ones.  Again, you need to do your research (or talk to your Realtor® who already has) to determine how far to take the renovation.  Do buyers in your neighborhood expect to see cherrywood floors, triple-glazed windows or media rooms?  You may choose to do these upgrades anyway because you like them, but it's good to know what to expect from the market.

Wood shake shingles are a red flag for buyers,
and some cities are already banning them.
Bathroom remodels, roof and siding replacement, garage additions and front door replacements fall into the next tier, usually recouping 55% or more.  Another consideration when deciding on your renovation priorities - is the current situation functional and adequate or broken and obsolete?  In other words, if the roof is at the end of it's life and buyers are going to request a new one anyway, you might as well get it done before it becomes an inspection and negotiation item.

Projects that are probably best avoided?  Anything too unique or custom that won't appeal to a larger audience.  Wine cellars and hot tubs may be an integral part of your lifestyle, but just as many people will rip them out as keep them when they move in.  Also, large room additions like master suites or family rooms generally prove too costly to pursue.  However, if the homes around you are popping the top and getting top-dollar for it, your home may be an exception to this rule of thumb.  If you'd like a professional contractor to give you estimates and advice on the projects you're considering, give me a shout; I've got several trustworthy recommendations I can give you.

I would love to help you with your real estate journey. 
Please contact me at 303-917-7143 or