When clients overcapitalize

by Jamie Henry13 Nov 2014
Oops! In terms of overspending on renovations that never pay, a $1 million pipe organ in a $130,000 Michigan home takes the cake. But there are a number of renovation pitfalls guaranteed to sink resale value and, ahem, your commission.
 
That 2,300-piece pipe organ took up the entire square footage of the home, save for one bedroom and one bathroom. The listing agent says he’s been contacted by interested parties from around the world. Locals are more interested in preserving the home and the pipe organ within it, while foreign potential buyers are more interested in separating the organ from property and restoring each separately.
 
Still, it’s up to real estate agents to educate clients about the types of renovations that can hurt a home’s equity. Suggest these compromises to your clients so they can have their organ and enjoy the best resale value, too.
 
Balance your clients’ wants with those of the average buyer
Think about what the “average” homebuyer wants – a fireplace, an open concept kitchen, hardwood floors. These things can add value to the home, so have your clients think twice before covering the fireplace or building a wall to close in the kitchen.
 
Balance your clients’ preferences with today’s trends
Homebuyers often factor the cost of renovations into the price that they’re willing to pay for a home. While the neon bathroom tiles your clients chose may reflect their tastes, think about how likely they are to appeal to the average homebuyer. Recommend neutral tile colours and more modern finishes that will appeal to a wider range of buyers.
 
Consider the neighbourhood
Someone dressed in daisy dukes and cowboy boots would look fine at a country concert, but would look awfully out of place at a rap show. The same can be said for homes. Urban loft-style décor is great for a downtown condo, but wouldn’t likely impress those looking for a suburban family home.
 
Consider keeping the basics
Big-ticket items – like a large garage and several bedrooms –really move a property. It’s fine for your clients to transform their three-car garage into a man cave, but doing so permanently will not likely improve the value of their home when it comes time to sell.
 
Get a permit
Unpermitted additions and renovations can negatively affect your ability to sell your client’s home in a number of ways. First, additions that aren’t permitted do not add to the home’s square footage. Second, and most importantly, the discovery of unpermitted renovations can cause the home to fall out of escrow.
 
 

COMMENTS

Poll

Is a Toronto foreign sales tax a good idea?