Every November I look forward to reading the annual statistics provided in Remodeling Magazine’s Cost vs. Value in home improvements and remodeling. Knowing these numbers allows me to make accurate recommendations to my clients who are selling a home in Rancho Santa Margarita. They want to know, “If I remodel my kitchen will I sell my Rancho Santa Margarita home for more?” or “Is it a good idea to install vinyl windows before I sell my home in RSM, or would it just be a waste of money?”
A few years ago remodeling was all the rage in South Orange County. New homes sales with upgrades galore were a hot market. To keep up with the Joneses, many homeowners pulled money from low-rate equity lines of credit to finance a number of home improvements. At the time the cost vs. value reports indicated that money spent on some home improvements was money well spent. A seller could be reasonably assured that a $15,000-$20,000 bathroom addition or a $75,000-$80,000 second story addition would at minimum be recouped at time of sale.
I don’t need to tell you that times have changed. Selling a home in Rancho Santa Margarita is more challenging today than it was a few years ago. For one thing, tightened credit standards have wiped out a nice slice of the potential buyer pool. Additionally, the number of homes on the market, while improved in comparison to 2007, is still considerably higher than it was four to five years ago, especially given the limited number of qualified buyers. In this economy every dollar counts. Make sure that know your housing market before you hire a contractor.
Sellers need to think twice before spending money on home improvements in 2009. When every dollar counts, sellers need to be even more cautious when it comes to spending money on home improvements. It’s essential that they know what buyers in Rancho Santa Margarita are looking for when they’re ready to purchase a home.
There are three types of buyers in South Orange County real estate market:
- First time home buyers
- Investors / flippers
- Buyers looking to trade up
Marketing to First Time Home Buyers
Many first time home buyers are discovering that they can finally break into the real estate market. Prices have become much more affordable and those who have socked away some extra savings are positioning themselves to purchase. Buyer interest, especially in the starter home category, is definitely on the rise. There is a high percentage of short sales and foreclosures in this price bracket. The majority of these buyers have higher LTV loans and are looking for as many improvements as possible. Many don’t or won’t have the additional funds to make home improvements right away. There is a considerable amount of competition at this level, with upgraded homes (priced accurately) seeing the majority of the action.
Eventually most of these buyers will revise their wants and needs list and will become more realistic about their requirements. That being the case, I would advise sellers in the Starter-Home bracket to limit their spending on any improvements and focus only on immediate safety & health maintenance issues. Sellers will not recoup the cost remodeling for a home in this bracket at this time.
Marketing to Investor / Flippers
Investors and Flippers are buying into both the low to mid-range condos and single family home markets. They have funds from a variety of sources and they are banking on the fact that this brackets of South Orange County homes are close to the bottom of the market. These types of buyers are strictly by the numbers purchasers. They expect a certain return on investment and if the numbers don’t pan out, the deal is off. Flippers will make their own improvements and lower bracket investors require very few. Don’t spend your money here!
Marketing to Trade Up Buyers
This is the one group that may be looking for improvements in place. The majority of Trade Up Buyers are looking to accommodate a change in family size. They are families who have outgrown their current home, are expecting additional children, or are individuals who have merged households and increased their buying power. Busy schedules and kids underfoot may be one reason this group prefers to purchase a home that has already been remodeled. If you’ve ever done a major remodel with small children in the house you know exactly what I’m talking about. In general this group will be satisfied with miscellaneous mid-range improvements. A minor kitchen remodel would be perfectly acceptable as long as the overall appeal of the home was pleasing. Trade up buyers are typically not looking to trade up improvements as much as they are looking to trade up in location, view or home size.
Overall this is not the time to throw money in improvements. If you are concerned that your home lacks some of the upgrades available on comparable homes in your neighborhood, reduce your asking price accordingly. If there are general maintenance items that have been neglected, you probably want to address those. The most important thing to keep in mind is that a home will sell when it’s priced correctly.
For additional information please contact me using the link underneath my photo on the right side of this page.
Click here to read: 5 Home Improvements For Rancho Santa Margarita Home Owners to Consider in 2009
Click here to read: 4 Home Improvement Projects to Avoid in 2009
