Most of us have heard on our favorite DIY show that kitchen and baths are the best places to start, but did you know that a return on your investment (ROI) rides a very thin line with the point of diminishing returns on your money when choosing to go extreme “low end” or “high end” improvements?
This means that you can make improvements but about 80% of the time, moderate to medium upgrades will be the “sweet spot” for the biggest ROI. If you are in a neighborhood touting quartz counter tops and you have laminate…well, guess what, you have to get quartz to be competitive in that market. If you are in a market where the average home was built in the 1960’s, its time to get rid of the shag and install some new and fresh hardwood or Luxury Vinyl Plank (LVP) flooring. While most interior improvements only bring a ROI of about 60%-70%, refinishing or installing hardwoods brings a whopping 110% recovery costs!
According to the 2022 Remodeling Impact Report published by National Association of Realtors (NAR) and the National Association of Remodeling Industry (NARI), consumers’ “Joy Score” is higher when they freshen up the paint throughout the home, but the largest VALUE to a prospective buyer will be the flooring improvements.
The four main factors that play into your ROI when updating include: your home’s location; the current market conditions; your competition; and the time of year. Most homes are not capable of moving to a new location and market conditions are influenced by forces outside of your control. Odds are also good that you are not going to be able to influence who else lists their home for sale in the neighborhood or how their homes will appeal to buyers…So, let’s talk about timing.
If you plan on selling in the Spring market, then all hands on deck! This is the best market that provides the opportunity for the highest price with least days on market when inventory is low. In the Spring, there will be more competition but with a feeding frenzy of buyers, you can stand out with noticeable improvements and updating.
If you plan on selling in the Winter market, your pricing strategy needs to be very accurate and improvements move to interior focus. Buyers have a limited inventory to browse, so the negotiations may be geared more towards terms that you don’t see in a robust market like price, seller help, and inspection repair lists.
Sellers frequently confuse maintenance costs with cosmetic improvement costs. Replacing an HVAC system or roof that is at the end of their life expectancy does not count as upgrading like installing a high-end fridge or changing out carpet for hardwood. Sellers should anticipate systems replacement prior to selling so your out-of-pocket costs are more manageable when its time to actually sell your home. Spending tens of thousands of dollars just before going active then still being forced to negotiate on price, seller assistance, and other dollar-minimizing terms leaves a sting at the end of the transaction and a hole in your finances.
Buyers want both newer systems AND cosmetic upgrades. Younger and first-time buyers do not always appreciate the COST of a new roof or new HVAC system and will attach VALUE to less-costly finishes like paint color. A buyer will also guesstimate the VALUE of whatever it is that is missing, malfunctioning, or not the right color palette and then multiply that number X10 to accurately determine how much to reduce their offer price.
As a seller, you must manage your COSTS VS. VALUE in advance of selling! Have a plan and don’t let maintenance get away from you. Don’t forget to consider the COST relative to your NET PROCEEDS and consider the VALUE of making updates to reduce your days on market. A relatively small investment can make a huge difference in getting to the settlement table!
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