After her successful treatment for breast cancer, a photographer in her 50s was in a celebratory mood. An ardent cook, she embarked on a major renovation of the small kitchen in her modest town house. Ultimately the work -- which involved high-end black appliances and custom cabinets -- cost more than $80,000. But when it came time to sell the town house the next year, she recouped only a fraction of the funds spent.
Mark Nash, a longtime real estate broker, doesn’t know the photographer in this true story. Still, he says it’s not uncommon for homeowners to overspend on presale upgrades.
“In desirable areas, available homes are now in painfully short supply. But that doesn’t mean the sky is the limit on what buyers will pay for your overdone improvements. Most buyers are pinched on affordability. They’re in no mood to shell out needless cash,” says Nash, the author of “1001 Tips for Buying and Selling a Home.”
Many would-be buyers hoped that after the pandemic, home prices would fall enough to put more properties within reach -- despite higher mortgage rates. But that hasn’t happened, says Andrea Chopp, an agent for Redfin, the national real estate brokerage.
As Chopp notes, “a lack of homes for sale is keeping prices afloat.” As of the end of June, new listings had fallen 27% from a year earlier. That resulted in a mere 1% drop in average home prices to $383,000. Meanwhile, bidding wars are still happening in some popular areas.
“Buyers should keep in mind that desirable homes are getting multiple offers and selling above asking price,” she says.
Despite strong demand from buyers, Chopp cautions sellers against hubris about the condition of their property, because “making small repairs and staging are important again.”
What’s not needed is the level of spending the photographer did to upgrade the kitchen in her modest town house with custom cabinetry and appliances.
“When it comes to presale improvements, classic cases of overkill include projects that involve tearing out walls or building on additions. These days, there’s no need to spend a fortune to get your house sold,” Nash says.
Danielle Hale, chief economist at Realtor.com, the home listing service, reminds sellers about the continuing housing crisis affecting many young adults.
“We expect prices to continue to soften, but not by that much,” she says.
Here are a few pointers for sellers:
-- Seek advice from local real estate pros.
Even if you have no intention of selling immediately, Nash recommends against signing any home improvement contract until you’ve asked for the advice of someone who’s sold real estate in your neighborhood for at least five years. That person should tell you how much of a project’s cost you can expect to recoup.
Those who are unsure how long they’ll stay in a home are often hesitant to ask a real estate agent for advice until their selling plans are solid. But Nash says a reputable agent should be happy to help, even if you have no idea when you’ll sell.
“Another plus is that good agents from your local market should be in touch with contractors. They know folks who can handle any work you decide to do smoothly and expeditiously,” Nash says.
-- Review neighborhood standards.
Tom Early, a real estate broker who was twice president of the National Association of Exclusive Buyer Agents (naeba.org), says current home purchasers are especially resistant about paying for renovation work that raises a property above local norms.
“After the Great Recession way back in 2008, recovery came to most real estate markets. But buyers are still totally resistant to overpaying. That means they won’t bail you out if you outstrip your market,” he says.
What sort of upgrades constitute “over-improvement”? For example, Early says you wouldn’t be justified to install expensive antique light fixtures in a neighborhood of starter homes. Likewise, you couldn’t recoup the full cost of building a three-car garage in a community where most homes have no garage at all.
-- Move slowly when seeking to renovate.
As many homeowners realize too late, a thoughtlessly done presale renovation can hit the wallet hard.
“It’s super easy to overspend on renovations. And you’re most at risk of overspending when you rush the process,” says Sid Davis, author of “A Survival Guide for Selling a Home.”
-- Reduce your losses on projects that prove too extensive.
It didn’t dawn on the photographer that she was spending too much on kitchen upgrades until her $80,000 kitchen project was underway. But Davis says she should have paused the project once she realized she was overspending.
When it occurs to you that you’re spending excessively, Davis recommends you contact all your contractors to negotiate your way out of expensive upgrades. For example, you might decide to cancel top-brand bathroom and kitchen fixtures in favor of something more generic.
“Average buyers don’t care if they get super fixtures or appliances in any given room. It’s the overall house that they’re looking for -- not perfection in every room,” Davis says.
Real estate agents often recommend less-expensive products than those suggested by contractors. For example, you might not need high-end Berber carpeting for your family room when a midgrade carpet would do just as well.
“Even if you’re compelled to pay penalties to back out of some work, you could ultimately save money by dropping the most costly elements of your renovation plan,” Davis says.
(To contact Ellen James Martin, email her at email@example.com.)