Expert: Jessica Bryan - 6/4/2008

Question
Hi Jessica,

I hope you will be patient with me as I need to give you background information.  I'm an American living in Vancouver, BC at the moment, but am returning to Nevada due to my husband's death last year.  Even  though the property is in Canada, my questions are not specific to the location.  My house is in a 55+, gated community of 40 homes.  It is a unique and desirable community and most units sell in a week without an agent.  This is a positive, but also makes it very difficult to determine what is a fair price.  There have been two sales of homes with the same floor plan as mine since October.  The asking price for the first one was $279,000 and sold for $269,000.The other sold this week, was offered at $299,000 and sold for $289,000.  All of the homes are 18 years old.  Interior painting was the only improvement in both cases.  The original condition is vinyl in the bathrooms, kitchen and laundry room with carpeting in the other rooms.  The kitchen cabinets are the inexpensive white melamine, with Formica counter tops and only cover half the kitchen.  The bathroom vanities are similar.  When we bought our house four years ago we had a home improvement loan of $30,000 rolled into the mortgage.  With this loan we gutted the kitchen and installed custom maple cabinets, with designer hardware, the entire length of the kitchen (15 feet), granite slab counter tops, and ceramic tile floor.    The appliances and range hood are stainless steel.  We also took up the carpeting and vinyl and replaced them with tile in the entry, laundry room, and bathrooms, and laminate elsewhere.  While the bathrooms have new floors, they have the original vanities, mirrors, and lights as the money only stretched so far.  We also replaced the gas fireplace three years ago.  Also my home is in a much better location in the development.  Once the residents heard I was planning to sell, their friends and relatives have called to discuss buying the property.  Setting a fair price is my first concern.  It will be the highest priced home offered and there will be some "sticker shock".  I have asked several agents for comps but, because of the uniqueness of the development, they have not been able to give me any.  They suggested that I take the assessed value and add 10%.  This does not work since it would price my home thousands of dollars lower than the ones which sold recently.  While I wish to rejoin my family soon, I have no real pressure to sell.  I need to get the most I can from the sale as I was left with almost no life insurance and a mortgage to pay.  I plan to buy something close to my kids where I can pay the mortgage from my US pension, so the bigger the down payment the better.  Can you also advise me if there are reasons to use an agent in this instance? (I do have an attorney). Also, one last thing,  some of the agents advised that I repaint the interior and update the bathrooms to reflect the kitchen updating.  Others say to leave it just like it is and let the buyers decide what they want to change.  I don't want to invest more money that I will probably not recover.  I don't mind painting inside, but don't feel updating the bathrooms will make much difference in the final sales price or the time it takes to sell.  Thank you so much for bearing with me.  Any advice you can give me is GREATLY appreciated.

Linda

Answer
Dear Linda;
I will advise you as I do many of my clients who are considering making changes to their homes before they list them:
Updates and renovations are excellent means to get a home sold quickly.  Beyond that the cosmetic changes are for the owner's personal enjoyment. It is seldom that the owner will recover the full cost of the renovations.  While your kitchen will present itself beautifully and will hold a higher value in the mind of the Buyer, it will not net you an additional $30,000. Considering that you have a four year old kitchen  renovation, there is also some depreciation that you have in there as well. I suggest that you list your home at the price of the last sale of an identical home ($289,000) and add an additional $15,000 to $20,000 for the kitchen.  Then, show what your costs were to do the kitchen on any promotional materials you have in the home so the potential Buyer understands that you are discounting the cost and this is a bargain to someone looking to do the same changes themselves on another lower-priced home.

As for painting the interior and changing the bathrooms; I suggest that you keep the bathrooms the same--do not add additional costs.  If the paint needs freshening first try cleaning or using a magic sponge to clean off scuffs and dirt.  Otherwise, get a quick and inexpensive paint job to cover old faded walls and brighten up the place.  

The thing that concerns me is if you put too much money into the home it may not appraise since appraisers tend to look at other homes in the neighborhood and will not give a considerably higher value to one home for cosmetic changes.  If you want, you can call an appraiser to discuss this.  It might give you a better feeling about the home's actual value.  I don't know about the contracts in Canada, but in the US there is usually a condition of sale that says that the home must appraise.  

Best wishes,
Jessica Bryan