This Home Improvement Project Offers the Worst Return on Investment

ImageMany home remodeling projects do wonders for the value of the home. Certain upgrades and renovations pay dividends when it comes time to sell, and you often can recoup the money you’ve invested in the upgrade.

There are exceptions, however. And one stands head and shoulders above the rest (or should I say below) when it comes to return on investment: 

The home office. 

Surprised? It may seem like a home office would be a boon for your home at sale time, especially considering the number of people who telecommute and work online. But the fact of the matter is, a home office seldom recoups more than 45% of the money invested in the remodel. 

Why? Multiple factors.

First, even people who work at home often don’t work at home. When was the last time you walked into a coffee shop and didn’t see a laptop open? Many people still find space outside the home to work. 

Second, a full-on home office renovation often takes up a bedroom which new owners might want to be able to convert back into a bedroom. If you’ve spent the time and money having built-in furniture added, media wiring, and other “office like” details installed, it represents a cost to restore or lost-usage for the new owners.

Of course, if you need a home office and want to have the home office of your dreams, it might be worth it to you to put the return on investment aside. But don’t undertake the project thinking it will pay off down the line. 

Curious which home remodeling projects pay off at the sale of your Lehigh Valley home? Let’s talk about what you’re considering: call me at 484-893-1234 or email joe@debandjoe.com.

Emotional Traps of Selling Your Home

I absolutely feel for clients who are stressed out during the sale of their home. While we do everything we can to make the process as smooth as possible, there are always high-stakes feelings on the table. Unfortunately, these mistakes can cost sellers thousands.

In the interest of protecting sellers everywhere, here are some of the common “emotional traps” that can directly impact how well (and for how much!) a home sells:

Emotional Trap #1: Pricing High

You’ve loved your home. You may have raised kids or started a marriage there. Everywhere you look, you see history, memories, and the reasons you fell in love with the place. I guarantee you: Buyers can’t see these. Remember: What you may think is an amenity might not be for a buyer, too. It could even be a negative. Distance your emotions from the list price.

Emotional Trap #2: Hovering at Showings

Sure, there may be times when you need to be there. But 9 out of 10 times, you’re only going to make buyers uncomfortable, get your feelings hurt when the buyers don’t like something, or take each minor complaint as commentary on how you’ve treated the place. Perhaps worst of all? You might prevent them from giving the agent honest feedback that would help you and your agent sell your home faster.

Emotional Trap #3: Turning Down the First Offers

Some of the sweetest interest in your home is going to happen in the first 14 – 21 days it’s on the market. If offers come during this time, consider them seriously! The longer it sits, the more likely it is you’re going to face price reductions. Don’t get cocky early on when offers come in and think there will be a steady stream. You might end up selling the home to these same people for less down the line.

Emotional Trap #4: Feeling Insulted by Negotiations

This may sound crazy, but when you’re in the middle of a sale, it’s a very real phenomenon. Remember: They’re not buying you, they’re buying the house. Negotiations prove the buyer is serious, so unplug from the nitpicking fast.

We provide our clients with the rational balance and support they need during the marketing and sale of their home. We’ll be glad to help you sell yours: just call us at 484-893-1234 or email homes@debandjoe.com

A Mixed Bag for March Sales Results

The March homes sales report from the Lehigh Valley Association of Realtors contains some not so good news for local home sellers. Sales in March were up 54% from February, but this is a typical seasonal increase for this time of year. Compared to sales for last March we saw a decrease of 8.6% from year to year. The average sale price for March was down almost 10% from February and 9.4% from last March. So where’s the good news? It’s not in these numbers, but in the interest rates, unemployment reports and consumer confidence surveys. As people stop fearing that they’re the next to lose their job they’ll feel better about committing to a home purchase. And as long as interest rates stay low they’ll be able to afford the home they want. If you’re currently trying to sell a home or thinking about it, those are the number to really watch.

Something to Cheer About

Several factors surfaced this past week that support the case that the housing market may be better than commonly reported:

Household Worth – The Federal Reserve reports that household net worth in the US soared $2.1 trillion during the last quarter of 2010.

Delinquent Mortgages – The MBA reports that last month the overall delinquency rate for single-family mortgage loans dropped to 8.22% at the end of 2010.

Late Mortgages (one payment late) – The MBA reports that on late payment mortgages have fallen to 3.25% of all outstanding home loans and are now at the pre-recession levels of 2007.

Debt Loads – Zillow reports the US families have shaved down their debt load in 2010 to the lowest level in six years – this could mean more sustained spending in the near term. Since a healthy housing market depends on consumers’ ability to borrower, so a cash rich household and available credit are good signs. However, the tight credit environment will keep a recovery tepid and make it difficult for many households to qualify for a mortgage. Zillow reports that it will be impossible for the one-third of Americans with credit scores below 620 to qualify.
Today’s household are now well below the household debt peak in 2007, but still above historic levers. However, in 2010 household debt fell to 116% of disposal income, from 130% in 2007.

Home Are Undervalued – Capital Economics just released a study, based on the Case-Shiller home price index. They calculate that in the Q4 2010, housing as 21% undervalued when compared with disposable income per capital. When measuring values against the FHFA index housing in Q4 was 15 percent undervalued when compared the same way.
Both measures show that home prices in 29 states dipped to a new cycle low in Q4 2010.
The same study says that the recent “de-valuing” housing inventory is attracting cash buyers and investors back into the housing market. This will have a stabilizing effect on home prices and create a more affordable market.

From the Economic Focus newsletter sent out weekly by the Fidelity National Title Company.