Is it worth the cost?

Is it Worth the Cost?

A stressful part of putting your home on the market is trying to figure out what to fix and upgrade to get the very best price. An experienced agent will recommend projects to consider and ones to avoid. After all, just because you put money into a renovation project doesn’t mean you will recoup the money in a sale.

You may also want to consult Remodeling Magazine’s annual Cost vs. Value Report for a breakdown of typical returns on renovation projects large and small. The 24^th annual edition published earlier this year contains input from some of the country’s top remodeling professionals and ranked 35 remodeling projects for highest returns.

In many cases, smaller-scale renovation projects recoup more of their initial cost than larger, pricier ones, according to the report. For example, a minor $20,000 kitchen upgrade returns 72.8% of renovation costs, but a more expensive $58,000 kitchen remodel only retains 68.7% of its value on resale.

Surprisingly, the report noted that exterior upgrades recoup more of their costs than interior renovations -- a trend that’s been building for the past five years. What’s the hottest exterior upgrade according to this year’s report? Replacing the front door with a steel entry door, which typically returns more than 100% of its cost.

The report also lists garage doors as a wise investment, returning up to 83% of their original cost when the home sells. Other prudent outdoor renovations include siding and window replacement, returning 80% and 72.4 %, respectively.

Interior improvements retaining the most value include attic renovations and basement remodels, recouping 72.2% and 70%.

“Just like an addition to the home, an unfinished space—such as the attic or basement—will instantly add value and livability to your home, as it increases the square footage and changes the way your family lives in it,” said Will Tomlinson, owner of North Carolina-based greyHouse Inc. Renovation and Remodeling. “You will be transforming a space that likely gets very little use into a fully functional area for your family to enjoy.”

The report also notes that non-essential features have less resale value. Sunroom additions recoup only 48.6% of renovation costs; home office remodels, 45.8%; and backup power generators, 48.5%.

Of course, homeowners’ needs and budgets dictate their choice of home-improvement projects. Still, it helps to know projects’ cost vs. return ratio when making the final decisions.

Short Sale Listings

Last night, my sister sent me a Facebook message telling me that I just had to look up this certain MLS # because she just couldn't believe how bad the photos of the house were.  Not because it was bad photography, but because the house was a complete mess.  She said that the photos should be used in a "real estate training" class of what NOT to do.  She basically thought that the agent must be a complete idiot and doing such a disservice to his client for taking pictures of the house in such a poor condition! 
My comment back to her, was "It's not the agent's fault!"  This little conversation gave me the idea for my very first blog.  Why would someone let their house be photographed for the market, with dirty dishes, and laundry strewn throughout the house? 
Immediately when I looked up the MLS # that she sent me, I saw that it is a "Short Sale" listing.  Definitition of a short sale, for those of you that don't know:  It doesn't mean it will be a QUICK sale!  Usually, it's quite the opposite!  What it means is that the BANK who holds the mortgage has agreed to SETTLE "SHORT" of what they are owed on the mortgage.  The only reason a bank would agree to do this is because the current homeowner is not able to keep up with the payments, and hasn't been paying the mortgage for at least 2 months.  Also, in most cases, the market value of the house is less than what is owed on the home.  It is extremely expensive for a bank to foreclose on a house, so they would rather settle short now, than go to the expense of foreclosing.   If a house is listed as a short sale, the mortgage is not currently being paid.  In fact, the homeowner is INSTRUCTED by their agent to stop making all payments on the mortgage.  Reason being is what incentive does the bank have to settle, if they are receiving the monthly payment? 
So back to the pictures.  For reasons just discussed, the homeowner is living in the house for FREE at this point, right?   I need to repeat this:  The homeowner is living in the house for FREE at this point, right?  All of a sudden, do the UN-flattering pictures start to make a little more sense, already?   As soon as the house SELLS, the homeowner is OUT!  There aren't many places to live for FREE, so what's the incentive for the homeowner to stage the home beautifully for the photos, or for the showings????   Many banks put a hold on the foreclosure proceedings if the house is listed for sale.  So, because the house is listed for sale, the foreclosure process has stopped, and the homeowner isn't making payments.  Not a bad deal for the person living in the home.   Why would they want it to sell???  The banks have started figuring this out, and are offering $1000 to the homeowner for a successful "short sale" closing.  At closing the bank gives the "homeowner" a check for $1000.  This always seems strange to me, but I understand the bank's dilemma. 

With all this said, I want to mention that not all homes that are listed as a short sale, are a mess.  Many people are having legitimate financial difficulty, but still have PRIDE.    These are the people that want to have the house looking nice, so that they can have a quick transaction, so that they no longer have the worry of the house on their shoulders.  These are the people that SHOULD get the help--the people that deserve it.  These people care that their credit remains as strong as possible, even though they can no longer afford their previous lifestyle.    They just want to move on to a less expensive housing payment.  I should also mention that it is less of a "hit" on your credit to do a short sale, "deed in lieu of foreclosure", than have a foreclosure on your credit history. 

I just wanted to get this "out there", because I was so surprised by my sister's comment.   I know a lot of people hear the term "short sale" and have no idea what it means, so maybe this will help explain. 
There's a lot more to be said about the process of BUYING a house listed as a short sale, but I will save that for another post.