When remodeling to sell, start small and pick projects wisely
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CHICAGO (MarketWatch) -- If your New Year's resolution is to sell a home in 2008, it's probably time to start thinking about how to make that home stand out from the rest.
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But before planning a single project, beware: Homeowners aren't able to recoup as many improvement costs as they did in recent years, according to a recent study by Remodeling magazine. In fact, real-estate agents advise clients not to overdo it regardless of what the local market conditions are like.
"It's more important that it's neat, it's clean and it looks spacious, rather than making sure it's the top of the line," said Cheri Kuhn, broker/owner of Waters Realty in Minnetonka, Minn. She cautions her clients to bypass projects that aren't necessary.
"The thing I find with sellers -- if they do a lot of remodeling -- they will take the cost of the remodeling and add it to the cost of the home and ask the buyer to pay for it," she said. But often they're not going to get that higher price.
That's because asking prices are based largely on comparisons with similar homes in the area, she added. And in the many markets that aren't exactly booming right now, buyers have more negotiation power over the price of the home.
To keep costs down and spend remodeling dollars wisely, consider the following five tips:
1. Ask for advice
Prior to making any remodeling plans, declutter your home and rent a storage unit if necessary to hold extra stuff while the home is on the market, said Shannon Aldrich, a Realtor licensed in Maine and New Hampshire with Keller Williams Coastal Realty. Then, get some advice from a local real-estate agent on how the home stacks up against the competition, she said.
"I see more houses in a month than most people see in their lifetimes," said Aldrich, who has written a series about getting rooms ready to sell on her blog. Sellers can use that experience to their advantage when deciding what projects to do. Visit Aldrich's blog.
When Kuhn first meets with clients -- sometimes six months before listing the home -- she'll make a prioritized list of improvements that will make a difference. Cleaning the carpets, painting the walls and removing wallpaper are common fixes -- if they're needed. It's wise to budget for these tasks before putting money aside for more expensive projects.
2. Dig deeper
It also could pay to look below the surface by getting a home inspection before listing the property. That way, problems that could hold up a sale are addressed in advance, said Dan Steward, president of Pillar to Post, a Tampa, Fla.-based home-inspection company.
Some estimate that for every dollar of perceived defect, buyers want a $2 to $3 discount, Steward said. If that's true, it might pay off to spend $2,500 replacing an old furnace.
Plus, replacing something as necessary as a furnace helps create a favorable perception of how well a seller took care of the home, Kuhn said. If there's a problem with an essential element of the house, a buyer might think "if that was neglected, what else was?" she said.
3. Look outside
Pay attention to exterior details such as the condition of siding and windows, Aldrich said.
According to Remodeling magazine's 2007 Cost vs. Value Report, a wood window replacement recovers an average 81.2% of its cost at resale and a siding replacement recovers an average 83.2% of its cost. The payoff for those projects is much better than for an upgrade that a buyer might not need; a home-office remodel, for example, recovers 57% of its cost. The estimates are national averages for midrange (not upscale) homes.
4. Spend time in the bathroom
Freshening up the bathroom doesn't have to be expensive, but could be important.
"People will put up with a lot of cosmetic challenges in a house if they know they could use the bathroom right away," Aldrich said.
It's most important for the bathroom to be clean, but also consider replacing fixtures, the tub, the sink and the toilet -- if they need it, she said. Replace cracked titles and curled linoleum.
The replacements don't have to be expensive, Aldrich added. A toilet can cost less than $250, and she recommends taller, handicapped replacement toilets to appeal to an aging population.
5. Keep it small in the kitchen
The other room that often sells a house is the kitchen. But it might be best to keep renovations modest. The Cost vs. Value Report found that homeowners could recover 83% of the cost of a minor kitchen remodel at resale compared with 78.1% of a major kitchen remodel.
Kuhn cautions her clients not to replace refrigerators, stoves or dishwashers. Buyers considering remodeling the kitchen will likely have their own preferences, she said.
Along those same lines, replace a countertop if it's crumbling but not if its only fault is that it's outdated, Kuhn said. Even then, seriously consider material costs -- there's no need to update to granite unless the competition has a granite countertops as well.