Previously we discussed how living in your home renovations is the first reason why upgrading your home could be a bad idea. Even though you think you can handle the dirt, the lack of sleep and the emotional issues that arise from the dirt and lack of sleep you should keep in mind that this could be bad for your health – mental and physical. Let’s talk about the second reason why upgrading your home could be a bad idea.
See the picture to the left? That is a diamond encrusted Mercedes Benz. Super nice and extremely valuable… This car is worth a lot of money! But who in their right mind would buy it? Definitely not me or you. Whoever would purchase this vehicle has to be part of the smallest segment of the population imaginable.
There may be only a handful of people in the world that could even afford this vehicle and only a few of them would actually consider purchasing it. How could you ever resell this car?
The other day I was showing condos in Green Hills in a development that has a reputation for being affordable (under $200k) and transient. It’s in a great location and appeals to people that just want something in the Green Hills area, but can’t afford the high end offerings.
One of the condos we visited was loaded with features; granite counter tops, Brazilian hard woods throughout, new high end vanities, brand new window shades, fresh paint, stainless appliances…everything was top of the line. This was a beautiful condo! The only issue was this property was listed $30K above its competition. There was literally another unit with the same exact floorplan, in decent shape (not decked out, but up to date) located in the neighboring building that was priced $30k lower. That is a huge spread for the price point of the development!
There are multiple problems for the seller of the “diamond encrusted” condo, but let’s focus on the two main ones. First, they are going to have a hard time justifying their high price to savvy buyers that are familiar with the development. Therefore they are marketing to a really small section of the population, which in turn will take them a really, really long time to sell (if in fact they ever do sell).
Second, they are going to have a hard time getting the property to appraise even if by stroke of luck they were to get an offer. Appraisers look at recent sales data to justify the value of a property along with specific features, amenities, etc. As it is currently priced I would have to say this property doesn’t stand a chance of appraising.
So here’s the point…Guard yourself from upgrading your house out of your neighborhood market. You don’t want to be the one trying to sell a diamond encrusted Mercedes Benz on a lot full of Toyota Camry’s. Take the time on the front end of any renovation project and determine whether or not it would be financially beneficial to add those “must-have” features.
Yes granite on the bathroom vanities is nice, but does it make sense for your neighborhood? Would corian suffice? You’re smart so just take your time and plan. For some guidance on how to determine what adds value in your neighborhood feel free to contact me. I have access to sales data and other information that can be very useful.
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