So what constitutes value and is associated with a higher price? Steve Roake of McColly Real Estate provides a very clear explanation of the distinction between value-added features in a home and those that ultimately make that home more likely to be sold than competing properties.
Separating "VALUE" From "SALEABILITY"
An error commonly made by sellers when pricing their homes is that they fail to distinguish value from saleability. The value of a home references the factors related to the property to cause it to be worth more or less than other properties. Saleability references the factors related to the property that cause it to be more or less salable than the competition.
Some factors that create value are : Location, Location, Location. If you're in a more desirable location, you'll get more money than a similar house in a less desirable location. Examples of more desirable locations would be lake front, wooded or park view lots. Less desirable would be homes that back up to the sewage treatment plant, a busy highway or the ugliest house on the block.
The number of bedrooms and baths, square footage of living area, a basement (whether finished or unfinished) and garage size are examples of amenities that will get a seller more money for than other properties that are lacking in those areas. Generally, more is better. Except in the case of cockroaches, weeds and repairs that need to be done.
Many sellers incorrectly believe that components of a house may add value. A new roof is a good example. The seller believes that because they just spent $8500 on a new roof that the home will be worth more, but this is not the case. It will make the home more salable, but it adds little value, if any. Why is this? Because buyers expect homes to have a roof in good condition. If the roof is in poor condition, the buyer will de-value the home because they anticipate having that expenditure in the near future, but they will not add value because it is new.
This would also apply to updating a kitchen, bathroom, carpeting, new furnace or hot water heater. Buyers expect these items to be functional. They make the home more salable. Some appraisers I've spoken to add only 40% of the cost of additions to the home such as for a fence or finished basement.
"My house has all these upgrades! We have six panel doors, extra plush carpeting and top notch appliances." So sorry you paid more for these features when the home was built, but its unlikely you'll recoup the extra cost when you sell. You might get a little more than your neighbors who don't have these features, but primarily, it just makes the home more salable.
One caveat: if you're in an area where all your competition has those benefits, you should, too. That's what buyers expect in homes in that area. If you have six panel doors, but most homes in your area don't, buyers will not pay you much more, because it's not an expectation.
So when determining your asking price, make a list of all the features and benefits that your home has to offer. Then, consult with your agent to determine if those features/benefits add value or make the home more salable. It will save you from having to make a series of price reductions later.
Tim McColly contributed to this post.
Steve Roake is a Broker for McColly Real Estate in Shorewood, IL. Steve serves the real estate needs of buyers and sellers in Shorewood, Plainfield, Joliet, Crest Hill, Romeoville, Bolingbrook, Oswego, Minooka, New Lenox, Manhattan and NW Will County.
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