3 Things to Consider About Renovations

In the current housing market, many homeowners wonder about renovations. Will the money they spend contribute positively to the value and resale amount of the property? If renting, would a renovation justify raising rent ? Or will the expense of a renovation be a waste of money.

Generally speaking, if a homeowner thinks they MAY want to sell or rent out their home within the next 2-3 years… think very carefully about any renovations and speak to a professional real estate agent. Current market conditions will weigh heavily on whether or how spending money on a renovation will be make a difference or become a loss.

Experienced agents that work in the area, know what buyers look for, and see the condition and renovations of other neighboring homes will have excellent insight. Here are some considerations a professional will guide you through:

With current supply challenges, buyers may be willing to take on projects of their own.

A more balanced market typically sees a 6-month supply of homes for sale. Above that, and we’re in a buyers’ market. Below that, and we’re in a sellers’ market. According to a recent report National Association of Realtors (NAR), our current supply of homes for sale, while rising, still remains solidly in sellers’ market territory:

“Unsold inventory sits at a 2.6-month supply at the current sales pace, modestly up from May’s 2.5-month supply but down from 3.9 months in June 2020.”

So, what’s that mean for you? If you’re a seller trying to decide whether or not to renovate, this is especially important because it’s indicative of buyer behavior. When there aren’t enough homes for sale, buyers may be more willing to purchase a home that doesn’t meet all their needs and renovate it themselves later.

This also applies to landlords. If there are lots of rentals to choose from, renters will be more picky. Not a lot to choose from? Rents will be driven higher without need for extra expense and renovation. Renovations, generally speaking, will more often than not be a wise investment long term. But if you are considering selling (or renting) the property in the next couple of years, those renovations will likely not increase the value and money you’ll get back for them in the short term… especially in the current housing market.

Also, many buyers look to buy homes they can renovate themselves, to their own personal tastes. You may want a swimming pool, but will the majority of buyers looking to move into your neighborhood?

2. Not all renovation projects are equal.

You don’t want to spend time and money on a project that isn’t worth the cost or is too niche design-wise for some homebuyers. According to an article by Renofi.com, basing home updates on what’s trendy right now can be a costly mistake:

“The last thing you as a homeowner want to do is center your home design around a passing fad – even worse, one thats design quality won’t last a good while.”

Many buyers are busy people and want to buy a property they won’t have to do renovate or make any changes to. But there are also many buyers that have specific tastes, and want to buy a property where they can make the changes and renovations themselves.

This means they won’t want to pay a premium for renovations made that they will end up redoing! Before making any decisions, talk to your real estate advisor. They have insight into what other sellers are doing before listing their homes and how buyers are reacting to those upgrades.

Don’t spend the time and money to be trendy – if your buyer wants to upgrade to the newest fad later, they can.

3. If you’ve already made upgrades this past year, your agent can help spotlight them.

If you have already completed some renovations on your house, you’re not alone. The pandemic kept people at home last year, and during that time, many homeowners completed some home improvement projects.

HomeAdvisor’s 2021 State of Home Spending Report found:

“35% of households that completed an improvement project undertook some type of interior painting, while 31% completed a bathroom remodel and 26% installed new flooring.”

Let your real estate professional know if you fall in this category. They can highlight any recent upgrades you’ve made in your house’s listing.

Bottom Line

For buyers, the best way to put a compelling offer together is by working with a local real estate professional. That agent can act as your trusted advisor on what terms are best for you and what’s most appealing to the seller.