Yes, you can over-improve a house and lose value in the process

Randall C. Becker
Randall C. Becker
Published on March 9, 2020

It’s one thing to hope your house is the nicest on the block and another thing entirely to own the nicest home on the block. And, the latter isn’t what you should aim for when preparing the home to sell.

Sounds crazy, doesn’t it?

Not when you know how the market value of a home is determined. In a nutshell, your home is worth what a willing buyer will pay for it. Now, this isn’t necessarily what they offer you for the home.

The proof of what a buyer is willing to pay is what he or she actually pays. It’s what homes like yours have sold for in the recent past.

The reality is that if you make improvements to the home that bring the value to more than the neighborhood average, your home might not sell.

Would you pay $500,000 in a neighborhood of $200,000 homes?

Even individual rooms can be overimproved and return zilch on your investment

The two rooms Americans choose to renovate most often are the kitchen and bathroom. If you plan on joining them, ensure that you’re doing it for your enjoyment and not to add value to the home. Because, depending on the surrounding homes, it may not.

If you plan on moving soon, and the rooms need minimal work, go for it. Otherwise, “Save the million-dollar kitchen for a million-dollar home,” warns Katie Severance, co-author of “The Complete Idiot’s Guide to Selling Your Home.”

Even if you aren’t planning on moving in the near future, some renovations will haunt you when the time comes that you want or need to sell.

Take the couple who decided that a walk-in closet was more important than a bedroom. So, they converted the small bedroom adjacent to the master into the dream closet.

Which changed his home from four bedrooms to three in a neighborhood of four- and five-bedroom homes – a value killer.

The opposite holds true under certain conditions. Adding square footage would seem to be a good thing, right?

And, it typically is, unless you add a room so large that it eats up the backyard or unless that excess square footage figure swamps that of neighboring homes.

Call us before you make improvements

Before one hammer hits one nail, you should know the current market value of your home and that’s something we can help you with.

It’s a free service, and we offer it to you regardless of whether or not you plan on selling your home soon.

Once you’re clear on its present value, you’re better able to determine which improvements will give you the best return on your dollar and which might put you over the top when it comes time to sell.

If the improvements you want to make are for your own use, and you plan on staying in the home for the long-run, then go for it. If, on the other hand, you’re hoping to improve your home’s value, be careful. Remember:

The most expensive home in the neighborhood often intimidates homebuyers.

Maintaining your home is far more important than upgrading it. That said, if you’ve kept up the home and it needs cosmetic upgrades, we suggest making them.

 

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