Ensure That What you Spend on a Property Really Adds Value
Valuers are often asked whether spending money on improvements will add a commensurate amount of value to an individual property. Clients are often disappointed when told that relatively expensive capital items might add little to the overall value, while some minor expenditure can add a lot.
It all becomes very confusing. In order to demystify this we have considered some representative scenarios.
What Adds Value to Your Property?
It is important to distinguish between functional items which do not add value and contributory (value) items which might add value.
Functional Items are those things that a buyer would reasonably expect to be in functioning order. These include integral parts of the structure such as foundations, exterior cladding, roofing, plumbing & wiring. A defective functional item DEDUCTS VALUE. Conversely a super adequate functional item DOES NOT ADD VALUE.
For example, a buyer can reasonably expect that when a tap is turned on then water will flow. New plumbing will give comfort that water will be likely to flow in a trouble free manner for the foreseeable future but it does not add value. Commonly we are asked whether ï¿½copper pipesï¿½ add value. They may be an indication of overall quality but in themselves they are merely part of the plumbing.
On the other hand if a functional item is defective and needs replacement either immediately or in the very near future then a DEDUCTION is appropriate.
For example if the roof needs immediate replacement or the cladding is inadequate (e.g. Weatherside) the cost of replacing the defective product with a functional material needs to be considered.
What constitutes Contributory Value?
When assessing whether an item adds value in a certain circumstance you need to consider its effect with reference to the competing property sales in your location (i.e. the item cannot be considered in isolation).
Items that add value are generally those features that either none of the comparable properties possess or are far superior in terms of quality (i.e. super adequate).
For example the subject property may have a particularly nice in ground pool, additional outbuildings, extensive decking, superior quality kitchen, air conditioning, central heating, etc.
How much extra do these items add?
Remember the maxim is added value. This is an amount in terms of cost over and above the standard expected from a similar property in the subject location. If every house in your area has these, then they would add no value. On the other hand if nobody had them then they may add a great deal to the overall value.
For example if a house owner replaced an adequate ($15,000) kitchen with a super adequate ($50,000) kitchen, the added value at the most is $35,000 and not the full $50,000.
Low Cost ways to maximise value
Presentation, presentation and presentation
Forget about location, location, location you canï¿½t move your house. However, you can maximise the way your house looks.
- Before showing your property, ensure that the grounds are clean and tidy. The grass is neatly mowed and any rubbish, car wrecks and associated demolition material are removed ï¿½to the local land fill.
- If you have an outdoor pool or spa, either have it filled with clean water or if empty have it washed down and clear of leaves and debris.
- If you have a family pitbull or other four legged ankle biter, consider relocating them to the local kennels for the duration of the marketing program. Remember man”s best friendï¿½may beï¿½the buyers worst nightmare.
- Clean down the exterior of the house, paintwork and guttering. Consider spot painting if necessary.
- Ensure the interior is clean and fresh.
- Remove the clutter. If you have excess furniture, hire a storage unit for a month or so. Uncluttered areas give a greater sense of spaciousness.
- Check the wet areas such as laundry and bathrooms and if there is growth, Now every actress, pop singer and reality TV st… READ MOREFollowing Orlando Bloom‘s fisticuffs with perpetual brat we’ve decided to look at some other fights of the rich and famous. treat with a commercial mould inhibitor. Note that if there is extensive mould growth it may be an indication of a more serious problem such as water ingress from another source such as a leaky roof. Have this checked out by a builder or plumber.
- Do the simple fix up jobs we all like to put off for a rainy day. Replace those tap washers, re-attach the rickety shelves, free up sticky locks, lubricate squeaky door hinges, free up reluctant windows latches, etc.
- Ensure that the kitchen and service areas are clean and fresh with particular attention to the stove cleanliness.
- If the curtains and drapes are old and dusty, consider having them commercially cleaned.
- If you know that there are to be people coming to view the property or there is an open home scheduled, consider cooking a batch of scones, or burning some vanilla essence in the stove. These aromas can impart a homely feeling.
- If you are presenting the home in winter, have the house heated and warm and have the lights on.
Most of these items can be achieved at little or no cost, yet have the potential to add thousands of dollars to the bottom line of your sale.
When home owners embark on a journey of expensive home improvements, there is always the risk of overcapitalising. This is when the development cost exceeds the eventual market value. Market values are dictated by values within the surrounding neighborhood. The value of the surrounding properties usually delimits the upper limit of value. Before undertaking extensive upgrading and improvement work, it is advisable to obtain professional advice from a Registered Valuer.
Consider a Pre-Sale Building Inspectionï¿½
Prior to putting your house on the market consider investing in a professional building inspection. These may highlight any potential problems such as moisture ingress and give you an opportunity to rectify negative issues prior to offering the house for sale. There is nothing more frustrating expending time and energy to secure a sale and purchase agreement only to have it fail on a building inspection.