When we put time and money into projects, there’s a tendency for us as humans to overvalue their worth. That’s usually the case when homeowners invest in renovations.
According to a Bloomberg News study cited by KGUN9.com, kitchen renovations return less than they did 10 years ago. Why? Potential homeowners have higher expectations now than they did before. Stainless steel appliances, for example, aren’t so much a luxury anymore, but more of a standard.
We wanted to understand how home sellers in several parts of Metro Atlanta have invested in their properties, and if their expectations are on par with buyers’ standards. We pulled FMLS data from four different transactions that occurred in the first quarter of 2017, and came up with these key takeaways. Check it out.
Case study: Acworth
The home we analyzed in Acworth, Ga. was purchased for $160,000 in October 2014, when homes within a two-mile radius were selling for just 1.9% less. This transaction was on par with market values.
In the two years of owning the property, the owners put a lot of work into it. According to records, the home was listed in January, and described as being in “excellent condition” with “fresh paint, newer flooring, updated kitchen, newer granite,” and more.
The original asking price was $209,900, and within a mere three days, they accepted an offer of $202,000.
Although the sellers accepted an offer nearly 4% less than the asking price, this home still sold for significantly more than nearby homes. In January 2017, the median price for homes sold within a two-mile radius had risen steadily to $185,000. While these sellers only paid 1.9% more than their neighbors in 2014, they were able to sell the house in January for 22.8% more.
Even if they hadn’t sold it for that much more than nearby homes, it’s worth noting that this family still enjoyed the benefits of owning a home with renovated features, which counts for a lot.
Takeaway: When nearby home values are steadily increasing, your upgrades will pay off.
Case study: Stone Mountain
Dekalb is bustling with new construction, with the majority of January home sales falling into that category. This Stone Mountain transaction was an interesting find.
Records show that the last sale of this particular home occurred in 2005 for a whopping $291,500. Now, our data doesn’t go back that far, but the median price for all Stone Mountain homes sold in 2016 was only $116,600, so paying $291,500 for a property in this area in 2005 was a big deal.
The owners decided to sell this home in December 2016, and it was described by the agent as a “lovely renovated home” with “new carpet throughout.” Sounds great, right?
Well, those upgrades were not enough for sellers. The house was listed in December for $239,000 and remained on market for 32 days before receiving an offer of $229,000. It is safe to say that the sellers lost a significant amount of money on this house, as it sold for 21% less than what they paid in 2005.
With the exception of new carpeting, we aren’t exactly sure what else made the property a “lovely renovated home.” There’s a chance that the buyers may have had to invest in a new roof or another costly upgrade. Either way, because the value of neighboring homes did not increase significantly, those renovations weren’t going to play a big role in increasing the property’s price.
Takeaway: If values of nearby homes are not increasing, there’s a good chance minimal upgrades will not significantly raise the value of your home.
Case study: Gainesville
One would think that someone selling a relatively new home would give the owners some leverage. They would probably only need to invest in minor upgrades, such as carpeting and a fresh coat of paint to get a good return on their home.
This case study proves this theory.
This property in Gainesville was built in 2014 and sold that same year for $260,000 – that’s 47% more than what nearby homes were going for at the time. The owners of the home decided to sell in September 2016, and originally listed the house for $289,000.
There were no indications in the description or the photos that any upgrades had been done. In fact, some of the photos we saw gave way to the idea that property was in need of new carpeting.
This became evident to the sellers as 30 days, then 60 days went by without a sale. After reducing the price, the owners finally received an offer of $272,500 in January 2017, which they accepted. At this point, this home sold for only 13.8% more than the median price of neighboring homes.
There was an opportunity here for the sellers to invest in fresh paint, carpeting and other small repairs in order to maximize their return on this “like-new” property. They didn’t, and likely took a small hit.
Takeaway: Don’t underestimate the power of fresh paint and new carpeting – even if the home you are selling is relatively new.
Case study: Roswell
In May 2008, this home was purchased for $225,000 – that’s 29% more than the median price of nearby homes at the time.
When the property went up for sale again in September 2016, the description included all of the amazing upgrades the owners had made, which are often considered desirable. Upgraded kitchen appliances, as well as upgraded bathrooms with new cabinets were noted.
Originally, the home was listed for $299,000 – which was probably a fair price to the sellers, given the renovations they had made to the home. Buyers were not seeing eye-to-eye with the owners, which was evident as the price had to be reduced four times. The property finally sold in February—145 days later—for $276,000.
It’s clear that the sellers overestimated the value of their upgrades, and buyers did not see the worth.
Takeaway: Overestimating the value of your upgrades will ultimately hinder your property’s sale.
Should you upgrade?
If you’re thinking about investing in a new kitchen or a new bathroom, go for it — especially if the elements are dated. It is important, however, to tailor your expectations, when you decide to put the house on the market. Unless you are investing in a specialty upgrade, there’s a good chance you’ll just be meeting the standards of what today’s buyers expect. To learn how Knock helps sellers get their homes in optimal condition before placing them on the market, read more about our strategy.