I recently went on a listing appointment where I needed to have a tough conversation with the prospective Seller's. Their home is fairly new and is in a lovely sub-division. The area has continued to show positive appreciation and substantial growth.
As I toured their absolutely lovely home and was given a spreadsheet of the many, many upgrades to the home, I knew that a tough conversation was looming. Although the home was stunning, the amount of upgrades to the home were way more than they could ever hope to recover right now based on the market report for their neighborhood. It is one of those sick feelings that you dread having.
The price per square foot Sold average in this particular neighborhood is about $100 s.f. With their upgrade list which exceeded the actual purchase price of the home, they were hoping to see it listed at $135 s.f. It pained me to see the love and care that they had put into this home but at this time the market could not bear at that price per s.f.
I explained to them that even if we listed the home at their desired price and received an offer, if it didn't appraise then they would be re-visiting the price at some point. Even if a cash offer came in, most buyers are savvy and would still not desire to pay way over market value in any neighborhood.
I encouraged them to go ahead and have an appraisal done prior to listing the home. Hopefully they will see the writing on the wall from a third party.
The lessons here are:
- Unless you plan to stay in your home forever, consider your upgrades before you do them as you may not get back what you put into them if you decide to sell.
- Know what the current market value is for your home. If you put in upgrades that you feel bump your value up way over what the neighborhood can bear, understand that you most likely will not see this investment returned.
- Realize that situations do change in our lives and what we planned on doing may very well have to change quickly.
Upgrades are a good thing but only if they are consistent with keeping your home valued with the current market rate. Have a licensed agent who knows your area consult with you prior to putting in some hefty upgrades. You may decide to re-think some of them.
Having a tough conversation with a Seller is necessary when you are being honest, know the market and don't want to leave them with false hope. The conversation is necessary and hopefully the homeowners will take the time to get an appraisal and then to re-think if they even desire to sell.