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Ready Set Sold with Bryan Vogt #14-02: Why adding living space is a loser for sellers

August 26, 2017

Bryan Vogt: Welcome back to, Ready Set Sold. I’m your host, Bryan Vogt. One of the things I failed to mention last segment, was you can also catch us on Facebook. We’re kind of everywhere. In the last segment was about the need for the improvements, that we talked about last week, but also talking about what not to update. Many times, the intent is good. The intent that sellers want to do, is to make those improvements, and that’s always great, but unfortunately sometimes they make those wrong improvements.
Probably the first rule of thumb you should look at, is to concentrate your improvements and upgrades on pre-existing living space, not adding more. I cannot stress that enough. Stick with what you have. Focus on your above level. So you have a basement, doesn’t mean you shouldn’t do things with your basement. It just means you really want to focus your improvements on the upstairs. Where’s the living space where most of the time is spent.
What you don’t want to do, and we just heard this story. I heard a story not too long ago, that they put on a sunroom. It was something that they wanted. They thought it would add more value. The cost of putting that on there, was something in the neighborhood of $15,000 and $20,000. Which maybe, for most people, that’s a chunk of change, but it’s not. The square footage of adding that on, is anywhere from four, five, six times the value of your home, in your location. So, the square footage, let’s say your house, just in rough figuring, and this is not a way that you want to evaluate the house, but just to kind of give you an idea. Maybe it’s $15.00 or $75.00 a square foot.
When you’re looking at the space that you get, which is not usually a lot, and the cost. That can be three or four times more. So, the idea of getting your money back, if anything, is just simply, I’ve never seen it happen. In just my professional career, and it’s been, like I said, over 16 years. It just doesn’t happen. The same thing with hearth rooms. Anytime you’re looking to add on living space, you want to stop.
You want to get the book. Okay, that’s one way, or talk to your agent. Get an agent involved. It’s never a bad idea to get your agent involved early in the process. We’ve worked with people a year, or two years down the road. They’re planning, getting into the preparation of it. Your agent shouldn’t have a problem with that, and give you some information, give you some tips, that can save you some money. That’s in the book.
Also, the basement, and the basement … Just a quick story. Happened not too long ago, and again, the sellers had lived in the house. They had an unfinished basement. They lived there I think, about 10 years. I think they lived in North Fallon, off Fallon Troy area. During that period of time, it just seemed like all their neighbors had finished their basement, and they saw the prices of what the basement was going for with those houses, seeing who did sell and I believe it was, again the price ranges was between maybe $240,000 and $255,000, something along those lines. They saw people getting that, and they really didn’t have a finished basement.
So, again watching some of the shows that’s on cable, especially East coast/West coast feeds, that they have. They got the idea that they needed to finish that basement before they could do anything. Well, in many cases, it took a lot longer than they thought. They were thinking maybe it would only take a month, but one thing led to another, and it was three months in, so that’s delayed the cost. It’s typical it’s $30,000, but the situation went even a little higher.
Long story short, when they finally put their house on the market, they did sell their home, and they sold it for in that price range. I think something like $250,000. Something along those lines. That was great, but the trouble is, they ended up putting in $40,000.00 in.
So, what’s the alternative? The alternative is, if you don’t have a finished basement, it is going to have some effect on the pricing of it, but in that situation, it may be very simply. We’ve seen it in the past where it’s $225,000. Maybe it’s not $250,000, maybe it’s $230,000. Maybe your price range is $220,000 to $230,000, and that situation, again, you save $15,000 – $20,000 that you didn’t have to spend, or even more than that.
That’s the thing you have to understand, is take your house where you’re at. If you don’t have a finished basement, that’s okay. That is perfectly fine even if all your neighbors do. There may be some fluctuation, but it’s usually not as much as what most people think.
Again, basements are good, but usually, even by the appraisal’s estimation, they usually value it, but we’ve talked to the appraiser, we’ve talked to and maybe by a third. It isn’t the same value as your above ground. Always remember when you’re making these improvements, when you’re looking at that. As I said before, I can’t stress this enough, focus on your living space you’re using right now.
Now, we talk about basements, and it doesn’t mean you shouldn’t do anything to the basement, especially depending on how long it’s been. I had a situation where, a very long time in 20 years, they still had wood paneling down, the old dark wood paneling. The carpeting was not good at all. In that situation, they simply pulled the carpeting out. They actually painted the wood. Just so you know, you can paint just about anything. It is amazing. If you haven’t done painting, or you haven’t heard about painting, it is truly amazing. I’m not sure what you can’t paint, and it also is made to last.
In this situation, what they did was is they had a downstairs. They put in new flooring. They put it on the market, and it was like in seven to 10 days. It was just gone. They had already done the updating above ground, and that was the one thing they had to do.
So again, it’s not that you need to ignore the basement. Being in the condition, it might be a situation of bringing in the realtor, giving them an appraisal. They can come look at it, and see what you may need to do. But a good rule of them is, again, it doesn’t mean you ignore the basement, but you don’t usually have to do near as much. There’s just not as near as many things in a basement, that you have to concern yourself with, than in your normal living space, when you have the kitchens, and all the bathrooms are usually upstairs, and the flooring in the bedrooms, and the things of that nature.
That’s the thing that you want to really want to focus on. So, you can have that success. You can have those updates, and it becomes almost … And that’s the thing, I think sometimes people really don’t know. They don’t know the power of these updates, and they really … We talked about it last week. But people, when you have those updates, that your house becomes just so much valuable in a buyer’s mind for various reasons.
Just for the fact is, that you have the updates. It’s ready to move in. There’s so many pluses to that. But again, when you make the wrong improvements, and I talked about it before, that you had someone that probably lost $40,000. We’ve seen people add hearth rooms or sunrooms, and losing $20,000. We’re talking serious money, that if again, you had the book, they used the book, or they just contacted an agent, understood the local market, they wouldn’t have had to do. That’s really important.
So, when we talk about the next segment is, just going to give you a quick preview, is talking about the outside of your home. One of the things you have to keep in mind is, one of the factors on the outside of the home is the appraisal process. Most people are aware of the appraisal process to some degree. It’s something like, and the appraisers I talk to, 20 years’ experience, we’re talking it’s in the 92% to 94%, I’m not sure which one it is, they put value in the current living space. They give some credit down to the basement.
Again, it isn’t near as much as the above ground living space. But the outside, the last 5% is allocated for the outside of your home, and it’s important to know that, because if you’re putting money in the outside of your home, what we’re going to talk about next segment, it’s probably not a very good idea, as far as return investment.
Hey, go get the book. It’s free. There’s no strings attached to it. If you use someone else, that’s fine. It just has valuable information. Go to Not .com., not .com. Get the book. Get it today.
Hey, you’re listening to Ready Set Sold, with your host, Bryan Vogt. We’ll see you in a few.

We’ll see you in a few.

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