Should Sellers Upgrade Their Kitchen and Baths Before Selling?

By
Real Estate Agent with Retired CA BRE# 01048160
https://activerain.com/droplet/4NlS

Should Sellers Upgrade Their Kitchen and Baths Before Selling?

Upgrading the Kitchen

In considering what a number of Buyers expect to find in the homes they want to purchase in 2016, it is often discussed that if Sellers would upgrade their Kitchens and Baths, they would more likely qualify for the higher prices they expect to receive on their property. Of course there is a catch to that, it will cost in the neighborhood of $40,000 to $50,000 to get their price. It would also be of interest that if you spend that much, maybe $25,000 to $30,000 actually goes to increase the home value. 

 

Upgraded Bathroom

Most home sellers don't fully understand why the entire outlay does not add to the home's value. The simple answer is in appraisal, a home has to have a Kitchen to be considered suitable for occupying. That means it has to have the basics that make up a Kitchen. A stove or cooktop, a sink and water supply, some cabinet space, etc. Just like a home needs a roof. The roof may have simple shingles or be a flat roof, it may not be upgraded to clay or cement tile, but there has to be a roof. In other words, upgrades that go beyond the basic definition of a Kitchen, is all that counts as increasing the capital value.

 

 

 

So why is it that upgraded Kitchen and Baths are so often recommended to Sellers wanting to obtain the highest price. Because Buyers are attracted to a home that has been professionally upgraded in the key areas of the kitchen and Baths. When showing homes that have been improved, you will also note that Buyers tend to be more accepting of other home features or lack there of that may not be a perfect fit. 

Yesterday, I had a call from a past client of 11 years ago and it is time to sell the home. I asked about improvements and then asked about the Kitchen and Baths. We will be meeting next week to determine if upgrading those areas specifically will greatly increase the overall desirability of the property and what the cost vrs value will be for the upgrading. I mentioned that I was just posting about this in my blog and and they reminded me why they would never consider anyone else to handle their property. 

 

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Rainmaker
3,961,712
Dorie Dillard CRS GRI ABR
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good morning William Johnson ,

I was so glad to see a post from you! You have indeed been missed!! Of course your past clients called you..you give logical and sound advice and they respect your years of experience and expertise! Great post..right on..professional kitchen and bath upgrades are attractive to buyers. They will often over look lack of other features if these areas are upgraded.

Jan 19, 2016 07:44 PM #16
Rainer
592,221
Sham Reddy CRS
H E R Realty, Dayton, OH - Dayton, OH
CRS

Great point:

Buyers are attracted to a home that has been professionally upgraded in the key areas of the kitchen and Baths

Jan 19, 2016 07:47 PM #17
Rainmaker
562,113
Women of Westchester Working Together
Women of Westchester Working Together - West Harrison, NY
Women helping Women get ahead

Yes, this is tricky business as you generally do not get your return on a full overhaul.  Actually, the main reason for this is that different people have different tastes and hence value things differently.  The kitchen is a perfect example - look at the diversity of colors and tastes in cabinets, countertops, floors, backsplashes.  If a new buyer spent their own money, they would get exactly what they want (and/or can afford) whereas a seller can never pick out what a potential buyer would want.

BTW, there are certain elements in the kitchen that you do get your money back.  The easiest one is upgrading appliances - usually a 1:1 return, while generating more appeal/selling faster.

Jan 19, 2016 08:25 PM #18
Rainmaker
279,636
Annette Thor
Connecticut Homes and Commercial Fairfield Cty,CT reinct.com - Westport, CT
Residential & Commercial Real Estate Broker in CT

Hi William, We all know if a buyer had to choose between two houses, all things being equal but one has an updated kitchen and bath, and the other not, the updated house almost always wins.

 

Jan 19, 2016 09:19 PM #19
Rainmaker
221,036
Richard and Jean Murphy
Harborview Properties - Portland, ME
(207) 712-4796

William, We have found that several of our buyer-clients specifically ask for properties that are in good condition and that DO NOT have updated kitchens and baths. They want to design those themselves. Interesting buyer perspective.

From the seller's standpoint, if they have the time and money to facilitate these changes and there is at least a break-even possibility, I believe the property would sell faster with the updates. Good post, thanks.

Jan 19, 2016 09:57 PM #20
Rainmaker
2,558,340
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Yes to doing this if one can do it...the results and the return will be there

Jan 19, 2016 10:39 PM #21
Rainmaker
2,004,737
Andrew Mooers | 207.532.6573
MOOERS REALTY - Houlton, ME
Northern Maine Real Estate-Aroostook County Broker

When you are in a small rural market with down close to the ground real estate property listing prices, ease up on the suggestion to tweak the bath or kitchen. The $20,000 and $30,000 buyer is not expecting granite and quartz counters in the kitchen, or two bathrooms per bedroom that other areas see as the market norm. Every real estate market hums and buzzs, purrs so so differently and the size of the price does matter. Less layers of players the lower you go on the real estate property listing price dial William Johnson !

Jan 19, 2016 11:19 PM #22
Rainmaker
680,205
Nicole Doty - Gilbert Real Estate Expert
Zion Realty - Gilbert, AZ
Broker/Owner of Zion Realty ZionRealtyAZ.com

My short answer is yes they should consider upgrading those areas only if they know they won't be outpricing themselves and throwing that money away. If the house is good enough to sell as is then clean it and stage it. 

Jan 19, 2016 11:24 PM #23
Rainmaker
2,887,096
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

William, Of course they would not consider anyone else to handle their property. You know the local market and you know the cost vs return.

Jan 19, 2016 11:29 PM #24
Rainer
19,886
Jeff Conway
Skyline Investment Realty - Spring Hill, FL
Real Estate / Property Management / Investments

William - great post!  Do you think there is a correlation between first time homebuyers & them needing/wanting updated kitchen & baths?  Or, is this a trend that EVERYONE looks for?  I can see the benefit of a house being move-in ready, but at the same time, it may not be to the buyer's taste!  I feel like this is completely dependent on the buyer!  

Jan 20, 2016 02:35 AM #25
Rainmaker
822,758
Maureen Bray Portland OR Home Stager ~ Room Solutions Staging
Room Solutions Staging, Portland OR - Portland, OR
"Staging Consultations that Sell Portland Homes"

Sometimes easy updates rather than full-on remodeling can work well to sell a home.  Kitchen cabinets can be painted, new hardware installed, wood floors refinished, new light fixtures hung, and for a very reasonable cost the seller would most likely get an excellent ROI.

Jan 20, 2016 03:33 AM #26
Rainmaker
1,131,357
Margaret Goss
Baird & Warner Real Estate - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

Although there is no doubt that buyers generally prefer a beautifully finished kitchen and baths, I don't always recommend that my clients do this.  

It depends on so many factors including the condition of the rest of the house, the available space, budget, and timing.  

Jan 20, 2016 07:18 AM #27
Rainer
262,478
James Bath
Gulf Shores Realty - Venice, FL
REALTOR® , AHWD® , SRES® ,e-PRO®

Very well written and thought out, William... It all depends, doesn't it?!?!

Jan 20, 2016 10:58 AM #28
Rainmaker
167,418
Dave Werth
WERTH REALTY - Fargo, ND
FULL TIME REALTOR

NO!!!  Spend the money on your new home !    ROI - run this one as a business answer and it usually comes out as NO.  Therefore..... no :-)

Jan 20, 2016 09:01 PM #29
Rainmaker
705,943
Richard Bazinet /MBA, CRS, ABR
West USA Realty - Scottsdale, AZ
Phoenix Scottsdale. Sellers, Buyers & Relocations

Great post William.  I do a lot of this. From my experience, the answer is.... it depends.

It depends on the added value equation, the condition of the property, competitive properties for sale and market conditions - a cost/benefit analysis. There are no general or universal rules.

In some cases, the $ used to remodel and renovate can fetch so many more $ in the sale. Case in point, my partner and I had a listed house in its original condition would sell for $800,000 or so. We suggested $45,000 of improvements, which were done, and we sold it for $1.1M. That was money in improvements well spent.

In some other cases, the remodeling and improvements cost more that the added-value on the sales price.

So the cost/benefit ratio has to be calculated and evaluated on a case-by-case basis.

Jan 20, 2016 10:48 PM #30
Rainmaker
196,628
Tina Parker
Keller Williams Select Realty - Bedford, NS
CNE, REDM, SRES, CSP Home Staging REALTOR, Halifax

We live in an extreme buyers market so competition is fierce. With borrowing money being so cheap, buyers want their homes updated and move-in ready so everything is included in the mortgage and not have to deal with the work involved and taking money out of their monthly budget to complete the work. In our case, the more work completed before listing, the better.

Jan 21, 2016 05:19 AM #31
Rainmaker
254,785
MaryBeth Mills Muldowney
TradeWinds Realty Group LLC - Braintree, MA
Massachusetts Broker Owner

I think when selling we need to look at the return on the investment on the kitchens and bath, will they recoup it - no one truly knows - will it sell faster and appeal to more buyers (maybe bringing a higher price) YES YES YES!

Jan 21, 2016 07:00 AM #32
Ambassador
4,254,070
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Wiliam

I think it depends on the current condition as well as what you actually do to it. I have seen some well-done upgrades to kithens and baths, and others that were so unique that they were almost more of a turnoff, and a buyer would have to spend money fixing it, on top of the premium the seller is asking becuase of all they did.

Will an updated mitchen and bath show better and be reflected in a better price? No doubt, but it sure isn't likely to be 100%

Jeff

Jan 21, 2016 02:30 PM #33
Ambassador
4,306,997
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

William Johnson - to an extent, the basic kitchen and bath which are 'functional' does not add any extra value to the house.

When it comes to added value for these upgrades, you are right - appraisers may not look at what extra it has to offer. However, in this market, good home does get multiple offers and possibly, some of the buyers are willing to let go some contingencies.

If the location is desirable, upgrades should add value - just my two cents.

Jan 21, 2016 02:59 PM #34
Rainmaker
775,902
Olga Simoncelli
Veritas Prime, LLC dba Veritas Prime Real Estate - New Fairfield, CT
CONSULTANT, Real Estate Services & Risk Management

Homes with updated kitchens and baths will certainly sell faster (if priced right), although the sellers may not get 100% on their investment. It's the time value of money.

Jan 21, 2016 08:20 PM #35
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