As empty nester baby boomers, my husband and I are updating to sell and downsize next year. Hopefully. Maybe. Between the arguments and the costs to update to get the best bang for our buck, the process has been….slow…to say the least. We want to be “on trend” but are starting to hate the home improvement television shows because they make it look easy and affordable.
Are you going through the same process?
As a responsible Realtor, I have an appraiser on speed dial. He has been in the business about 30 years and I am here to tell you that it seems “the business” changes its parameters every year. Because my husband and I have flipped several homes and I want to give my clients the best advice I can, I regularly take classes given by mortgage underwriters or appraisers.
What an eye opener those classes are — but they can be a real downers.
For instance, three years ago, an appraiser told me that a finished basement in the neighborhood where I was pricing a listing would get a $10k credit, but a finished walkout basement would get a credit of $15k. It also did not matter if the owner paid $20k to finish it or $40k. Why?
Now, I have seen homes with finished basements get $40k more on their sales price over homes in the same neighborhood without finished basements. This is called market price, or what buyers are willing to pay. I do not recommend finishing the basement to sell because that is a very costly endeavor, and if done, the ROI may be, at the highest, about 70-75 cents on the dollar.
When viewing finished basement homes, an appraiser can allocate small dollar amounts towards what people have included. If the homeowner put in a bedroom, it must have at least a 7 foot long wall, rescue door or window, and a closet to be considered a bedroom (Michigan). An appraiser can give the seller about $10-$15 per square foot credit, but do not look for it in the actual appraisal because appraisers rarely do it. A basement bedroom cannot be in the above ground house bedroom count, but the listing agent can say “basement has an additional 4th bedroom” on the sales verbiage to attract more buyers. (Michigan)
Most buyers in my market want a bathroom in a finished basement. Best bet is to install a full bath in case future buyers’ family members will spend time living there – which is a latest trend – extended families in one home. Buyers will also look for kitchenette bars.
Which is worth more money, a 3 or 4 bedroom house of the same square footage in the same neighborhood? They are the same in an appraisal value, but a buyer may pay a higher price for a 4 bedroom. Years ago, the extra bedroom could get a higher appraised value. Recently, I have seen many 2 bedroom homes getting the same market price as 3 bedroom homes, whereas the price was less for them years ago – a perk of the extreme sellers’ market that we have now.
An appraiser will not give a higher dollar value to wood floors over carpet or laminate, but buyers will. Same with granite counter tops. If you put in the nicer upgrades, you will generally draw more buyers who are willing to pay a higher price.
Roof replacement – yes, if it only has about 5 or less years left on it. Generally, old roofs are single dimensional and are easily spotted in neighborhoods that have already gone to 3D. Buyers notice this immediately. An inspector will tell the buyer that the roof only has a max of 5 years left on it which may affect buyer purchase decision. Sellers will get a high ROI from a new roof install, but an even greater hit in reduced buyer price if not. Realtors have stories about how many times they did not get good offers on a house because buyers were turned off by old roofs.
Luxury home buyers want updated tile in baths and kitchens. The 4×4 tile that the builder installed in the bathrooms is out. That subway tile seen on TV is not a show stopper in my market, but the latest designer ceramic and porcelain styles are. Porcelain is usually less expensive than ceramic and I put it into my own master bath. (I admit I saw the long, grey tile on two home improvement shows and I like it.)
Why did X house sell for $300k and Y house of the same size in the same neighborhood sell for $225k? The Y house either backed to a busy road, was not updated after 20 years, had bold paint colors in every room, had what is called functional obsolesce (ie no bathrooms on the same floor as the bedrooms), or economic obsolesce (ie yard faces the back of a grocery store). There are many reasons why one house sells higher than another.
Today’s buyers are “HGTV trained” and may not be able to afford out of pocket upgrades. They may look for a home that already has what they want, even if they need to pay a higher price.
The latest trends may be gone in ten years. When considering updates to sell, ask a local Realtor what trends are the hottest, then do the most affordable for your budget. We see what sells the fastest for the most money every day in our markets, and the TV home shows aren’t always applicable. Ship lap? I recently saw a new home buyer rip out all of the ship lap put in a home only a few years earlier.
Finally, buyers love the smell and sight of fresh, neutral, satin paint. It’s like an attraction hormone or something.
Wells, that’s my two-cents. Good luck! I can’t wait to see what you have done!
Ruth Berklich is a Buy/Sell Realtor with Keller Williams, Rochester, MI. She can be reached at (248) 609-8000 or email@example.com