Renovate for Love

Owners of real estate feel pride, often justified, in their renovations. When I tour a property with a prospective seller, she will often point out to me the beauties of her California Closet, or her Viking range, or her Sherle Wagner sink (often bought 20 years ago!) We all experience satisfaction with what is ours, but that also means we do not see it objectively. So it is important for sellers and buyers of real estate to understand the actual value of renovations over time.

• First and foremost, sellers rarely receive dollar for dollar what they invest in a renovation. We see this in particular with properties which, although recently redone, are going onto the market for one reason or another. A seller will say “I have a million dollars in this renovation, so you add that on to my cost to purchase and that is what I need to get going out.” Unfortunately, that is often not the way it works. Unless market escalation is raising all properties, it’s a rare buyer who wants to pay for the exact choices someone else has made. Even if the work is new, buyers will usually factor the cost of the choices THEY want to make into the offer they provide. Often even a new renovation will return only 50 or 75 cents on the dollar in a flat market.

• Second, once a renovation is five years old, most buyers will believe that everything needs to be redone. There is no premium for a 10-year-old renovation because really, for most NYC buyers today, there is not that much difference between “good” condition and an estate. Hopefully the “good” condition apartment has upgraded electric, but otherwise buyers will alter each of these units in the same way: new baths, new kitchen, new built-ins, new decorating. That’s just the way it is today.

• Third, an inverse correlation exists between the specificity of a renovation and its value to a subsequent buyer. The less neutral the palette and more unknown the brand names, the greater the difficulty a seller will experience. The renovations which tend to retain value are neutral in palette and luxuriously, timelessly minimal in design.

• Finally, sellers should remember that time on the market can be as important as price in seeing value added from a renovation. Even if a buyer knows he has to re-do, a serene and uncluttered property creates positive reactions, and positive reactions lead to offers. So a great looking property can subliminally motivate a buyer even if he knows he has to renovate.For a motivated seller, this can be another source of substantial added value.

A home renovation project should be a labor of love. It should always reflect the owner’s taste and aesthetic values. But some renovations will appeal more to a subsequent buyer than others. This is true even when, as we often see, the subsequent buyer believes she will just paint and move in but ends up redoing everything! It’s never a bad idea to have the notion of resale in mind when renovating, especially when the anticipated ownership window is three to five years. In the end, here’s my advice: make your home the home you want, but try to keep it open and airy so it won’t require a complete do-over in case you want to sell it. And spend the money knowing that you are doing it for yourself, not because you expect to get a dollar for dollar return. You cannot count on the return, but you CAN count on the pleasure you will enjoy every day from living in the home you created.