Dollar for dollar, improvements don't pay off


December 27, 1992|By ELLEN JAMES MARTIN

The Silver Spring house seemed to have everything going for it: a stone fireplace, recessed lighting, new ceramic and hardwood floors, a vast deck and a wholly revamped kitchen. So why did it sit unsold for more than six months with barely a looker?

The problem was that the house was priced $20,000 over other nearby homes, says Sally Hulbert, the Coldwell Banker agent who listed the home. Granted, $20,000 was less than the owners had invested in improvements. But it proved far more than the market would bear, she says.

"You can't get way over the market for anything, no matter what it is," Ms. Hulbert says bluntly.

What the Silver Spring couple failed to grasp is how the average buyer views an over-improved house. He may well appreciate your $20,000 worth of extras. But he'd rather keep the $20,000 and do his own upgrades if he choses, realty specialists note.

"You need to deal with the realities of the market -- not what your actual investment has been," says Michael Brodie, an executive with the RE/MAX Realty chain.

Suppose you install $5,000 worth of exquisite decorator faucets and turquoise marble floors in your master bathroom. Then you take the full $5,000 on your sale price. Prospects come through and admire your posh plumbing and turquoise tile. But will they give you back the $5,000?

No, because instead of turquoise marble they may have wanted peach. Or maybe they would rather put the $5,000 into their daughter's prep school education.

"It's hard to sit there and tell sellers who have put their heart and soul into a house that you can't put a dollar figure onto the work and add it to the price," laments Ms. Hulbert, who recalls failing to convince the Silver Spring couple of the futility of pricing their home way above the neighborhood.

The Silver Spring couple -- he was a salesman for AT&T and she was an interior designer -- had to learn the lesson the hard way. After months of waiting, they had to bring the house down to the prevailing market price to make it move, Ms. Hulbert remembers.

Granted, you may get a tiny premium over other neighborhood homes when your over-improved property goes to market, says Dan Freedman, broker-owner of ERA-Imperial Real Estate Inc. in Cross Keys. But if you list your place more than 5 or possibly 10 percent above neighborhood houses, the only victim of your actions will no doubt be yourself, Mr. Freedman says.

"Very often, we find people will prefer to buy the plain Jane property rather than one with all the extras at the higher price. They figure they can save the money and do the extra work themselves later," he says.

But you needn't be entirely dismayed about the realties of bringing your over-improved house into the market. Although you undoubtedly will recover only a fraction of your investment, you have a good crack at selling faster and for a larger percentage of your list price than does the average home in your community.

"Generally speaking, improvements will enhance marketability, but not necessarily price," says Mr. Brodie, past president of the Residential Sales Council, an education group tied to the National Association of Realtors.

* Here are pointers from realty experts on how to get the most for the home in which you invested a small fortune:

* Get a thorough analysis of the worth of your property before you price it.

Given the substantial investment you've made in your home, you have more reason than the average seller to pursue the pricing issue carefully. Under the circumstances, it would not be unreasonable to ask three to five agents to offer their recommendations for your list price.

If all the agents you query come in under the price you honestly believe your house could fetch, you may want to go the extra step and pay for a professional appraiser to render an opinion.

"To get a true value of a house with many extras in it, we advise people to get an official appraisal. It brings them down to reality to have an independent appraiser tell them what their house is worth," says Mr. Freedman, the Cross Keys broker.

* List all the special features of your home and possibly write out a comparison with a lesser property nearby.

There's not much room on the basic listing card to tell prospects what makes your home special. That's why it's worth attaching a separate sheet that highlights the extras.

"We listed every little detail of everything that had been done. And we did find a buyer who fell in love with the house," recalls Ms. Hulbert of the over-improved property in Silver Spring.

If your house is close in price to another nearby property that lacks many of the same upgrades, it can be persuasive to show a point-by-point comparison of the ho-hum house, Mr. Freedman suggests.

* Be sure your house benefits from at least one "brokers' open house" during the first three months of your listing.

A so-called "brokers' open," which brings realty sales people through your property, can be a powerful marketing tool -- even more powerful than the customary public open house.

That's because every agent who is impressed with your property can influence serious customers to see the place.

And a pool of serious customers offers the best chance of finding your buyer, realty specialists point out.

"Words mean one thing. But seeing is believing," Mr. Freedman says.

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