Renovating To Increase The Selling Price Of Your House

There are two ways we usually think of home renovations. We sometimes view them as improvements done in order to increase the value of the home -- in other words, as investments. Or we may think of them as simply increasing our own personal enjoyment of our home, without necessarily influencing the potential resale value.

Thinking of a renovation project as an investment implies that a project should have an impact on the resale value of the home. Many of us are conditioned to think like this. We tell ourselves, "If I spend $10,000 on installing a new hot tub in the back yard, or $20,000 renovating the basement, that should increase the value of my home by at least as much as I spend on the renovation."

But experienced real estate agents know it doesn't work like that. Most houses have a resale value range that is determined by the neighborhood where the house is located. People come looking in your neighborhood for houses in the price range of the neighborhood. If your house is priced $30,000 higher than the neighborhood average it is not likely to sell at that price.

The reason is pretty simple. People willing to spend another $30,000 will be looking in other neighborhoods. No one wants to have the best home in a poorer neighborhood. Most people would prefer to have a moderate house in a better neighborhood. That way they actually get more house for the money -- because the resale value will be enhanced by the better neighborhood.

** Different types of renovations and repairs

The basic principle at work is that homes in most neighborhoods have a pre-determined price range -- pre-determined by the neighborhood itself. The range will have a high point -- say, $150,000 or $200,000, or $300,000, and resale values of specific houses in the neighborhood will be pegged at various points below this high point.

When you are considering selling your house, its resale value will be decided based on how it compares to the other houses in your neighborhood. The objective of renovations should be to move the resale price as high within the pre-determined price range as you can. But as we have already seen, there is not much point in trying to push its value above the price ceiling for the neighborhood. You just won't get that money back.

On the other hand, if you get a market evaluation of your house and find it is below what you think are comparable homes in the neighborhood, there may be specific renovation projects that can move your house's value up towards the neighborhood ceiling price.

Where your house's value is pegged will usually be based on two sets of factors: the features of the property, and the condition of the property.

By "features" we mean things like number of bathrooms, back yard decks, finished basements, and finished landscaping and fencing. These are things which most people would want to add, and the more of them your house has, the closer its resale value will come to the ceiling price for your neighborhood. If everybody else on the block has a finished basement, chances are the lack of this feature will reduce the resale value of your place. But adding these expensive features at this late stage of the game is probably not worth it. You will probably spend more to add them than you will get back in the resale price.

The "condition" of your house is another matter. This is where renovations and repairs can pay a dividend. Over the course of the time while you are living in a house you normally do the upgrades necessary to keep your house in good repair. These include things like painting, upkeep on gutters and roofs and routine improvements to bathrooms, kitchens and basements. Prospective buyers expect these things to be in reasonably good condition, and if they are not they will certainly reduce the resale price of the house.

These are the things you should concentrate on in order to push the resale value of your home up as high as possible. Make sure the exterior is in good repair. That includes the roof, cement and brick work, sidewalks, fences, decks, and windows. If painting is required make sure it gets done. Spruce up the landscaping too.

On the inside do the obvious things. Make sure the paint is clean and bright looking. Rejuvenate the kitchen and bathrooms. Often inexpensive things like changing shower curtains, or adding new towels can make a big difference. And make sure your floors are in good shape too. Be sure to have your carpets properly cleaned, or replace them if necessary.

Focus on the things that will make a difference and a relatively minor investment will make a big difference to the bottom line.