How a home is fixed-up or improved can put thousands of dollars in a seller's pocket. Although it is clearly in the seller's best interest to fix-up a property before it is placed on the market, many sellers do not take the time to properly prepare their homes. This lack of preparation can only reduce a seller's bargaining position.
In preparing a home sellers should be guided by the maxim that buyers tend to seek the least expensive property in the most expensive neighborhood they can afford. If a seller's property is a subdivision of $60,000 homes, it would probably not be worthwhile to add a two-car garage at a cost of $10,000. From the buyer's perspective, the homes is still in a subdivision of $60,000 homes.
The fact that a $10,000 addition has been made to a home does not mean that it is an "improvement." The buyer, in the case above, may not want a two-car garage. Or, for the additional money, the buyer may be able to get a home with features considered more desirable. Most probably, the buyer will look at the additional cost and then consider a larger house or one in a "better" (read "more expensive") neighborhood.
Sellers should recognize there are bounds to the improvements which can be made. These bounds can best be identified by asking several questions.
First, is the improvement necessary? Suppose your dishwasher is in poor condition. Should it be replaced? Probably not. The buyer may be perfectly satisfied with it. If the buyer does complain, then the seller can always use the purchase of a new dishwasher, or credit for one, as a bargaining chip.
Second, is the improvement consistent with the neighborhood? Big improvements such as pools, garages, and additions may actually reduce the marketability of a home. Homes in a given area compete for a specific group of buyers who can be identified by the price range in which they are interested, the location they seek, and other factors. How will your home compete if you have to raise your price to pay for special features?
Third, can you get your money out? Seek improvements which create more value than cost. As an example, if there is a dead or dying tree in your yard it should be cut down. In this case there are two benefit - a source of potential buyer anxiety has been removed and a new asset, firewood, has been created.
Fourth, is the improvement ego-satisfying? Puce stripes in the living room may appeal to some buyers, but not many. Make improvements with the thought that you want first to satisfy the buyer, not yourself. This may require that you save favored decorating ideas for your next house.
Fifth, will the house sell more quickly as a result of the improvement? In some areas insulation, storm windows, central air-conditioning, and heat pumps are highly desired by many buyers. Would any of these, or other improvements, marketly raise the value or salability of your home?
Sixth, will the improvement limit your market? Of 100 potential buyers, how many will want an additional bedroom or a specific feature such as a pool? How many buyers will reject your home because a special feature is not particularly wanted or implies excess additional cost?
Perhaps the best improvements involve cleaning, fixing, painting, and repairing that which is already in your home. Anything else should be looked at with both care and eye toward the future marketability of your home.
Peter Miller teachers the course "How to Sell Your Own Home - With or Without a Broker" - through the Consumer Information Institute here.