Remodeling Your Home to Help It Sell May Not Be the Moneywise Approach

Before putting your home on the market, it’s natural to ask for advice on what should be fixed or upgraded before doing so. Here’s how we re-spond when asked.

First, you need to know that every study we’ve seen shows that sellers almost never recoup 100% of the cost of remodeling, so you should only do so for your own enjoyment, years before you plan to sell. Don’t make updates expecting to get a higher price for your home..

Rita and I, or example, recently spent $40,000 to update our kitchen, and we love it! (It was done by Bonnie Kitchen Design in Golden, and we strongly recommend her!)  But that doesn’t mean our home increased its value and selling price by $40,000 or more. We made that improvement for our own enjoyment, just as we did when we spent $20,000 on our master bathroom several years ago.  Yes, it will increase the attractiveness of our home when we eventually sell it, but that will only be after years of happy enjoyment of those two improvements.

We’ll probably make additional improvements in coming years, but it will never be to dress up the home for sale. On top of not recovering the full expenditure upon sale, it’s a huge disruption of one’s life to engage in major renovations.

The most recent study I’ve read about cost vs. ROI (return on investment) was made by Remodeling magazine, as reported by RISmedia.

According to that report the 5 projects with the highest ROI in the mid-range cost category are:

Manufactured Stone Veneer (94.9%)

Minor Kitchen Remodel (80.5%)

Deck Addition (Wood) (75.6%)

Siding Replacement (75.6%)

Entry Door Replacement (Steel) (74.9%)

The 5 projects with the highest ROI in the upscale cost category are:

Garage Door Replacement (97.5%)

Window Replacement (Vinyl) (73.4%)

Grand Entrance (Fiberglass) (71.9%)

Window Replacement (Wood) (70.8%)

Bathroom Remodel (60.2%)

Lastly, here are the 5 projects with the lowest ROI in the mid-range cost category:

Backyard Patio (55.2%)

Master Suite Addition (59.4%)

Bathroom Addition (60.6%)

Roofing Replacement (Metal) (60.9%)

Major Kitchen Remodel (62.1%)

Master Suite Addition (50.4%)

Bathroom Addition (58.1%)

Major Kitchen Remodel (59.7%)

Bathroom Remodel (60.2%)

Window Replacement (Wood) (70.8%)

So, clearly you should only remodel when it’s intended to be enjoyed by you for years to come. If you know you’ll be selling this year, we advise our clients as follows.

First, only make improvements that eliminate a defect or an issue which will turn off prospective buyers.  I call these “eyesores,” things that stand out like a sore thumb, and not things that are simply “dated” or out of tyle.

Here are some examples:

Do refinish hardwood floors that are seriously and obviously in need of refinishing.

Do replace carpeting that is seriously old, such as 1970’s shag carpeting, or carpeting that is seriously worn or stained. (Again, think “eyesore.”)

Do replace damaged countertops.

Do repair damaged walls and replace damaged doors that can’t be repaired.

Do replace those 1990’s glass-and-brass lighting fixtures. (They’re so unappealing that Habitat’s thrift store won’t accept them as donations!)

Do replace burned out light bulbs.

Do repaint (inside and out) where there is peeling or discolored paint.

Do replace rotted timbers on your deck, then power wash and re-stain or repaint as necessary.

Do improve curb appeal (always the first impression), including weeding and pruning and freshening the front door. (It’s true that red doors sell homes…)

Do have someone with “fresh eyes” walk through your house and identify other turn-offs. (Our stager performs that function.)

Do not replace undamaged countertops or bathroom fixtures just because they are “dated” — even those pastel colored bathtubs and sinks. (I tell buyers “You can’t buy these anymore!”)  The exception would be the toilets. A white chair height low-flow toilet can be replaced for a couple hundred dollars and installed by our handyman for $50 (but he only works for our clients).

Beyond the above advice, I tell my sellers to be strategic about major issues which they know need to be done. If these are likely to become inspection issues, don’t fix them prior to listing your home if they’re not the kind of eyesore which would deter a buyer from making an offer.

For example, I have a listing, currently under contract, which had damage to the concrete driveway. The seller was thinking he should repair it before putting the home on the market. We knew it would be an inspection issue, but by leaving it undone we could use it as a bargaining chip. Sure enough, we got under contract (well above listing price because of competing buyers), and the inspection demands included repairing the driveway. Because it was such a big expense, the buyer didn’t ask for a bunch of other repairs.  If the seller had fixed the concrete prior to listing the home, you can sure the buyer would have asked for those other repairs, but instead they were delighted that the seller agreed to pay for the concrete repair.

I have used the same strategy to save other sellers money on inspection items. For example, one seller knew that radon needed to be mitigated, but we knew that this issue (which we properly disclosed) would not deter buyers from competing for the home. Yes, it became an inspection demand, and the buyer was delighted that the seller agreed to mitigate it.

Your situation will be different, of course, and we are happy to meet with you in your home and discuss what’s needed and strategic to fix before listing. We consider such advice part of the free staging consultation we provide sellers.

Coming Next Week: Broomfield Ranch on a Big Lot

This 3-bedroom, 2½-bath home at 1303 Loch Lomond Ave.,  listed at $456,000, is on a corner lot, with RV parking around the corner. Built in 1987, the sellers have owned and loved this home since 1996. The lot measures 9,148 square feet, and the living space is 1,808 square feet. There’s a large master suite with walk-in closet and master bath. It has a spacious family living area with cozy fireplace and large windows. There’s plenty of storage in an unfinished basement and dedicated laundry room. It is within walking distance of the Bay Water Center, library, community center, grocery stores, gyms, restaurants, and home improvement stores!  Boulder School District has incredible educational opportunities for growing families. For more information, call listing agent Debbi Hysmith at 720-936-2443.  View more pictures and a video tour at www.BroomfieldHome.info.

Statistics Show a Slowing Real Estate Market — But Not at Golden Real Estate

The 4½-year-long seller’s market is clearly transitioning into a “balanced” market and may be moving toward a buyer’s market by 2020, judging from statistics garnered from REcolorado, the Denver MLS.

In December, for example, the median days on market for City & County of Denver sales was 20, the highest since Feb. 2014, and the ratio of sold price to listing price was 98.5%, up from 98.3% in November, but otherwise the lowest since Feb. 2012 — nearly seven years ago.

January statistics won’t be available until early February, but a study of the 403 homes sold in the first 21 days of January shows that the median days on market is even higher — 28 days — and that the ratio of sold price to listing price has dropped to 97.2%.

The number of sold listings in December was 783, the lowest for a December since 2011. This compares to more than 1,000 sales in every December from 2014 to 2017. The number of active listings for this December was 1,605, the highest for any December since 2013.

Now let’s look at Jefferson County statistics.

In December the median days on market for Jeffco sales was 24, and the ratio of sold price to listing price was 98.6%. Both stats were the worst (relatively speaking)  since February 2014, nearby five years ago.

As with Denver, a study of the Jefferson County homes sold thus far in January shows that the median days on market will remain above 20 and that the ratio of sold price to listing price will dip even further. With 307 sales thus far and another 308 listings under contract over 20 days, I predict that the number of sold listings will be the same as or higher than January 2018, when 553 Jeffco homes were sold.  The median sold price will continue to climb, though less quickly.

Given these statistics, you can imagine our surprise at how well our own listings have performed this month. 

For example, broker associate Kristi Brunel listed a home on a busy street (usually not a good selling point) for $520,000, which was above what neighborhood comps suggested. She got it under contract for 13% more in four days. There were 60 showings and 13 offers, but there were 20 or more other offers which weren’t submitted once buyers knew how high the bidding had gone. Saturday’s open house, just hours after Friday’s big snow storm, was so busy and with so many cars parked on the street that one neighbor asked Kristi if it was a church function!

I had a similar experience with another listing. I got multiple offers which bid up the home to 7% over its listing price within four days, and the open house was the busiest I can recall. A Golden listing of mine which didn’t sell in December sold readily in January for nearly its listing price, and a $1.1 million listing of mine in downtown Golden sold in less than a week with multiple offers driving the price up by $75,000 following an open house where I needed help to accommodate the flow of buyers. 

So you can understand why I don’t quite know what to make of the current real estate market — except perhaps that Golden Real Estate knows how to sell homes better than other brokerages!

What we do know with certainty is that there are many disappointed buyers who did not win the bidding wars on these Jeffco listings and that homeowners who think they should wait until spring to put their home on the market should consider doing so now — and with us!

As I’ve written in the past, there are multiple reasons why winter is a good time to list a home, but our experience with these few listings is surprising even me. But beware — the reason that the MLS statistics are not as good as our own experience at Golden Real Estate may be that other brokerages are not listing their homes at the right price and not providing the kind of marketing for which Golden Real Estate is famous.

Buyers are definitely getting wiser and not making offers on homes that are overpriced. Give me or one of our broker associates a call and ask us what we consider the right price to list your home. 

The Realtor Code of Ethics Exists to Protect You

You’ve probably seen the advertising, “Make Sure Your Agent Is a Realtor.” That’s because not all licensed real estate agents are members of the National Association of Realtors (NAR) and only members of NAR can call themselves “Realtors.” And only Realtors must swear obedience to the Realtor Code of Ethics and are required to take 4-hour biennial refresher classes about the Code.  (Note: All Golden Real Estate agents are Realtors.) The Realtor Code of Ethics has 17 articles that are divided into three categories. They are as follows.

DUTIES TO CLIENTS AND CUSTOMERS:

Article 1
Realtors protect and promote their clients’ interests while treating all parties honestly.

Article 2
Realtors refrain from exaggeration, misrepresentation, or concealment of pertinent facts related to property or transactions.

Article 3
Realtors cooperate with other real estate professionals to advance their clients’ best interests.

Article 4
When buying or selling on their own account or for their families or firms, Realtors make their true position or interest known.

Article 5
Realtors do not provide professional services where they have any present or contemplated interest in property without disclosing that interest to all affected parties.

Article 6
Realtors disclose any fee or financial benefit they may receive from recommending related real estate products or services.

Article 7
Realtors accept compensation from only one party, except where they make full disclosure to all parties and receive informed consent from their client.

Article 8
Realtors keep the funds of clients and customers in a separate escrow account.

Article 9
Realtors make sure that details of agreements are spelled out in writing whenever possible and that parties receive copies.

DUTIES TO THE PUBLIC:

Article 10
Realtors give equal professional service to all clients and customers irrespective of race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity. Realtors do not discriminate in their employment practices.

Article 11
Realtors are knowledgeable and competent in the fields of practice in which they engage or they get assistance from a knowledgeable professional, or disclose any lack of expertise to their client.

Article 12
Realtors are honest and truthful in their communications and present a true picture in their advertising, marketing, and in other public representations.

Article 13
Realtors do not engage in the unauthorized practice of law.

Article 14
Realtors willingly participate in ethics investigations and enforcement actions.

DUTIES TO REALTORS:

Article 15
Realtors make only truthful, not misleading, comments about other real estate professionals.

Article 16
Realtors respect the exclusive representation or exclusive brokerage relationship agreements that other Realtors have with their clients.

Article 17
Realtors arbitrate and mediate financial disagreements with other Realtors and with their clients.

Life’s Transitions Are at the Heart of Most Real Estate Needs

In my 17 years as a Realtor, I have learned that most people’s real estate needs arise from life’s many and varied transitions.  These can include relationship changes such as marriage and divorce, a birth or death in the family, health changes, and other reasons for upsizing or downsizing, as well as job relocation, job loss, and changes in income. People also relocate to be closer to grandchildren or other family members.

Clients have come to us because of most or all of these “transitions,” but perhaps the most common is, sadly, divorce. When couples divorce, one option is for one spouse to buy out the other, and al-though the court (in a non-amicable divorce) might require a valuation by a licensed appraiser, often we’ll be called upon to give a “Broker Price Opinion” of the home’s value. I don’t charge for this service, nor do I think most agents would. If a sale of the home is necessary, of course we’re available to assist in that, and the proceeds can be disbursed as the couple or the court dictates.

Medical changes or uncertainty, which can affect people of all ages, often necessitate a home sale. We can help the seller of a multi-level home find a wheelchair accessible home or simply one with fewer stairs, and discount the commission on the sale of their current home when we earn a commission on their purchase. If the seller is moving to a rental such as in a senior community, we can refer them to a specialist in that field.

Marriage or simply the combining of two households is a happier transition, and, again, look for your agent to discount the fee, as we do, for selling your current homes in return for earning a commission on your new home together.

Empty nesters (and others) come to us on occasion wanting to downsize. They may want to use their new-found freedom to travel, and ask us to find them a “lock-and-leave” home such as a condo or patio home, where you have no maintenance responsibilities and it’s not obvious when you’re away.

Relocation is a big area of need, too. This is a good time to “sell high and buy low,” by moving from Denver to, say, Goodland, Kansas, where a recent client of mine was able to buy a bigger house using only the equity from the sale of their Arvada home.  Now they have no mortgage!

Have You Owned Your Home a Long Time? Here Are Some Tips for Avoiding Capital Gains Tax

If you bought your primary residence back in the 1960s or 1970s, there’s a good chance that you’ll be pushing the limits of the capital gains tax exemption when it comes time to sell.

There is an exemption of capital gains tax of $250,000 (single) or $500,000 (married) for a home that was your principal residence for at least two of the five years preceding the sale. If you bought your house for, say, $30,000, in the 1960s, it’s quite possible that it’s worth 10 or 20 times that amount now, resulting in the possibility of capital gains taxation.

If one of a married couple moves out, the $500,000 exemption is preserved by the other spouse as long as the absent spouse is still alive, providing the couple sells the house within 3 years of both moving out.

Do not add your heirs to the title of your home as a “joint tenant” with right of survivorship.  That’s because your heirs inherit your original purchase price as their cost basis, whereas if they inherit the property through your will, the basis for them is stepped up to the fair market value of the home at the time of the inheritance, which will help them avoid capital gains tax when they sell it.

I am not a tax advisor, and am only recounting what I have been told by tax and estate-planning professionals. Consult your own tax professional before acting on anything I have written here.

Seniors: Learn What You Need to Know About Real Estate

Last month’s column was about the risk seniors face of being scammed or conned out of their homes.

Let’s face it — seniors need to be careful and knowledgeable about real estate as they age. There are issues of downsizing as well as inheritance. And you need to know how real estate works, how to choose the best Realtor and know that he or she is working in your best interest.

At Golden Real Estate we have two agents who have earned the Seniors Real Estate Specialist (SRES) designation as a result of special training on a multitude of issues facing seniors. One of them is David Dlugasch, shown at right during his PowerPoint presentation to a group of seniors. The other is Kristi Brunel.  If you belong to a senior group that welcomes outside speakers, please consider calling David at 303-908-4835 or Kristi at 303-525-2520 and arranging for a live presentation.  You may learn something that could help you in the future.