I met with 2 groups last week, one a potential Seller and the other a Buyer I had been working with. After meeting with them, I reflected on how different the two experiences were when it came to valuing Real Estate.
The first was a Buyer who I had been working with for the past 6 months. We ended up offering on 4 different properties, only to be outbid on the first 3. The 4th home was the winner with the Buyer securing his dream home.
The second experience was with a potential Seller who invited me in to price out his property. This would help to get a baseline on what it was worth as he was also looking for a home. He needed a complete picture of his financial situation to make a buying decision.
The Buyer who bought the property last week had a home inspection done as part of his agreement resulting in a near perfect report. The inspector identified the work the Seller had done to the property and included in his report how much of the “working parts” of the home were almost new. During the inspection we chatted about how upgrades that are not “exciting” are most of what an inspector takes notice of. This home had had the shingles done recently along with windows, furnace, central air unit, baths, flooring, paint and work done to the electrical system. The only issues that arose were more related to the Buyer and their lifestyle. He knew that the kitchen needed to be renovated, the floor trim updated and work done in the garage to make it into a work at home space. We discussed how these improvements would make the home a 10 for the Buyer, and how much he would enjoy them over the next few years. The improvements that had been done by the Seller cost in excess of $75,000 and we were excited that the only money needed to be spent on the home would be by choice not by necessity.
Now the second home we viewed was for a potential Seller. This home was stunning. Literally everything had been, not only renovated, but dramatically overimproved. To give the reader a sense, the backsplash tile was in excess of $5,000! Shingles, windows, engineered hardwood flooring, custom solid wood interior doors, a stunning new kitchen plus a 2nd kitchen in the basement, a home theatre room, (in excess of $75,000) and an addition on the front façade creating a new roofline, verandah and stone floor. Literally hundreds of thousands of dollars were spent in upgrades.
Where the two experiences merge, is around the idea, “invest vs improve.”
In the first example, the Seller did the improvements that needed to be done such as HVAC system upgrades, windows and shingles. When the Buyer took this into consideration, he felt that the home only needed a few items to make it his own. The investments the Seller made helped not only to increase the price but helped the home to sell quickly for top dollar as set by recently sold homes in the area. The second example left me to question if the Seller could recoup the money he had invested in the property. The neighboring properties were selling in the $1,000,000 – $1,200,000, meaning that this seller would need to sell in the $1,400,000 – $1,500,000 to recoup his upgrades. Personally, I was impressed by the improvements, but I felt it may be a challenge to find a Buyer who feels that this “unicorn” is worth hundreds of thousands of dollars more than the average homes in the area.
What the first example shows is that by making the right investments, homes tend to sell for the highest prices allowing the Buyer to add their own personal touches. The second example would indicate that the goal would be to find a Buyer who believed that the investments made to improve the property were investments they would have made themselves, and this would limit the number of Buyers that may be interested.
Homes tend to sell in a tight range of value based on other homes in the same area and when a home is overimproved, it is challenging to find someone willing to pay above market prices.
My advice has always been that if you are planning on investing in your property for a future sale do your homework. Consult with a full time local, experienced realtor to have a conversation about what will help with value and what items are best avoided. Here is a short list of things that will and may not help with value.
Upgrades that pay for themselves:
· Shingles, windows, HVAC systems.
· Removing walls to open small spaces.
· Kitchen upgrades. (It is not necessary to replace the entire kitchen, some smaller upgrades may include hardware, quartz counters, backsplash and new appliances.)
· Bathroom upgrades.
· Paint.
· Exterior decking upgrades.
· Front door systems.
· Upgrading older pot lights to LED lighting.
Upgrades that Buyers may not see value in:
· Repaving driveways.
· Expensive solid wood interior doors.
· Expensive porcelain floor tiles.
· Above ground pools.
· Overdone landscaping.
· Engineered hardwood flooring. (Instead of reasonably priced flooring.)
· The trend of stand-alone bathtubs.
When a Seller is planning a move and pondering what upgrades will help increase the value or help the home sell faster it is always best to consult with a professional. I have been in so many homes where the homeowner did work they felt would help sell the home and in the end the Buyer ended up with upgrades that they really didn’t have to pay for.
If you have any questions about improvements that will pay off when selling I can be reached at lindsay@buyselllove.ca or 905-431-5744Connect with us on Facebook, Instagram, LinkedIn and YouTube.