Selling Your Home? Don't Make This Mistake
by Maurie Backman | Updated July 19, 2021 - First published on June 4, 2021
If you're selling a home, here's one move you could really regret.
In selling your home, there are several moves that might mean you wind up unhappy. One is choosing the wrong real estate agent -- someone who doesn't know your neighborhood well and doesn't help you price your home competitively. Another of these is listing at the wrong time -- such as in the heart of winter, when the elements work against you, or even during the spring inventory boom, when there's lots of competition.
But here's another mistake you don't want to make if you're selling your home: over-improving it.
Don't sink too much money into your home
It's common to make home repairs or modest improvements before selling a home. But there's a difference between going that route and making major improvements hoping to command a higher sale price.
If your home needs some new paint, some minor floor repairs, or some regrouting work in a bathroom, those are all modest projects worth taking on before listing your home. Not only are they relatively inexpensive, but things like chipped flooring, unsightly grout, and stained walls could be a major turnoff for buyers.
On the other hand, it doesn't necessarily make sense to completely gut your bathroom and renovate it before listing your home, nor does it pay to take on other major home improvement projects. The reason? It's rare for a home renovation to deliver a return on investment of over 100%.
In other words, if you spend $10,000 on a home improvement, your chances of getting back more than $10,000 in resale value are pretty low. You might get the bulk of your $10,000 back, or, in some cases, even your full $10,000. But most of the time, you'll only get a portion of your investment back.
In fact, take a look at Remodeling Magazine's most recent Cost Vs. Value report, and even the most financially rewarding home improvement project on the list -- manufactured stone veneer -- only fetched a 95.6% replacement cost. That means if you spent $10,000 on manufactured stone veneer, it would translate into $9,560 back in the home sale. You'd still be down $440.
Be smart in how you spend
There are sometimes benefits to improving a home outside of adding to its resale value, which is why renovations often make sense when you'll get a chance to enjoy them. But if you make major improvements when you're about to sell, you probably won't end up coming out ahead financially.
This holds especially true in today's housing market. Low inventory and competitive mortgage rates have led to a surge in buyer demand. So even if your home isn't the most updated one in the neighborhood, you might still have an easy time finding a buyer and walking away with a good sale price. In fact, most home values are inflated right now, which pushes buyers to their financial limits. If you renovate your home before selling, you might drive your listing price up to the point where you alienate buyers who would otherwise make you an offer.
This isn't to say you shouldn't fix any glaring issues with your home before putting it up for sale. But sinking a ton of money into last-minute improvements is a decision you might ultimately regret.
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