The Over Improved Home—The Dangers of Renovating Too Much
What does the over-improved property mean? That means a home that has maybe been renovated a little too much and therefore value and home renovations are in-congruence with one another.
So if you are an owner, what are the implications if you over improve your home or if you're a buyer, what are the implications if you're trying to buy an over-improved home?
I'm just going to go over a couple of quick facts and then I'm going to give you the three biggest money pits of over improvement.
The first thing to consider with the over-improved home, if you're an owner, and you're thinking about renovating, just because you spent money updating a part of your home does not mean you will get a return on investment. You heard that here. Just because you renovate your kitchen does not mean you will get a return on investment.
Renovation is not the golden ticket towards improving the value of a home.
Now of course if you take a state condition apartment or something that hasn't been renovated in 25 years, and you make logical sound improvements to it, you've probably increased the value of your home, so that is a logical argument to be made.
Having said that, oftentimes people improve a home that has already been improved, they improve a home in a distasteful fashion. We see that a lot. And therefore they're just spending money that they think is going to be money that they recoup, but they do not. So that's just sort of a quick tip, quick fact.
Also, when you do decide to renovate a home, if you don't want to over improve it, just remember one word and that word is consistency. I don't need to see the most expensive renovation with my clients in order for me to encourage them to bid on a home or in order for me to say, "Hey, I think this is a really good property and here's why." I need to see a consistent and thoughtful renovation.
So what does a consistent and thoughtful renovation look like?
For starters, you're going to have congruity between the major rooms in the house. So that means the kitchen has a similar design motif and aesthetic and time period as the bathrooms, and the bathrooms have a similar aesthetic as the floors, and the floors match the paint color, and the paint color makes sense with the furniture, and the furniture makes sense with the drapes and blinds. Right? Design and renovation conceptually should all have an equal and nice flow to it so that when you walk in a home, it looks as if the home has been renovated kind of in one fell swoop, in one time frame, and has been done in a thoughtful and consistent fashion.
Oftentimes you see a kitchen that is brand new and bathrooms that might only be two or three years old, but for whatever reason, the owner at the time was on a completely different design train. They were riding a gravy train on one day and then riding the anger train on the other day and they have an angry kitchen and a really happy bathroom. And we see that a lot and oftentimes those are the same sellers who expect you to be paying for this incongruous renovation, which can be very expensive for that owner, but also something that a buyer is not necessarily all that keen on spending money on because they're going to renovate it anyway.
And that brings me to my third point. If you are a buyer looking at an over improved home, bear in mind that this can be one of the toughest types of homes to negotiate on because the owner, as I just alluded to, is convinced that their home is worth X amount more than say, market value, or their home is worth paying more for because they've just renovated it. They've put the magic touch on the home, it's new, it's move-in, and it's renovated.
We encounter this very often where the owner expects the buyer to pay for their renovation and oftentimes the buyer walks in and says, "Listen, I like the bones of your home. I like the way it feels. I like the light. I like the size. I like the shape. I like the ceiling heights. I like all of the elements, but man, I do not like your dungeon looking bathroom." And people are entitled to not like somebody else's work and if the work is over improved, if it's out of style or out of taste, it's distasteful, then oftentimes that over improved bathroom, listen, you're not going to get your money back.
But what happens is at first that owner has to come to terms with that fact that they just spent this money on something nobody else wants. But then the second issue becomes after coming to terms with that, they then are stuck in that reality of having spent all this money that they're not going to recoup and that takes an even longer amount of time to come to terms with which makes that negotiation arduous and laborious and time consuming. So if you are a buyer, just bear that in mind. The over improved home, it works both ways. You could be stuck in a grind if you're a buyer, and if you're a seller, you can be stuck with your home for a very long period of time.
And now I'm going to share with you the three biggest tips of how to avoid over improvement money pitfalls.
And these are pretty simple things, but we are also seeing them in a lot of people's homes because listen, it's 2018 now and people like ease of use and a lot of the things people employ in their homes and add to their homes are these ease of use concepts. And so of course what do I mean by that?
The first one is home automation systems, right?
I can appreciate someone who wants to do electronic blinds, or they want to turn on their thermostat from their phone, and they want their security system, and they want all of this, and they want that technology infused into the home. Listen, if you want that, you go for it. That is a great value add from the perspective of quality of life, meaning it adds a piece of mind to your lifestyle, but it does not add bottom dollar amounts to your pocket. Meaning you will not recoup your home automation system expense. I tell all of my clients, "If you really want to have home automation, stick to the basics." Right? Because if you're going to go and spend 20, 30, 40, 50 grand on the world's greatest home automation system, I'm sorry this is not the four seasons hotel, you are not getting your money back on that type of investment.
And parlaying that into the second type of home automation if you will, home enhancement systems.
It's a sound system. Listen, Sonos makes a $1,500 system that you could buy at Best Buy or any electronic store, install into your system, plug and play and be up and running in less than an hour. That system is a great system that has great sound and great options for listening to music, and you can be very happy as a clam if you have that system, and it's only $1,500. I don't know the exact amount of money and quite frankly, I'm not advocating and nor am I a non-attorney spokesperson for Sonos. Having said that, it is a very good system and if you want one, go get one.
But if you go with the in ceiling, mega boom town, blah, blah, blah type speakers, I don't even know anything about automated speaker systems and in ceiling speaker systems because I think they're so ridiculous. So if you go for that mega super sound system where you get this receiver that takes up a closet in your room, and you're like, "Dude, check out my system," and you sit down on the couch, and your hair explodes because everything is so amazing. Listen, if that's your lifestyle, and you want that, you go for it and I highly recommend you do that because we as brokers are always encouraging our clients to understand the difference between value from a financial perspective and value from a lifestyle perspective.
If that's going to enhance your lifestyle, you go for it. A) 96% of the people don't care that much about a home sound system and B) the technology is changing so often that you will find yourself with a better system for half the price in three years. It's like TV technology. When you put up a flat screen, and you expect the next buyer to want your TV, dudes, the technology changes every 15 minutes. I'm pretty sure that while I was just giving you this spiel, there's been a better TV that came on the market through some sort of like luxury Japanese brand. Okay? So just bear that in mind when you're thinking about your home surround sound system.
And then the last thing that is oftentimes incredibly expensive, oftentimes a lot of people don't realize the most expensive thing you can do in a home because it requires a very skilled artisan to do so, but you do not recoup the cost of, is built in systems.
Again, if you are in a home that lacks closet space, then of course a built in might be a logical addition to a home, but if you're one of these people who wants to have a home office, you want to have this whole custom closet system that extends beyond the wall, it's not an actual closet. If you want to have a pantry, a butler's pantry, if you want to have just some additional siding to your home, all of these custom pieces. First of all, you need a great woodworker to build those for you and there is not one cheap woodworker in this world and if they are cheap, they probably work at IKEA.
Second of all, it's just very specific and people don't want specific when they're buying a home. Why? Because they have their own version of specific and they want to put their specific into that home. So I highly recommend that people minimize the built ins because you often end up spending the most amount of money on those types of things with the least amount of return.