Market Insights: Warning: Do not over capitalize | SummitDaily.com
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Market Insights: Warning: Do not over capitalize

DANIEL WEBSTER JOHNSON

This article is directed only to people who might sell someday. If you never plan to sell your property than stop reading right now. Well now that you are serious about selling your property let’s get down to the nitty gitty of this week’s topic.

Real estate brokers hear this question all the time, “Will I get my money back out of renovating the kitchen/ bathroom/deck…” The answer, “It depends.”

The ‘market insight rule’ is – if the upgrades make you feel warm and fuzzy they you probably won’t generate one extra dime extra for your property. Case in point: a few years ago my wife and I bought a second home in Denver with a large back yard. At the closing the seller kept talking about how much they loved the super low maintenance, fully landscaped yard. My guess is they paid a professional firm at least $35,000 to do the work. We left the closing and the first thing my wife did, that afternoon, was to begin the process of ripping out the weed matt and pulling out the roses. She loves nurturing the soil and growing vegetables. All that landscaping actually had a negative value for us as it was a ton of work pulling it all out.

So how do you determine which upgrades will make you money when you sell?

The National Association of Realtors publishes an annual report that quantifies the benefit of various upgrades, however I have never found it an effective guide in our resort community. There are the three important factors to take into consideration.

1) The current market for similar properties. Right now you must be very, very careful. In just about every segment of the market there are too many properties on the market and not enough buyers, which puts a downward pressure on prices. When buyers have a huge amount of choice it is very hard to recoup the costs of upgrades.

2) The overall condition of the property. I have shown properties that every buyer considers worth nothing more than the land it was built on. For example a 1970’s A-frame in a great location. The property is priced way too high because the seller has just upgraded the kitchen. Silly seller.

3) The intrinsic features of the property. A home that has a floor plan buyers want, is well constructed and has at least one special benefit such as great views or backs onto National Forest will probably repeat rewards for the seller when upgraded.

There are two professionals to speak with before you meet with a contractor. Your extremely experienced and active real estate broker and their staging firm. These pros know because they spend all day long visiting homes and more importantly they know what is selling.

These photos are an example of a home on the edge of The Raven Golf Course in Silverthorne that sold earlier this year. It was in great shape, was staged well and was not over capitalized.

Good luck and love life…

Daniel Webster Johnson is a broker associate at Resort Brokers Real Estate. He can be reached at (970) 393-3300 or at daniel@YourMountainBroker.com.


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