When To Avoid 'Value-Added' Home Improvements

by Broderick Perkins DeadlineNews.Com Home improvements can add value to your home, but if you perform them when it's time to sell your home, don't expect the buyer to pay for them. "The Value of Housing Characteristics" a recent statistical analysis by the National Association of Realtors' National Center for Real Estate Research, calculated the "value added" contributions of dozens of home features and facilities. It found: • An extra bathroom adds 24 percent to the value of a home. • A sitting area added to the master bedroom increases the sales value of the house by 8 percent. • Garages can add 12.9 percent to the selling price of a home. • A house with a single fireplace sells for 12 percent more than an identical house without one. • A laundry room that's not in the basement raises the market value by 15 percent. While certain features improve a home's value, its selling price and its salability, that doesn't mean a home improvement completed to add those features will return enough added value to cover all of the home improvement's cost. What's more, not only will you spend money you could use on your new home, the buyer may not even like what you've done. Real estate experts say leave the major improvements to the new buyer and concentrate on curb appeal, landscaping and interior work that transforms your home into a model home, not the Taj Mahal. Why? • Appraisers say additions that don't reflect what's been done to other homes in the neighborhood rarely pay off. If comparables don't show, say the addition you performed, the selling price isn't going to fully reflect what you paid for the addition. Not only can't you increase your sales price enough to cover the cost of the work and time, second-guessing what the buyer will want in appliances, decor style and finishes could cost you the sale. • Staging experts say better ideas include cleaning up, removing the clutter, adding a new coat of paint, installing carpeting, manicuring landscaping and updating fixtures, windows, doors and other cosmetic touches, put your home in the best light and cost only $5,000 to $10,000. In most markets, those items are what buyers expect -- generic improvements that enhance your home's functionality, efficiency and aesthetics -- all to give it a more contemporary feel. • That also means completing deferred maintenance. Make repairs to fix or replace broken items and systems. Use your cash to put the home and its components in good working by replacing missing roof shingles and broken or cracked windows. Repair driveway cracks and straighten listing fences. Make sure doors, gates, lights, plumbing fixtures and other items are all working properly. • Beyond the cosmetic touches and functional upgrades, but far short of full-fledged alterations and additions, the best home improvements that help net sellers full market value include a new roof, kitchen and bath remodels and only those alterations and additions that brings your home in line with the others in the neighborhood. • To often home improvements are random, uneven upgrades. If you leave one of your bathrooms in its original 1950s style, but remodel the other, or if you landscape the front yard, but leave the backyard in its natural weed-infested state, most buyers will notice what's left to be done, rather than credit you for completed work. You should, however, right wrongs -- even if the work won't garner you a full return on your dollar. If you or the previous owner completed work on your home without a permit, make it right before you attempt to sell the phone. In many states, you and your agent are required to disclose known conditions that could affect the value or salability of your home. If you don't and a home inspector or appraiser uncovers unpermitted work, you could be liable for nondisclosure, the lender could stall the deal and you'll still have to fix the problem. Ultimately, you could be required to have the local building officials inspect existing conditions to obtain a permit to correct any work that's not to code. Otherwise, if the work doesn't comply with building codes, especially if it's a health or safety hazard, you could be forced to tear out the work. And that's not the worst of it. If, after close of escrow, a buyer discovers work completed without a permit and the local building department decides not to approve the work, a chunk of the home's value could become a legal issue. Any difference in value based on what was not permitted at the time of sale, could become a point of litigation. Finally, it is sometimes in your best interest to let the buyer take care of any necessary construction. If an inspection or appraisal turns up the need for major corrective work, consider leaving money in escrow with instructions for the escrow officers to pay the contractors once they complete the work. Let the buyer select the contractors based on several fair bids and have the work done after the close of escrow to avoid a construction zone in your home while you are trying to sell it. If the buyer supervises the work, you don't incur any liability and the lender knows the property will be restored to its proper condition, which enhances loan value. Copyright © 2005 DeadlineNews.Com -- Broderick Perkins, is executive editor of San Jose, CA-based DeadlineNews.Com, an editorial content and consulting firm. Perkins has been a consumer and real estate journalist for more than 25 years.