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Archives > August 2015

Return on Investments 

written by Jill Gargus CID, CCSP

References from Home Gain 2011

In the real estate world, there are differing opinions on how far a seller should take the upgrades before selling their home. In the home staging world, we have to consider a number of factors when offering our professional advice to a client. This survey on home improvement and return on investment was done by Home Gain in 2011 and it available for viewing on www.homegain.com

It is very important to consider these upgrades for a number of reasons. Number one if your competitors have done upgrades and have been regularly maintaining their property over the years, the buyers are viewing those homes against yours. And they will buy a more upgraded home, especially if you are trying to get the same price.

“Market value” is what a buyer is willing to pay you for your property, not what you think it’s worth.

Number two, It does not make financial sense for a buyer to give you a high asking price when they have to invest thousands in upgrades. If they see a house already upgraded, most buyers will choose that one, as you would if you were the buyer. Their reasons are usually the same. They can’t afford to do upgrades because they are already maxed out for the purchase price. And number three they usually do not have skills to tackle these items themselves and they are not looking to buy anyone else’s headaches.

If you chose to keep your property dated and wait longer on the market for a sale, you will encounter a number of stressors. Things like extended carrying costs, double property payments, double utilities and taxes if you already bought a house, stress, going stale on the market, price reductions…etc.

The one thing you can do to try to sell faster if you are not doing upgrades, is to start off with a much lower price than your competitors. That way you hit the market with enough impact to get you noticed and get showings, and you may get lucky and find a buyer that is willing to take your “project house” on.

If this is the road you want to go, then it is not enough to be $5,000 under your competition. You will need to consider the level of upgrades that would be required and drop your starting price to that point. This may mean $10,000- $30,000 depending on how extensive the work is and how neglected your house has been, it may mean even more.

Investors or property flippers tend to want to get a “deal” for 60%- 75% of the listing price, so that there is equity already built in to the property and they can safely tackle the upgrades without losing money. It just numbers for them. But for you, it’s your equity you are giving away….reconsider this and do the upgrades that will put you front and center on the real estate map, and then keep your equity!

Return on Investment (ROI) and % of how many Agent’s Recommend (AR) these updates in %

  • Clean and De-Clutter = 586% ROI – 99%AR
  • Lighten and Brighten = 313% ROI -97% AR
  • Staging                      = 299% ROI – 80%AR
  • Landscaping             = 258% ROI -with 93% AR
  • Electrical/Plumbing Repair = 181% ROI 92%AR
  • Replace /Shampoo Carpet = 169% ROI with 98% AR
  • Paint Interior Walls = 109% ROI with 96% AR
  • Paint Exterior Walls =51% ROI – 81 % AR
  • Repair Damaged Flooring = 107% ROI 93 % AR
  • Update kitchens and baths = 172% ROI -75% AR

Taken from www.homegain.com

So you can see that all updates so offer a return on investment, some more than others. The stats are clear that the majority of Real Estate Agents make these recommendations and their advice should be heeded, as they are in the business of selling real estate and they are engaged daily in the ups and downs of selling.

Agents provide a very clear picture of what buyers want and you would do well to consider their opinion and get your house “saleable” by doing as much as you can to compete with the market.

Real estate has changed dramatically in the last 10 years and thanks to all the Home Staging Television shows, buyers want what they see on TV and they are willing to pay for it.