By Damon Poeter
“Honey, I’d really love to put in an outdoor kitchen — and the best part is that it would totally increase our home’s value!”
Who hasn’t heard a variation of that statement? Home improvements can certainly add value to a property in terms of potentially boosting the selling price, but not all improvements will maximize your return on investment.
For example, let’s say you put a pool in your backyard and now your property is appraised at $10,000 more than it was before. That’s terrific! But what if it cost $15,000 to put the pool in, plus whatever you’ll pay in maintenance and insurance over the years to keep it up? What if the market happens to be made up of buyers who don’t want to pay all the associated costs that come with a having a pool?
“Don’t let your desires become a good excuse to make a bad financial decision,” says Matthew Angel, a USAA advice director and CERTIFIED FINANCIAL PLANNER™.
One mistake people can make is thinking that embarking on big projects before putting their house up for sale will net them a nice return on their investment. That’s not always the case, Angel says.
“It’s probably not time to redo the patio if you’re selling this week,” he says.
An exception might be for repairs that must be done to pass a home inspection, which can affect whether any buyers will make an offer on your house.
But there are some smaller, less expensive projects you can do to try to attract more potential buyers and more bids, if not markedly increase the appraised value of your house, according to Angel. Here’s a few:
Spruce up the curb appeal. Trim the lawn, clean up the front yard and plant flowers or place potted plants outside your door. Rake up leaves and keep your grass watered and healthy. Make serious home buyers want to knock on your front door, not drive away to another showing!
Keep the house clean, uncluttered and smelling fresh. You don’t need to present a blank canvas of empty rooms and hallways, but you should strive to show what a cared-for, spic-and-span, tastefully decorated home looks like.
Don’t forget to clean out the garage. If you plan to solve a clutter problem by shoving everything into the garage, reconsider. Potential buyers will be examining your home from top to bottom, and they won’t be happy stepping over junk to get a look at the garage. At the very least, organize extra stuff in neatly stacked boxes – think of it as getting a head start on moving out after closing the sale.
Work on small fixes in bathrooms and the kitchen. Replace cabinet pulls, clean grout, hang hand towels, buy new bath mats, organize drawers and pantries and install new shower curtains. If you want to get more ambitious, replacing faucets, countertops and light fixtures are DIY projects that can often be done for less money than you might think.
Consider upgrading curtains, blinds and window screens. Natural light is ideal, so make sure your current window treatments aren’t blocking it.
Paint with neutral colors. If you’ve decided to paint the interior of the house before putting it on the market, use a soft, bland color palette. This allows home buyers to imagine what the walls would look like in their preferred color scheme.
If you have your heart set on a major home project and can afford something large scale, such as a pool or a kitchen remodel or a built-in fire pit, that’s great. Just think of those sorts of home improvements as investments in your quality of life, not as investments that you will profit from if you sell your home.
If you don’t plan to sell your home any time soon but would like to maintain (or even steadily improve) its value over time, focus on keeping up with maintenance and repairs. Angel recommends the following:
* Clean out gutters
* Maintain your roof and siding
* Trim trees
* Repair plumbing and electrical problems
* Add garden and landscaping features
* Paint the exterior on a schedule
* Inspect the foundation and other structural elements of your house for damage periodically
That list might not be as exciting as enlarging the master bedroom or putting in a hot tub, but it can help you avoid having to scramble to do expensive fixes to pass an inspection when you want to sell, Angel says. “Still want that backyard kitchen? It may make a great addition to your home, but try to view it as an expense that might help the value of your home rather than an investment."
Remember that, when you want to sell your home, your agenda in making any improvements is to encourage more bids and offers so you can close on a sale, not necessarily to directly profit from a higher listing price. Keep your expenses low and your home improvement plan strategic, opting for low-cost, easy-to-do projects instead of big, expensive ones.
Matthew Angel serves as an advice director at USAA, focusing on the personal finance tenets of short-term saving and home advice. Matthew holds professional credentials including a CERTIFIED FINANCIAL PLANNER™ designation, AAMS® and a Master of Business Administration degree from the University of Texas at San Antonio. Matthew’s history at USAA includes seven years serving members as a financial planner and leading teams of financial professionals to help members achieve financial security. Outside of work, Matthew enjoys hunting and riding motorcycles and is a proud husband and father to four kids.
Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.
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