Most homeowners find satisfaction in making improvements to their home. But, sadly, not all upgrades will pay off. There is a risk of over-improving a property, which is when an owner puts more money into a home than they can get out of it once they sell.
The reason being? Improvements are only a portion of a home’s value. Other factors come into play, like location, square footage and nearby comparables. If you undertake a massive renovation and outfit your home with high-end finishes, but are located in a less-desired neighbourhood, you may not be able to recoup your costs if you do decide to sell.
There are ways to avoid over-improving your home. Here are five tips to consider:
1. Consider longevity
If you are making updates to your forever home or you don’t have plans to move for several years, over-improving isn’t as much of a concern. However, if your timeline is shorter and your current home is a launching pad for your next place, be very careful in what upgrades you make. If your choices are too extravagant or lavish, you might not be able to recoup your costs. You also want to avoid updates that are overly trendy because they may not resonate with buyers.
2. Look at comparable properties
A comparable is a tool used in real estate to determine a home’s value and list price. It looks at homes that are the same size, condition and location within your neighbourhood. Before improving your property, have a realtor run comparables to know the market value of your home as well as the market outlook for your area. A realtor can also provide advice on upgrades and improvements and whether or not they will increase your value.
3. Choose the right finishes
Exotic hardwoods, high-end marble countertops and imported wallpapers are appealing, but they may not attract a wide range of buyers. Optimize upgrades by choosing finishes that won’t over-improve your home and price-out potential buyers. Less-expensive materials can still achieve the look you want, but for less.
4. Focus on value increasing upgrades
Heed the advice of your realtor and complete the upgrades that they deem worthwhile for your home. A modest kitchen or bathroom renovation will likely provide a good return on investment, as well as other sensible upgrades, like energy-efficient windows or a new roof.
5. Avoid buying an overpriced home
If you overpay for a home in the first place, you’re unlikely to come out ahead after making extensive improvements. Always consult with an experienced real estate sales representative when buying a home. The ideal situation is to buy at or below a home’s worth so you can make the right improvements and sell for top dollar.
Final Thoughts
Always do your homework before committing to any major upgrades. Pay close attention to your local market and study comparables in your neighbourhood so that you don’t over-improve to your detriment.
Have questions or are considering a renovation? Please contact me, Deborah Clerk, Real Estate Sales Representative and ASA at Keller Williams Realty Solutions, Brokerage, in Mississauga, Ontario, to learn more about improvements that will add value to your home.
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