Is remodeling your home worth it during a down market?

I get asked this question all the time as homeowners who are trying to sell their homes consider the amount they should allocate for repairs. There are two main areas of thought that exist today around this subject. The first focuses on "Maximizing Returns". If you are trying to maximize returns then any investment in home repairs that does not change the living status is not advised. When I use the term living status this means that if a home is unlivable in its current condition and you were to invest in the home to make it habitable then this would result in a change in its living status. With the majority of local markets declining at a rate of 10% or more annually, investing in major home repairs doesn't make sense from a return perspective because your home will not appreciate greater than the amount of the investment within the next few years.

However, I do not necessarily agree with "Maximizing Returns" approach in all cases. The core reason being if your goal is really to sell now or you must sell, then the question changes to what must I do to make my home, more competitive than others on the market. At this point, depending on your repair budget this may be a strong consideration.

When determining where to place your funds, many will say to immediately place money into upgrading your kitchen and bathrooms. While in most cases this is correct, however it is important to understand why. The key is to examine your home as compared to others on the market and invest in areas where your home will naturally gain a "competitive advantage" over other homes in the market. As an example, lets say other homes on the market have a much nicer outside appeal. The homes in the area have nice custom wood doors, updated paint, stucco, or siding an your home is in need of exterior maintenance. All things being equal (assuming your kitchen is comparable to theirs), I would not invest in updating your kitchen first. I would seek to improve the exterior of the home as many buyers will never get past the outside of the home if it is not appealing.

So, lesson learned here is to think of your home as competing with others. Whatever you can do to gain a perceived difference in value as compared to others homes in the area is something worth considering if your ultimate goal is to sell in the short term.

Thanks

Joseph Bradley

Broker Owner - Family Realty Group
Real Estate Strategy Experts

Family Realty has specialized in REO, Short-Sale, and Pre-foreclosure properties for over 30 years, with our founder and my grandfather Joseph Goodwill. My success as the owner and chairman is based on maintaining F.O.C.U.S. during market upturns and downturns: F.O.C.U.S. stands for Financially Secure, Operational Expertise, Customer Focus, Unparalleled Industry Knowledge and Superior Technology. We are a boutique real estate firms that provides personalized services to consumers or banking institutions looking to sell or purchase a home in Contra Costa, Alameda, and Placer Counties located within California. As the Broke-Owner of Family Realty Group, I am personally involved in all of our client transactions ensuring the highest level of focus and accountability in servicing your needs. If you would like a FREE Home Seller or Home Buyer Handbook, or list of available REO properties please call me at 925.401.0405 or email at josephb.frg@gmail.com.