A Seller’s Guide to Upgrading Your Home with ROI in Mind

How to choose your next home improvement project like a real estate pro

There is a lot of people that are getting into the real estate game for the BRRR (Buy, Renovate, Refinance, Rent) method for more passive income or just need to make some cost-smart improvements for a home their about to put on the market. Making upgrades can be as easy as replacing the handset on your front door and freshening up the paint job, or as daunting as remodeling an entire kitchen or master bath. The question always is, what home improvements give the best return on the remodeling dollar?

Return on Investment (ROI) is generally less than 100% in real estate, so the rule of thumb is “less is more.” It is frequently advised in this area that it’s better to update/remodel your home while living in it and not solely at the time it comes to sell. That way, there is more enjoyment in the improvement and less cost and time in preparing for sale. Some desirable upgrades or home improvements will not return their cost in the sale price, so it’s better for the owners to enjoy them all along.

If your home is worth $275,000, and you spend $25,000 to revamp the kitchen, don’t make the mistake of assuming that the investment will increase the value, dollar for dollar. The remodel may add value to the home, but the return in dollars spent will be around 50%. Smaller upgrades, like replacing outdated fixtures in the kitchen and bath, are certainly worthwhile, but major remodeling of those rooms isn’t wise, just to sell your home.

That’s not to say you can ignore necessary repairs that a home inspector would red-flag or mortgage company would demand before issuing a loan to a buyer. If major problems, like a leaking roof or outdated electrical wiring, exist, you may want to repair those before putting your home on the market, or expect to give concessions to the buyer.

Example of outdated electrical wiring

STARTING WITH THE BASICS

Every listed home should meet the basic expectations of any buyer. It should have a sound roof, functioning gutters and downspouts, foundation without cracks, functioning heating and/or air-conditioning system, solid subflooring, and safe and secure electrical wiring. With finance-mandated home inspections, any shortcomings may be required to be remedied to get buyer financing approval.

It is important to understand that the market value of a home is determined by the prices of comparable homes recently sold in the area. Extensive remodeling to sell the home or to increase the value may not pay off. The property needs to be up to the standards of neighboring homes, so while the kitchen has to be comparable to others, spending $25,000 to remodel a kitchen in an area where comparable homes recently sold for $375,000 will not increase the house’s value to $400,000. While it may be a helpful selling feature, it won’t return dollar-for-dollar value.

MECHANICAL MAINTENANCE IS A MUST

It is easy to get wrapped up in the more eye-pleasing aspects of preparing a home to sell. However, the upkeep of all the more mundane aspects of the home cannot be overlooked.

These mechanical features require consideration:

Electrical boxes and wiring
Natural gas lines
Plumbing
Central heating and air-conditioning

If these components are old, outdated, or not working correctly, the home’s appeal is lowered, as is the eventual sale price.

According to the National Association of Realtors®, 65% of homebuyers surveyed wanted to be sure their new home had a working central air system. Of the 31 mechanical features inquired about in the survey, this was the most important.

People want to purchase a home that reflects their aesthetic tastes and lifestyles, but also one that is safe and sound. Faulty electrical systems do not provide a feeling of safety. Leaky plumbing arouses concerns of mold infestation and sewage problems. These areas can require extensive work and they are extremely important. Overlook them in the preparation stage, and you run the risk of trouble later with inspections and appraisals.

It aids the sale if professionals certify or remediate any deficiencies in the mechanical systems. Having a professional inspection for buyers to review is a big plus in marketing.

Have a certified plumber inspect the entire water system for leaks. Check the well and septic field, if applicable.

-Hire an electrician to check the wiring.
-Call an HVAC company and have technicians perform a thorough service checkup.
-Contact the natural gas supplier and have them double-check the mechanics of your tank and lines.

If you’re looking for an alternative to calling and arranging all the different inspections, certified home inspectors usually cover all items related to mechanical issues (and more). They will be able to identify possible trouble spots. Many buyers hire an inspector, so you may be saving them a major step in the sale process.

If you have mechanical issues and decide to sell your home “as is,” it may be necessary to negotiate with the buyer in some situations. We’re in a heavy seller’s market where we don’t need to do that as much right now but the tide can turn and things will go back a buyer’s market.

REPLACING APPLIANCES

New appliances undoubtedly make an impact on buyers. The National Association of Realtors® conducted another survey of buyers and found that:

-Buyers were usually “interested” or “somewhat interested” in buying a home that featured new appliances.
-Roughly 17% of respondents preferred stainless steel.
-The most important factor: that appliances were available in the home.
-Most buyers who were unable to get their sought-after appliances said they would have been willing to pay, on average, nearly $2,000 more for them.

Potential buyers want appliances included and will pay more for them, especially if they are new or in excellent condition.

New appliances might be what sets a house apart from the home for sale across the street. If new appliances are out of reach, offer immaculately clean and fully functioning existing ones.

Example of appliances for a home

UPDATING HARDWARE

Carefully inspect your bathroom and kitchen hardware. If it is unsightly or worn, it’s best to replace it. Put yourself in a buyer’s shoes. Your home will potentially be their new home. Old, worn-out fixtures are not going to speak to them the way nice, new shiny hardware will.

Unless your knobs, pulls, handles, or hinges are broken, you need not replace them. Get that fresh look simply by thoroughly washing, sanding, and painting them with spray paint made specifically for kitchen and bath hardware, making it cost-effective.

Check these hardware items closely and replace, as needed:

-Towel bars
-Toilet paper holder
-Door handles
-Dated light fixtures

The goal is to touch up your home nicely without excessive spending. The internet has a wealth of do-it-yourself videos that can help you update your bath and kitchen if your budget is limited.

If you have broken or worn-out hardware, it’s best to replace the entire set. If you can find matching pieces, you can paint the old and new to match.

LET THERE BE LIGHT

Whether natural or artificial, bringing in light is one of the most effective ways to show off your home.

Using light to enhance your home’s appeal can make a difference. Harsh light is unflattering, even to the best furnishings and features. Dim lighting gives everything in the house a dingy feel. Assessing the lighting in each area of your home will give you a quick idea where to bring in more light. Rooms with abundant windows greatly benefit from natural light, as your home will be seen during the day.

Supplemental light is necessary for rooms with smaller windows or little natural light coming in. Increase the wattage of light bulbs in your lamps to improve artificial light. As a rule of thumb, there should be 100 watts for each 50 square feet of space.

There are three kinds of lighting. General lighting or overhead is typically ambient. The pendant light is good for tasks like food preparation or reading. Accent lights are usually on tables or mounted on walls. You can use all three to bring out the best your home has to offer.

Key areas, such as foyers, can set the stage by impressing buyers with a dramatic light source. If you do not have an abundance of natural light coming in, a chandelier-type light works if your ceilings are high. Otherwise, wall sconces are impressive in smaller spaces. Do not assume you need to buy new fixtures if you can update existing ones. The goal is to make sure each area of the home is effectively lit.

Kitchen and bathrooms are pivotal rooms. These two areas can make or break a sale. The combination of ambient, natural, and pendant light can bring out the best in your kitchen space. Mounting track lighting underneath cabinets gives the counters a chance to shine aesthetically and functionally. Make sure the light over the sink area is sufficient and working properly. If you have a hood over the stove, install clear bulbs to ensure the brightest light.

Lighting in the bathroom needs to be intense without being harsh. Soft lighting enhances any part of the house you want to highlight.

Avoid harsh lighting in the bedrooms, as well. Lamps strategically placed will give the bedrooms a peaceful, restful feel. The closet light should be bright, though.

One last tip: Lightly painted rooms still need sufficient light so the room does not appear drab.

FLOORING PLAN

Although you want to avoid home shoppers looking down on your home, they will be looking down at what is under their feet. Your home’s value can be downgraded by the buyer if your floors are in bad shape. On the flip side, if your home’s flooring is well done and in excellent condition, buyers will be more willing to pay more for it.

Maximizing profit without compromising investment dollars is the goal, but if flooring and carpeting are not in salable shape, you need to take inventory. There is no point in spending money unnecessarily if the improvements do not add significant value or help the home sell quickly; however, there are options that don’t break the budget.

Repairing and thoroughly cleaning the floors are the least expensive ways, so start with those. Take stock by examining all floors. Move furniture out of the way and make notes regarding condition, stains, or blemishes. Write down what needs to be replaced, cleaned, or repaired.

Carpets can be steam cleaned to eliminate stains and odors. If the carpets are path-worn and dull, you can replace them easily with other kinds of flooring with a reasonable ROI, although carpeting does make a room feel cozy. Laminate floors can be cosmetically fixed with repair kits found at home improvement stores.

Hardwood flooring can be easily refinished if the wood is worn or water damaged. Seek the advice of a flooring professional because real wood floors add a level of quality to a home that laminate floors cannot match.

TIPS FOR KITCHEN AND BATH

When making upgrades to kitchen and bath, be aware of what constitutes a substantial investment. The key is to consider the mass appeal for the sake of resale value. Let’s say one homeowner decided to add a backsplash and more cabinet space in the kitchen and then updated the appliances and refinished the oak flooring. Total cost was $4,000. The seller kept the price comparable to sales in the area and ended up selling for $27,000 more than the asking price because interested buyers started a bidding war!

The lesson here? You do not need to bust your budget to sell your home, but you do want to have mass appeal. Kitchens are pivotal in home appeal.

Here are some suggestions of what you can do to your kitchen and bath to impress buyers without losing ROI:

Paint neutral colors.
Add a new backsplash in the kitchen.
Install new countertops if dated or if you need to bring the home up to current area standards.
Add new, multifunctional kitchen faucets.
Add cabinet space or increase storage in the pantry.
Replace dated bathroom vanities. Pedestal sinks or trendy cabinet sinks have mass appeal.
Replace toilet seats — or the entire toilet, if necessary.

TWO ENERGY-SAVING UPGRADES
TO LOWER UTILITY BILLS

More and more buyers are looking for homes that reduce consumption and save them money on utility expenses. Here are two options that can make your home more energy efficient.

Install an energy-saving smart thermostat (less than $300) that saves on utility bills.
Install solar vents ($500-$700) in the attic space that help expel hot air during summer months.

MAKING A CASE FOR SPACE

When people accumulate an abundance of possessions, they need space to store it. They also want a way to clear the clutter. According to the National Association of Realtors®, most homebuyers would have preferred improved and greater closet space, as well as other storage options. Consider these statistics showing what buyers are looking for in a home:

-93% wanted a laundry room
– 90% wanted a bathroom linen closet
– 86% wanted garage storage
– 85% wanted a walk-in kitchen pantry

STORAGE IS A PLUS

Give buyers great storage, and you’ve won their hearts. If you can add new closets to your home easily, do so. Building a simple closet isn’t difficult if you are moderately handy. If you’re selling an older home, where closet space is typically minimal, this will help!

If your rooms are already small, you might not want to take any square footage away from them. Existing closets can be updated to maximize the space at hand.

If you don’t have the skills, or the funds to hire someone to build new space, consider investing in closet organizers to make the most of what space you have. For instance:

You can easily design your custom closet kit online with a storage solution company like ClosetMaid.
Your standard home superstore or hardware store often has exactly what you need in an inexpensive, prefabricated form.
Organizers won’t enlarge your closets, but maximizing vertical and horizontal space is a suitable alternative.

And don’t stop there — after all, storage isn’t restricted to closets. Storage improvement opportunities apply to all cabinets, clothes closets, linen closets, and attic and basement spaces.

Make sure you organize your cabinets. The same retailers that provide closet organizers can help with this. Take a good look at your laundry room and linen closet. Adding extra shelving in these places can make a big impact.

Look for any place you can provide attractive and inexpensive storage space. Make sure your improvements are tasteful, and you will benefit from increased storage solutions.

Updating your home with ROI in mind is the best approach when preparing your home for sale. Look over this recent list of what buyers want in a home. Compare it to what you have in yours, and upgrade accordingly, without surpassing the price line for comparable homes in your area.

FEATURES MOST HOMEBUYERS WANT

-Energy Star-rated appliances — 94%
-Laundry room — 93%
– Energy Star rating for the whole home — 91%
– Exhaust fan in bathroom — 90%
– Exterior lighting — 90%
– Bathroom linen closet — 90%
– Energy Star-rated windows — 89%
– Ceiling fans — 88%
– Garage storage — 86%
– Table space for eating in kitchen — 85%
– Walk-in kitchen pantry — 85%

Keep in mind these features are not guaranteed to be effective or profitable upgrades.

FEATURES FEWER BUYERS WANT

Shower stall without a tub in the master bath — 51%
– Two-story family room — 43%
– Wine cooler — 42%
– Wet bar — 41%
– Laminate countertop — 40%
– Laundry chute — 32%
– Outdoor kitchen — 31%
– Game room — 31%
– His & hers baths — 31%
– Glass-front cabinets — 31%

If you have more questions don’t hesitate to reach out today to our contact us page or reach out on social 

Alex Juarez

 

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