Last year I went on a listing appointment. Normally, when I meet with someone, they give me a tour of the house, and I take notes about what I see and then we sit and discuss the seller’s goals and expectations. The homeowner was a very nice lady and as we talked about her home and all the memories, I could just tell that she wasn’t interested in selling her house at that time. Maybe a more aggressive real estate agent wouldn’t even have bothered to go to the listing appointment. I have no idea. I just know that over time you tend to know what you are getting into before you actually go on the appointment.
The comparable sales of homes in the area indicated a value of this particular home at about $250,000. I asked the homeowner what she thought she would like to sell the house for and she was at about 260,000. This was a little high for the area so I asked her why. She said, “I’ve got a very nice gazebo in the back yard.” I’d seen the gazebo on the walk around the property, but I thought I might be missing something so I asked her to show it to me again. The gazebo looked to be about 10 or 15 years old. A lot of homeowners are going with a pergola now, so the buyer desire for a gazebo is going to be limited. Now I have this gazebo that is weathered and old, someone might even want to negotiate a removal of this gazebo in a real estate purchase offer. I asked the homeowner how much she’d purchased the gazebo for. She said, “five hundred dollars”. My quick math led me to a $9,500 difference in the price paid versus price asked for the gazebo. I asked her, “If you paid $500, why is it now worth $10,000?” She said that it was “an inconvenience to install it.”
This logic is quite prevalent on the seller side of real estate sales. I believe the best real estate agents in St. Louis work with sellers to explain current market pricing. Still, you’d be amazed at what someone will ask for because they did the work. A $5,000 bathroom remodel adds $20,000 to the asking price. If only it worked this way!
For the past few years, I’ve seen agents ask their sellers to provide a features or improvements sheet. I’m not convinced this is for anything except the seller’s ego. The sad fact is that a buyer is only going to pay so much for a home in a particular location. If the best house on the street sold for $400,000, and you are asking $450,000 because you remodeled one bathroom, it’s not going to work.
This was especially true during 2008 downturn in the market. People had put a ton of money in their homes only to watch prices continue to slide to below what they had invested. At that point, some homeowners chose to walk rather than to continue to pay on the home. This exacerbated problems in the marketplace.
All things being equal, you will get a little extra if you make an improvement to a home. This is not a guarantee, however, and you can certainly go overboard. I’ve walked through neighborhoods where the average price was $180,000 but someone in the neighborhood over improved and wanted $400,000. The house sat on the market forever. It would seem that people want to be in neighborhoods where there are similar homes. There’s even a saying about never buying the best house on the block.
As I left my listing appointment with the seller, I told her that I understood that she paid something for the gazebo, and there’s nothing wrong with doing things to homes to add value. Unfortunately, this particular gazebo was never going to bring an extra $9,000 to the sale price. When we talked about it, she seemed to understand that.
If you are considering listing your home, consider the repairs or improvements you made within the neighborhood you are currently living in. If everyone has granite countertops and you have Formica, even if you spend the money for granite, you are just bringing yourself to the level of the other homes, don’t expect a higher price for what is expected in the neighborhood. If you’re in the St. Louis area, and you are thinking about making major improvements and how they could affect the asking price for your home BEFORE you put out any money, please feel free to reach out. We can certainly ballpark what you are thinking versus the reality of the real estate market in your particular area.
John Schink is a real estate broker in the St. Louis metropolitan area who specializes in full service listings and buyer agency. He is a member of both the Saint Louis and Jefferson County Boards of Real Estate. If you are looking to buy a home for sale in Saint Louis, Missouri or the surrounding metropolitan area or considering selling your home, or for general real estate related inquiries, he can be reached at 314-707-4821 or [email protected]