A Dollar Spent Doesn't Always Add a Dollar To Your Home's Value

Hi Bliz - You're right, and one of the very frequent conversations we have with clients involves whether to do improvements. I really like these because it gives us a way to stay involved with them, and prove our value, even when they're not buying or selling.

Some upgrades that the seller does can actually lose them a lot more than they spend.

You're so correct.  Also, the the owner who spent $50k in upgrades did this to what was grandma's house, and that included putting in ac and a 2010 kitchen, well, sure, it enhances the value of the home, but doesn't necessarily bring it even to market expectations.

I just worked with a buyer....it's the seller you spoke of who spend a bucketload of cash, and so vastly over-improved the home.  That's fine, since they expected to live there another 20-30+ years and they'd enjoy it.  But, life happened, they had to move, and the home barely appraised at the price we paid, which was less than asking and didn't even cover half of his upgrades.

Bill I so agree with you, I see homes that have spent $450k on crown molding....just as an example....clearly no return on the money $20k would have done the job, Endre

Excellent post on this subject! Sometimes I feel like I spend half my life telling sellers they don't get 100 cents back on the dollar spent. And that maintenance expenditures are not improvements; they are something a buyer expects. Right now I have a seller who keeps reminding that 8 years ago they spent several thousand dollars on window coverings--now out of style, not in great shape--and he still doesn't get that the buyer expects window coverings in a resale home.

Great points here, Bill.  Generally most improvements will add value, but return is usually lower than 100%.  kitchen improvements generally 70% and bathrooms 60%, just as examples. 

BTW, generally converting carpet to hardwood has very positive ROI..it's one of the few that does.  generally, 90% prefer hardwood.  they may like different colors, but that is easy to change.  One of the reasons kitchens only have 70% return is that you find there are so many different tastes on cabinets and granite (as well as flooring esp HW vs tile) so it's impossible to appeal to everybody.  Generally granite has 1:1 for return and appliances are usually somewhat positive.

Oh how many times I've had this conversation. Buyers tend to do this in reverse.  "Well, it needs a new kitchen and that will cost me $X.XX so I'll subtract that amount from the value to determine my offer."  It doesn't work that way! First of all, the market analysis I provide takes into account improvements needed. Secondly, you do not get a dollar for dollar value in your improvements.  

Folks in your service area would certainly be wise to call you before making any changes... Happy Day

I recently met with a homeowner who was thinking of tearing out her hardwood floors (sand & stain) and replacing them with engineered flooring. I tried to tell her the existing hardwoods had more value but she didn't want to deal with the mess of sanding and re-straining. I did mention the dustless method but I don't think she was buying it. That is a clear case where the money spent may not get the seller more money.

I preach this all the time to sellers!  One woman had a list of the plants she had added to the yard, and how much each one cost.  (Japanese Maple -- $30)  Presumably she wanted her money back on those too!  Sorry, not happening.