Home improvements and home sale price question

[Monkeyleg]

As we get ready to make our move next year, I'm finally getting around to all of the projects I've been ignoring for years.

We had the garage and all wood trim on the house painted last year. We also put a new roof on the house, and had the main bathroom remodeled with good quality (the good stuff from Kohler) sink, toilet and fixtures.

This year we're having interior drain tile installed in the basement along with a sump pump, to eliminate water problems, which are very common in the southern part of Milwaukee county because of the heavy clay content. We're also going to have a new high-efficiency furnace put in, as well as a new air conditioning system.

We remodeled the downstairs bathroom 10 or so years ago, and did some improvements on the kitchen (flooring, range, sink, countertop, etc). I may put replace the built-in oven, and will try to afford a new countertop.

The chimney has needed repair for years, and I'm finally having a mason come out and tear it down to the roofline and rebuild it.

Thanks to my brother in law, I've had and will be getting real deals on a lot of this. The basement drain tile and sump pump is a $10,000 job, but I'm getting it for $4000. The furnace and A/C would also be about $10K, but I'll be getting it for $4500. The bathroom would have been about $7500, but I got it for $5000. The roof was $4000 (cash), and the chimney will be $950 cash instead of the $3500 I was quoted by many masonry companies. Taken together, all of the stuff I've had done or will be having done would be the equivalent of about $30,000 to $35,000.

We had our house appraised last year for a refinance, and that was before any of this was done. I'm assuming that the appraised value of the house took into account the crumbling chimney, old crummy bathroom, bad roof, old furnace and A/C, damp basement, etc.

My question for those who know about such things is this: will these improvements increase the value of the house, will they just make the house easier to sell, neither, or both?

[CNYCacher]

They will likely increase the value of the home, but not by that much.  Ease of sale will probably be increased.

[Balog]

Material improvements should increase value.

[Brad Johnson]

My question for those who know about such things is this: will these improvements increase the value of the house, will they just make the house easier to sell, neither, or both?

Market value is market value.  Your improvements will make the house more saleable, and at a premium, within the market value range for comparable homes.  Pushing your home beyond the premium market value expectation would require adding sq footage or making huge improvements that could be reflected in an analysis of comparable properties (i.e. adding a shop).

Example, the value for comparable homes in your market range:

Low: $100,000 (liveable but with no cosmetic or mechanical updates)

High: $140,000 (100% mechanically and cosmetically updated).

If your home is in average condition (some mechanical and costmetic updates) the market expectation would be roughly $120,000.  Put $50k into paint, carpet, roofing, and new appliances.  Now you have a $140,000 house with fresh paint, new carpet, a nice roof, and a nice stove.

A lot of people fall into the "over-improvement" trap.  They watch too much HGTV and figure they'll get a dollar-for-dollar return on everything they do.  That isn't the case.  You can improve a home to the point where you have more in it than the market will bear.  By that I mean that a $15,000 Viking range in a $50,000 mobile home does not up the value on a dollar for dollar basis.  All it does is make it a mobile home with a really nice stove.

Improvements for saleability should always be made with the market demands in mind.  If the market says a home like yours in premium condition would be $140k, and your home's current condition puts it at $120k, then your improvement budget should be no more than the $20k difference.  And those improvement should be made strategically, beginning with mechanical issues and continuing with the most visible cosmetic items.  In other words, make sure everything works, and works properly, then hit the big cosmetic stuff like paint, carpet, and fixtures.  Don't forget to use products that are in line both aesthetically and financially with comparable homes in your market.

Brad

[never_retreat]

Just don't over no it. The roof it a good thing to do, the furnace maybe not as much especial if the old one was working.
Don't waste money painting and carpeting because most people will do it again to suit there tastes. Things like that can waste serious money. But it you do have a room that is a god awful color than by all means paint it something neutral.
Clean up the lawn and landscaping but don't spend a mint planting shrubs and stuff.
Get the idea.

[Monkeyleg]

Thanks for the replies. We have one of the smallest homes in the neighborhood, so we're not constrained by what the market will bear as far as home prices go.

All of the things we're fixing are things an inspector (or any buyer who knows anything about houses) would see as problematic. I'm surprised the furnace made it through this past winter.

I don't think the housing market will recover by next spring, so I figure we need to have a house that's as problem-free as possible. We may only get one or two chances to snag a buyer and I don't want anything to mess things up.

[CNYCacher]

The furnace in the home we bought last year was 40 years old.  We asked them to replace it as part of the purchase offer.  They refused.  We bought it anyway.  It's still running.  Meh.

Maintenance things like a new roof or new furnace cost X but you don't get X back on the sale.  Why would you?  All the other houses have working roofs with some sort of usable life left.  If the other houses had NO roof, then maybe you could get back a majority of the cost of a new roof on the sale, but the average house for sale has an average roof already.

[Balog]

So his sale plan is to be nothing special, to offer nothing that would entice a buyer? In a down market that seems a poor strategy. No repairs and no sale is a hell of a lot less payback than X in repairs and a sale.

[Monkeyleg]

There's a lot to be said for a house that's move-in ready, which is what we intend to have. There's only two things beyond what I've mentioned that need to be done: upgrading to 100 amp or more service, and sanding the oak floors.

I'll try to find an electrician who can do the upgrade for as little as possible. Refinishing the floors is something that's hard to do with the house full of furniture, so I'll be prepared to offer to have that done as soon as we're out and before the buyer is in.

One concern of mine is that the Milwaukee market may not recover in value as quickly as areas we're looking at. If home prices in Huntsville, Alabama and Milwaukee remain depressed at about the same amount, then we're trading sideways. If Huntsville, for example, comes back stronger, then we'll get less house.

[HankB]

Essential repairs may be necessary for the house to sell at all; unless a buyer is Mr. Fixit, a bad roof or deteriorated exterior mortar is a turn-off for most people.

Beyond that, cleaning, painting, mowing the lawn, and (above all) "decluttering" are the most cost-effective actions to take.

[erictank]

Essential repairs may be necessary for the house to sell at all; unless a buyer is Mr. Fixit, a bad roof or deteriorated exterior mortar is a turn-off for most people.

Beyond that, cleaning, painting, mowing the lawn, and (above all) "decluttering" are the most cost-effective actions to take.

We actually consulted with a stager, who helps you figure out how to best set your home up for a quick sale at the highest price, before doing our work.  As a result, we did the few needed repairs, painted, and replaced most of the carpet and kitchen/entryway linoleum, and SERIOUSLY decluttered (probably over half our stuff is in storage now, including a bunch of our furniture - both my wife and I have a LOT of stuff), and are almost ready to go to market - should be this Friday.  I'll grant the possibility of bias, but our townhouse compares VERY favorably with most of the places we've looked at so far.

[alex_trebek]

I have been looking at houses lately with family members. I have noticed a lot of stupid stuff people have done to their homes. One of the important things to pick correctly is paint colors. Be sure to paint gender neutral that will enhance the room, and compensate for it's errors. If the room is dark, paint it a light color etc. You won't believe how many lavender rooms we have seen.

Check out the competition when it comes time to sell.

The high efficiency furnance will get the lucky buyer a tax rebate
 FYI.

What does your kitchen need? Might want to look at upgrades there.

I don't think you will get your money out of refinishing the hardwood floors; they are very expensive to have refinished, if memory serves. If they aren't that bad, the buyer might not even notice.

[41magsnub]

As I recall one of the best things you can do is get very good lighting in the kitchen if that is not the case already.  It is neither expensive or difficult to put in some track lighting to replace the single bulb fixture above the sink (assuming this is the case).  I did mine for whatever the lights cost (>$100 at home depot) and about 1 hr of work.