Selling Your Home in Trickier Times.

Navigation: Main page

Author: Ryst, Sonja

FIVE FOR THE MONEY

The boom may be fading, but a little knowledge of local conditions and a few improvements can make all the difference

When Vishal Khatri and his fianceee put their condominium in Falls Church, Va., on the market last August for $240,000, nobody bit. They dropped the price on the decades old one-bedroom to $225,000, and that still didn't help.

When they looked at the eight or 10 similar units being offered in their area at around the same price, they discovered that none had been renovated much. So to make their condo stand out, they decided to spend two weeks during late November upgrading the kitchen and bathroom for $8,000. They made the white kitchen countertops look like granite, changed the white cabinets to maple, and put in new light fixtures.

When the condo was ready to go on the market in early December, buyers started coming back and making offers. Finally, they sold the unit in March for $225,000 to a buyer who had seen it before the renovations and not made an offer at the time.

WHITHER HOUSING?

"It was a big relief," Khatri says. Nobody used the condo while it was on the market, costing his fianceee around $1,000 a month in mortgage and other fees. He thinks he got an O.K. deal, considering that his fiancee had bought the place in 2002 for around $115,000.

Sellers like Khatri are facing a more complicated housing market this spring, as the pundits debate about where prices will go next [see BW Cover Story, 4/10/06, "Buyer [And Seller] Beware"]. In the latest indication of the market's health, the National Association of Realtors said on Apr. 25 that existing home sales amounted to 6.92 million units last month, up from 6.90 million in February. But the pace of sales slipped compared to the 6.97 million units sold during March, 2005.

In previous markets "a monkey with a credit line made money," says Michael Corbett, author of Find It, Fix It, Flip It! "Where the market now is softening a bit, home owners need to be smarter, and they need to reevaluate their homes."

WORDS TO THE WISE.

Indeed, for home owners looking to augment or preserve the value of their dwellings, it may be time to play some defense. What are the best strategies in the current market? This Five for the Money has some advice from experts.

1. Get to Know Your Neighborhood

Richard Powers, the president of the Appraisal Institute, says you should learn about your local market before deciding to make home improvements.

You don't want to renovate your home to the point that it becomes the most expensive one offered in your neighborhood. If everyone on your block has 10-year-old homes, kitchens, and bathrooms, then Powers would warn against spending $75,000 to have the best cabinets money can buy. "Keep yourself mid-range" for the market where you're selling, he says.

To figure out what's selling in your neighborhood, experts recommend that you talk to local realtors, visit home-improvement stores, and go to open houses. You can get a list of certified real estate appraisers to consult in your area at www.appraisalinstitute.org/search.asp. You can also play around with real estate Web sites such as Zillow.com or RealEstateABC.com to see how your home stacks up against its competition, before you decide which upgrades you should make.

2. Consider Market Trends

"I'd be careful on high-end renovations if the market starts going down," says Powers of the Appraisal Institute. "You're putting a lot of money into something that may be dropping in value." But he notes the country hasn't seen a dramatic downturn, and he adds that you should look at each market individually, since some are still appreciating.

For example, existing home sales in the Northeast rose 1.7% from the previous month, to an annual sales rate of 1.19 million units in March -- 2.6% more than a year ago. But sales in the West dropped 0.7%, to 1.43 million, during the same month, a whopping 12.3% below their levels in March, 2005, according to the Apr. 25 National Association of Realtors' report. [Remember that even those are just averages.]

3. Let Your Light Shine

Corbett says that 65% of all people buying the home will check it out a second time before they make an offer. They'll often drive by at night with their friends or family to show them the place first. And that can present an opportunity. If you buy low voltage lighting to make your house look just as great in the dark as during the day, he says it will affect the buying decisions of many potential buyers.

"The more light and brightness you can bring into your home, the more valuable it becomes," Corbett adds. Instead of putting in heavy drapes, select material that looks as bright and airy as possible, he says.

4. Roll Up Your Sleeves

Sometimes all it takes is a cleanup. Corbett remembers someone asking him for advice on whether to drop the $205,000 asking price on a condominium that hadn't sold after nearly three months in the market. When Corbett looked at the place to see what could be done, he was horrified. He found stacks of newspapers and junk inside the kitchen cabinets.

On Corbett's advice, the seller spent a few days cleaning up the house and throwing away the garbage in it. A week later, he ended up selling the condo for $212,000. "That's a huge amount of money to make from just 'save it, store it and chuck it'," Corbett says.

Repaint the house, replace worn carpets, and fix anything that needs repairs. Before you do anything else, you should make sure your home is in good condition, says Powers of the Appraisal Institute. Then you can move on to other upgrades such as bathrooms or kitchens, he says.

5. Choose Your Remodel Wisely

On average, people who invested $10,499 into remodeling a 5-by-7-foot bathroom in 2005 ended up with a new one that had a resale value of $10,727 according to the "Cost vs. Value Report" that the National Real Estate Association publishes annually in conjunction with Remodeling magazine. In contrast, people invested $14,913 into kitchen improvements such as new flooring and countertops in 2005. The improved kitchen ended up with a resale value of $14,691.

"There's more value in the bathroom," says Tom Stevens, president of the National Association of Realtors. Prospective buyers don't want a grungy old facility," he adds.

You run into a challenge to recover your costs when you start adding square footage to your home, such as walls, foundations, and a roof. "Then you have to make sure you're doing the right calculations and not overbuilding," says Stevens.

On average, people who added a 24-by-16-foot master bedroom suite to their homes spent $73,370 in 2005 and resold it at a value of $60,460, the National Real Estate Assn. found.

Whatever you do, make sure you gauge your investment against your odds of recouping its cost at a given price. As in any real estate endeavor, a little preparation goes a long way.

~~~~~~~~

By Sonja Ryst