This episode of theGetting Your Edge podcast that explores the intricate balance between costs and value when choosing home remodel projects before selling your home. Join our expert hosts, seasoned real estate agents, Judy Gratton and Dennis Day of the Edge Group Team and EXP Realty, as they dive into the world of home renovations with a financial lens. Some remodel projects will not recoup your investment. However, some projects will add value over your costs, when you sell your home. Find out which projects will get you the best "bang for the buck." Judy and Dennis will help you make the best decisions, so you can bring in top dollar when you sell your home.
This episode of theGetting Your Edge podcast that explores the intricate balance between costs and value when choosing home remodel projects before selling your home. Join our expert hosts, seasoned real estate agents, Judy Gratton and Dennis Day of the Edge Group Team and EXP Realty, as they dive into the world of home renovations with a financial lens. Some remodel projects will not recoup your investment. However, some projects will add value over your costs, when you sell your home. Find out which projects will get you the best "bang for the buck." Judy and Dennis will help you make the best decisions, so you can bring in top dollar when you sell your home.
Dennis (00:00):
Welcome everyone to Getting Your Edge, How to Right Size Your Home and Life podcast. I'm your host, Dennis Day, and I'm here with my co -host, Judy Gratton. How are you today, Judy?
Judy (00:27):
I'm great, Dennis. Thank you for asking. It's great to be back and we have an excellent show today. We are going to talk about the cost versus the value for homeowners looking to do repairs or remodels before they put their home on the market. Yeah, if you're thinking about selling your home, not every remodel project really makes sense. So we want to show you the things that give you a return on your investment. But first, let's talk about our big move. Sure. Do you want to explain? I do. I'm excited. We have now moved to EXP Realty.
Dennis (01:01):
It is a new brokerage for us. Yeah, I'm really excited for this move. I think EXP is going to be a fantastic place for us. But really, if you're a customer or client of ours, you're not really going to notice the difference.
Judy 1 (01:31):
That's right. Most of the changes will be behind the scenes, but our clients may notice our even better customer service. EXP really does have technology and tools that help us to improve our already amazing customer service. It will be like going from solid gold to a platinum level of client relationship. And we believe EXP is going to make us even better agents, which will transfer down to our customers.
Dennis (01:45):
Yeah, I'm totally excited. By the way, we're recording this podcast on July 3rd. It will drop on July 5th. So we want to wish America happy birthday. And we hope that you have a fantastic Fourth of July.
Judy (02:05):
Yep. Happy Fourth of July. And now let's move on to our topic. Let's go. OK, so this episode is about the cost versus the value of repairs that you do on your home with the intention of selling your home. What we're trying to do is help sellers understand that there really is a difference on the different kinds of repairs you do and how that can affect your price on your home and also, you know, how much of it can you expect to get back? What is your return on investment? Many homeowners do wonder whether it's worth investing in a remodel. I cannot tell you how many people I talk to that want to put in those granite counters or quartz counters before they sell the home.
Dennis (03:02):
So let's start by discussing why it's crucial for homeowners to consider the value of the remodels. If you've been in the remodel market or you've talked to your friends, you know, these big remodeling projects aren't for the faint of heart. They can be a significant investment, both in terms of time and money. Finding a contractor is really hard. I'm experiencing this. We had a water leak and that was in February 1st. We still haven't got a contractor. It takes so much time and money, and sometimes the contractors just don't follow through on the timelines. It's expensive. It's essential for homeowners to assess the potential return on investment and making a firm decision before they start their remodeling project.
Judy (03:37):
What I'd like to do is have you envision your home that you're going to sell as a pie. And to get the best price for your home, you need to be able to sell the whole pie. And you need to be able to check all the boxes under condition, location and price. And we talked a little bit last week about location and price. And today we're going to focus on the pros and cons of condition. The more upgrades, updates, good impressions a home has, the more pieces of the pie that will be in there that will raise the value of your home. Does that make sense? So the first thing I'd like to talk about is the importance of first impressions. And when it comes to selling your home, first impressions really matter. Potential buyers often make quick judgments based on the initial look and feel of the property. And some ideas to consider that are really not terribly expensive but can make a huge difference on that first impression are landscaping. If you have the lawn mowed, the yards, the beds weeded, maybe fresh beauty barked down, seasonal flowers in place. Those sorts of things are going to make the yard look better.
Trees trimmed, bushes that are overgrown trimmed back, all of that. And that's not terribly expensive to get that sort of thing done. And then power washing, power washing the driveway, power washing the sidewalk in front of your home and making sure that the gutters are cleaned out. All of those make your home look better. Then you could consider fresh paint. Whether you need to paint the whole house or maybe you just paint the front door.
Judy (05:31):
But fresh paint can make a huge difference not only on how the home looks from the outside, but as they approach it, it smells good. Then consider removing debris. Oftentimes we stack things in front of the house or on the side of the house, whether it's palettes or extra car parts or garden equipment. Get them out of the way, move trash cans to a hidden spot so you've got a nice clean look on the front of your home. And then possibly consider either replacing the front door if it's beat up or if you can't afford that, as we talked about painting. But you could maybe replace the doorknob if you have an old doorknob on the house. It makes a huge difference. And then the final thing that you do to kind of bring it all together is put a brand new welcome mat out front. Those are all part of a first impression. And one of the reports that we provide for our sellers is called the Before You Sell Your Home Report.
Judy (06:32):
And it actually talks about, and this is really interesting, a lot of us get really tied up on how are we going to get the buyers to come and look at our house? Well, 78 % of their buying decision has already been made before they ever walk in the door. If your home is in the right location and it has the right square footage, you're 78 % of the way there. And then after that, the 22 % that's left over is what we talk about with the first impression,
the homey feel, and how clean the home is inside and how it smells. These are all really important items that will help add to that piece of the pie for you. So that is a report that we provide to people that give them ideas of things that they can do that are not expensive, that really add value to the idea of the first impression.
Dennis (07:31):
Well, we need to distinguish between what is deferred maintenance or maintenance versus what is an upgrade or a remodel, because there's a big difference. Having a hot water heater that doesn't work is not a remodel. No. Can you talk about the difference of that?
Judy (08:01): Well, anything that is structural or a safety item, and so your roof, your siding, your hot water heater, your heater, these are things that people expect to have working and in good condition when they buy a home at an average price. So they're not going to give you any more top dollar. They are a part of the pie, but they are kind of the required parts of the recipe, if you want to say. So if you have not been able to keep up or someone has not been able to keep up on the maintenance of the home,
Judy (08:31):
those items, if not repaired, most likely the home will not qualify for a loan. Lenders, and we mentioned this in our last episode, the appraiser works for the lender, and they come out and they look at the home and they say, yes, the asking price of this home is OK, because everything here is in relatively OK condition, maybe not stellar, but the roof is going to last for a few years. There are no bare wood spots showing on the siding or on the home, and they'll go ahead and appraise it at value. But if they see items like a bad roof or bare spots on wood are notorious where the paint has chipped off, they will call for a work order. And that means that those items have to be repaired before they will issue a loan on the home. And so deferred maintenance items are things that the appraiser will most likely find, and they will demand that those be fixed before they ever loan money. So if you can't afford to do those deferred maintenance items, you've got to plan that your home, your pie is not going to be a complete pie. And so you're not going to get as much money for your home as you would if those items were there as they're supposed to be. They are not improvements. They are structural and safety items, and they're required to be in good condition.
Judy (10:01):
So that is the difference between that and, say, putting in new carpeting, even to a degree, putting in new windows. As long as the windows are still in good condition and work, they're OK, and they're there. If they're broken or the seals are broken, even the seals in double pane windows are not really structural. They can be repaired and they're more cosmetic. But if you have a broken window or a missing window or something like that, then those sorts of things have to be fixed. Again, that falls into structural.
Dennis (10:34):
Well, you have to look at the lender's side. I mean, they're lending you money so you can buy this home. It's an investment for them, and they're not going to lend it on a dilapidated or falling apart home.
Judy (10:48):
It's not going to work. And I mean, it's wonderful to be able to advertise that the home has a brand new roof. But just because you put a roof on,
Judy (11:01):
the house needs a roof. If it was allowed to get to a point where it needed to be replaced, all you've done is replaced it before you sell the house. So you're not going to recoup anything for that. That's just kind of the expected maintenance. And a lot of people get that confused with doing, like, maybe the color is not the most current color of the house. And if you paint it a better color, then that is an upgrade. And what can you recoup for that?
Judy (11:32):
Or you replace the garage doors with nicer garage doors, or you replace the flooring inside. Although it's not structural, some cosmetic fixes, like if you've had issues with dogs and whatnot, that's going to affect your pie. And you may get some return on that investment, but not quite as much as others. We do have a list that we can go over and explain what some of those look like.
Dennis (12:01):
A house that's falling apart can be sold. It's going to have to be cash or perhaps a rehab loan. It's not like it's unsellable. But nobody's going to get a loan on it. Not a conventional loan or an FHA loan. Not any of your standard loans, no. Let's mention the first steps. If you're thinking of selling, this is like within a year or two. One of the first steps you want to do is really get an understanding of the current market.
Judy (12:37):
Correct. Look at recent home sales and see which features and upgrades are fetching the better prices. This can help homeowners prioritize their remodeling projects and potential return. This is where a top -notch agent can really be valuable. They'll be able to do this research to help you stay current. This is their job. They know what home improvement trends are going.They understand what buyers are looking for. They understand which things are outdated or old -fashioned. And we know which homes are selling and which ones are not.
Judy (13:02):
That's a great point, Dennis. And it's important to align yourself with remodeling projects with preference to the needs of potential buyers. If you plan to sell your home in the near future and this topic aligns well with episode 17 that dropped two weeks ago, you have to know about what's happening in the real estate market now.
Dennis (13:32):
You're a homeowner. You've done your research. Got a clear picture of the trends. Give me an example of something that was a trend and now is not.
Judy (14:03): Granite countertops were very, very, very, very, very popular and they're okay. But now almost all of your new construction is using quartz. And so buyers are looking for quartz countertops instead of granite countertops. That's just an idea. If you look at architectural design, back a couple decades ago, there were a lot of homes that had the faux stone on the front. They looked more like cottage homes and now they're very contemporary. Lots more glass, flat roofs. So things go through changes like that. The color of flooring, the color of cabinets, oak was huge and then it wasn't.
Judy(14:32):
And then it was white and then it was dark. And now you might find a mix. You might find gray countertops, gray on the bottom and white on the top. It just kind of depends on what the latest trends are in the market. The homeowner has done his research, has a clear picture now. And they understanding the market trends and so forth. What do they do next? If you're really going to sell your home, one of the best things that you can do, although there's a risk to it and I'll explain that, is have what's referred to as a pre -inspection.
Judy (15:07):
And this only works really if you're going to be putting the home on the market in the near future. And so you hire an inspector. And now remember the appraiser works for the bank. You're paying the inspector so he's working for you and he's coming to look at your home. And he will crawl under it. He will crawl over it. He will look at the electrical. He will look at all of these different things.
Judy (15:31):
And he will tell you what's working and what's not working. And that gives you the information you need to know what needs to be fixed. One of the first things that you can do is just walk through your home and start opening cabinet doors under sinks. Is there a leak under there? A lot. I can't tell you how many times we find leaks that people didn't even know they had. Just little drips. But it's wet and it shows there's water staining.
Judy (16:01):
It's nothing serious. But if you fix that, that's very inexpensive and not a big deal. Leaks around toilet rings. Cocking in the bathrooms that has gotten old and discolored or dirty. All of these different things are things that you can notice yourself. But then if you bring in the inspector, he can tell you what it looks like underneath your house or how the insulation is in the attic. I can't tell you how many times we discover that there's been some kind of rodent infestation,
Judy (16:35):
especially under the house, but sometimes in the attic because trees are too close. If you find them out, if you have knowledge of anything, all owners are required to fill out what's called a disclosure form that they present to the buyer to say this is what we know about our house. So if you have this inspection done by an inspector and they give you knowledge of something that's wrong, you need to disclose it on the disclosure form that you'll be providing for the buyer even if you fix it.
Judy (17:09):
So you may say rodent infestation under the home, but we had exterminators come out. We replaced the vapor barrier. It's been taken care of. So now you've covered yourself and your legal liabilities by disclosing what was discovered by the inspector. There's the risk. If you have that inspection done,
Judy (17:31):
you may find things that you didn't know about. But if you don't have that inspection done and you wait until you're under contract with a buyer and they have the right to have an inspection done, if they do, they may discover it and now you have an unhappy buyer who could walk away. You may end up losing money. Whereas if you did it up front, you have knowledge. You either disclose it and fix it or disclose it and don't and adjust the sales price.
Dennis (18:01):
The goal is always to sell at the very possible highest price. So what kind of projects bring in a strong return on investments?
Judy (18:20):
Sure. There's actually a report done every year called the Cost versus Value Report. And they take the most popular maintenance, repair items, remodel items within an area in the country. So for us, that area that they look at is Seattle, Washington. And this year they defined 23 projects that are very common.
Judy (18:34):
Then they look at the job cost. How much does the job actually cost you? And what is the value, the resale value of that job when you sell your home? How much of the cost is going to be recouped? And so for instance, right now in 2023 in Washington's, in the Seattle, Washington area, the number one thing that you can do to improve the value of your home and actually make money on it is have your siding replaced with fiber cement siding or hardy plank siding.
Judy (19:10):
The cost of that, the average job cost is about $15,000 here versus $19,000 in other parts of the country. And you can expect to recoup here $23,000. And I'm rounding numbers out. It's $23,620. But that gives you a recoup of 151.3 % of what you spent.
Judy (19:36):
So that's worth doing if you can afford it. And then the second largest item here is HVAC conversion. And especially if you're adding air conditioning, the job cost is, they're quoting here around $22,907 here. You can expect to recoup $23,609. So that's the value of it when you add that to your home.
Judy (20:03):
And so you can expect to get 103.4 % of that back. And then it moves down to vinyl replacement, vinyl siding. You can expect to get 99.2 % of that back. Garage door replacement, you can get 88.7 % of that back. Interestingly, every year this changes and it varies as to what you can expect to get back. Would you like to know what some of the ones are that do not, where you begin to really lose money on getting it done?
Dennis (20:31):
I would guess that it's probably those major big project high ticket items.
Judy (20:41):
Correct. Like adding a deck. I've heard people say, I need to, I want to add a deck before we sell the home. Well, right now the cost of adding a deck is $31,665. And of the resale value for that, what it's going to add to the value of your home is $9,176.
Judy (21:01):
You will only recoup 29% of your investment in that deck. Another thing that people talk a lot about is major kitchen remodel. And an upscale kitchen remodel right now. And that's the only one that they have in the report. This year, they used to have mid -range, but for some reason this year it's only upscale. Would run you $173,836. And you can expect a resale value of that of $44,635.
Dennis (21:35):
And that's only recouping 25.7 % of your investment in the kitchen. What I frequently say to people when we're seeing that remodeling a kitchen is not the most well spent money. You know, why are you putting a brand new kitchen in for someone else? Let them do it. You're not going to recoup the money that you spent on it when you sell the home. It's not going to bring the value up that much higher.
Judy (22:01):
So there are little things that we can do in kitchens that are not as expensive. You can replace faucets. You can replace hinges on doors that look old. You can either really clean the cabinets or you can paint the fronts of the cabinets. You do want, however, to make sure that your appliances are working if they're in the home. There are smaller things that can be done that can boost the value of your home and make it look better.
Judy (22:31):
Painting, painting inside and outside. It's something you can do yourself. And paint must be in, especially inside the home, a neutral color. No bright things, no neon green. No black. The reason being there may be people who love black paint. I happen to like it in places. But if they don't like it, you've just narrowed your market. And so the more neutral you can be and everything that you do if you are preparing the home to sell is really important.
Judy (23:05):
Like I have a very dark primary bedroom for my own home because I like it. But I know that when I sell my home, I need to paint that bedroom because it's not something that everyone would like. And neutral is always going to be the best that you can do if you're thinking of selling stay middle of the road. And that's true of carpet colors, flooring, anything at all that you're spending money on. Please don't put turquoise bathtubs and toilets and things in.
Judy (23:34):
They're cool. They look great in some homes. But if people don't like turquoise, you're going to have a problem. New lighting can really add. Taking out that fluorescent light, changing the fixtures inside, outside is not very expensive. You know, a few hundred dollars, but it can make a big difference in how your home looks when it shows. And light bulbs. Light bulbs can make a big difference. What color are the light bulbs in your home? What's the wattage of the light bulbs?
Judy (24:02):
Are they too bright? Are they too dim? Are they all the same color? So if you have canned lights and you have three or four different now that we have so many choices, you have a bright daylight and a warm pink and a thing else. And now suddenly it's not attractive. It's distracting. So light bulbs can make a big difference. And the other thing that I love is it kills odor. So if your home smells musty or whatever, paint it.
Dennis (24:33):
Well, what about those DIY projects? I'm a DIYer. Can homeowners save money by doing certain things on their own?
Judy (24:40):
Some things, providing they know what they're doing and they actually finish the projects and they look commercially done. That is not something that would happen in my home. We hire it done and it looks like it was done correctly. In terms of structural and safety items, you're better off getting them permitted if they require permits. Because the disclosure form actually asks if you do any major remodeling or whatnot, and did you get the proper permits? And when you say no, people start to get uncomfortable. So if you're going to jump in and do that sort of thing, get your permits, use the right people.
Dennis (25:31):
Well, some DIY, yeah.
Judy (25:31):
Probably not a kitchen remodel, bathroom model. I wouldn't recommend it. It seems that every contractor I've ever met who, they're great about finishing the jobs in your home, although albeit it'll take time, they never seem to get the ones done in their own homes. Because they're always out working on someone else's. So I'll walk in to sell a home and the contractor has started a big project and it's like, well, are you going to finish that?
Dennis (26:01):
Any advice, Judy, before we wrap this whole thing up for homeowners considering a remodel project?
Judy (26:20):
Well, first of all, why are they considering it? Is it for them to enjoy? That's a whole different story than are they remodeling the home in hopes to get a higher price? And just reiterating your home is a pie. You need those basic ingredients in there like the roof, the electrical, the plumbing that are all in good condition, that everything is painted. All of that is a healthy part of the pie. And if it's not, there are ways for agents to help you work around that, but you cannot anticipate getting the price of a full pie when it's not all there. And then the cosmetic upgrades, they need to be current. It really have a realtor come in. They have connections with stagers and interior design people and contractors and landscapers in the whole nine yards that can help to bring this whole pie together at the price that most people will feel is a really good value based on what you've done.
Judy (27:18):
So maybe you decide that you don't want to do that kitchen upgrade because you're not going to recoup. You're only going to get 25% of that cost back. Why would you? Make informed decisions. Don't just say, well, their home sold for this. And so if I do that, I'm going to get that because markets change.
Dennis (26:33):
This kind of brings up a point that I really want to mention is that if you're going to be in your current home for eight to 10 years or more, go ahead, do the big kitchen or bath remodel, go with that big project at the deck, make it your home, make it your space, enjoy it. It's your home. Make it the way you want it. When it's time to sell, having an updated modern kitchen,
Dennis (28:01):
even if it's eight to 10 years old, will bring a return on your investment in the long run. That hundred thousand you spend on the kitchen over eight to 10 years will bring money back to you. For example, if you have a 1960s kitchen or a big bathtub and you plan to live in your home for a while, do the remodel, go for it. But trying to sell that home, if you do nothing and you say you have a 1960s kitchen and you're in there for 10 years and you haven't done anything, well, then instead of selling a 60 year old kitchen,
Dennis (28:34):
you're selling a 70 year old kitchen and that's harder. So, yes, do the remodel. If you're going to be there a long time, enjoy the house, make it yours.
Judy 28:41):Well, I think we've given our listeners enough to chew on for today. Don't you? We're always here to help. So if you have any real estate questions, please feel free to reach out to Dennis or I or my husband, Jim. Consultations are always free. And I want to thank our listeners and our viewers on YouTube.
Dennis (29:02):
And I want to thank our listeners and our viewers on YouTube. Remember the cost versus value remodeling project is a critical factor to consider. Don't hesitate to reach out to the Edge Group team. We can help you so you can do your due diligence and make informed decisions. Stay inspired. Keep improving your home. One thing I want to mention is that there are businesses that do this remodel for you before you sell and don't charge any cost until you close. So we'll try and get that episode up as soon as possible. Thanks for listening or viewing. Enjoy your fourth. Adios amigos. Thank you so much, Dennis. Bye. Bye. Just a reminder, folks, that we will put up the pie on our website under the Podcast and Freebies tab.
Dennis: Goodbye
Judy: Goodbye