So often when I go to list a home, folks ask me what they should do to improve their sales price. The answer seems to be ever changing. It used to be that you could equate almost every dollar spent on a renovation as money right back into your pocket and then some. Take for example a kitchen rehab. Years back you could spend $25,000 on a redo and then turn around and list your home $35,000 higher or similar. Today, things are very different. I know this because I went through it. Let me preface my following comments with the fact that I am not an attorney and don’t pretend to know the full terms of the Frank /Dodd act, but I am paraphrasing what was told to me by a trusted appraiser. I was looking to refinance my home and had recently completed a pretty big remodel of not only the kitchen, but everything else that the tile floor covered. By my calculations, I added substantial value to the home and the refinance appraisal should have been a piece of cake It was not. I was prepared too for the appraiser. I had my receipts and before and after photos to justify the price increase. Believe it or not, I barely made the value I needed to refinance. At first I was angry. How could I only gain a small percentage of my investment back? Instead of wondering, I took to task one of my trusted appraiser advisors. Here is what I learned. New requirements for determining value prohibit appraisers from giving full value for updates to homes. There are also different classifications for homes. You have C1,C2,and C3. The first is new construction and it carries the most weight and has best value. The second, C2 is for a recent remodel, say within the last three years and has limited value (like my situation) and the third is basically as-is when first built. Another common mistake many agents and sellers make is adjustments for square footage. Many think if their neighbor sold at say $100 a square foot, that their home should sell exactly the same and they multiply their square footage by the price sold per square foot. NOT TRUE! The appraiser has an equation for figuring out what to multiply the square footage difference by to make the price adjustment. In my neighborhood, that amount is $35 a square foot. If I was making a square footage adjustment, I’d multiply the difference x $35 to get the adjustment value, and you don’t make adjustments for both square footage AND a bedroom or bath. I could go on, but you get the idea and I don’t have that much space! There are numerous right and wrong ways to price homes. So what does all of this mean? Well, it means be cautious when getting your house ready to sell. Don’t assume that every little thing you do will give you more value in an appraisal situation. Don’t get me wrong….cleaning up and adding a little here and there is a good thing, just don’t overdo it. Also, it bears saying that not all home purchases are financed and some buyers when paying cash are willing to pay more for what they like. It’s a game for sure! Keep in mind the bottom line. My advice is to keep it simple unless you really don’t have a choice. At the end of the day, don’t let this information keep you from being happy in your home. I built my kitchen to be a place I enjoy and understood on some level that I was not going to get all of the value back. We still need to keep on living! As always, give me a call if you would like to chat about what I have shared! 321-293-2240.
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