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Cover story: Home options that add the most value
Question of the Day
In the excitement of buying a brand-new home and choosing the features and finishes they desire, the last thing most buyers are thinking about is selling that home. Resale value is not always at the top of the list of considerations of new-home buyers, yet the choices made in the builder’s design center will have an impact on the property’s future value.
New-home buyers always should pick the options they love and that will enhance their lives while they live in the home, but real estate experts also recommend choosing options based on the neighborhood price range and focusing on items that cannot be added easily later.
“While structural upgrades are a good place to start, you never want to be the biggest house in the neighborhood,” said Mike Wagner, an associate broker with Keller Williams Realty in Leesburg, Va.
“For example,” he said, “if most of the homes in the area have a finished lower level, you definitely want to do that, too. But if you also add a finished fourth level and therefore have more square feet than any other home, you’ll have a hard time getting your money back when you sell it. You might be able to ask $50,000 more, but not $100,000 above the neighboring homes.”
Donald S. Boucher, president of Boucher & Boucher Inc. in the District and president of the Washington, D.C., Metropolitan Area Chapter of the Appraisal Institute, said homebuyers get the best return on their investment when they choose options similar to those in other homes in their neighborhood.
“You don’t want to be the house to stand out, because when you go to sell and your house is 3,500 square feet and the others in the community are 2,700 square feet, you aren’t going to be able to sell for that much more money than your neighbors,” Mr. Boucher said. “Sometimes if you are the smallest house in the area, you’ll get a little bump up in price, but if you are in a community of $500,000 homes and you added $100,000 in options, you’re still not likely to sell for $600,000.”
“My sense is that your home is for shelter now more than for rapidly building value, so buyers are better off spending money on what they really want,” Mr. Melman said.
An NAHB survey in 2008 showed that typical upgrades (appliances, cabinets, flooring, landscaping) averaged $16,844 - or about 5 percent of the sales price of homes - as reported by responding builders. Buyers of a $400,000 home who choose to spend 5 percent of the sales price on options would spend $20,000, but many builders offer cash toward options or specific options as a buyer incentive.
Many buyers want more living space, and builders often offer a finished lower level and sometimes a finished attic level on single-family homes and luxury town homes. Additions can be costly and sometimes impossible, depending on the lot or community rules, so real estate experts suggest choosing structural improvements as options instead of upgraded appliances or other items with a shorter life span.
“A typical morning room addition through the builder might cost $25,000, but if you try to do this later, it could cost at least $10,000 or even $20,000 more,” Mr. Boucher said. “Things like a finished lower level or finished attic may also be cheaper to do from the start.”
Mr. Boucher said anything that adds to the curb appeal of a home, such as a brick front or stone accents, can be a valuable option because it makes buyers feel the home is solidly built.
Though buyer preferences change over time, a recent NAHB study showed that the top 10 features buyers want are centered around storage and energy efficiency. Buying a new home with desirable features, such as a well-lit laundry room with extra space for storage and perhaps a built-in ironing board, could add long-term value to the property, Mr. Melman said.
“Energy-efficient windows, appliances and HVAC systems are all on the top of the list of buyer preferences,” he said. “Buyers also want ceiling fans for their energy efficiency and value.”
Mr. Wagner said adding the wiring for ceiling fans as an option can save money compared to installing them after the home is finished. Recessed lighting is another feature that’s easier and less expensive to install when the home is being built. He said buyers who are handy may want to consider finishing the lower level themselves at a later date rather than paying the builder.
“If you do choose a finished lower level because you want that living space right away, I highly recommend adding a full bath rather than a powder room because the full bath adds more value,” Mr. Wagner said.
Some features add a “wow factor,” Mr. Wagner said, but are not necessarily going to add value to a home.
“A finished fourth level or loft makes sense if the neighborhood supports it, especially if it’s a luxury town house, but you may not get your money back on it if other homes in the area don’t have this feature,” Mr. Wagner said. “Whirlpool tubs were in vogue for awhile, but the truth is that most people don’t use them.”
Kitchens and baths sell homes, Mr. Boucher said, so buyers may want to concentrate their dollars for options in those areas once they have made the decision about structural improvements.
NAHB research shows buyers want an eat-in kitchen, plenty of counter space and a walk-in pantry for storage.
“Depending on the price range, buyers expect hardwood and ceramic tile floors and granite counters, stainless steel appliances and hardwood cabinets in the kitchen,” Mr. Wagner said. “But you’ll have a wide range of choices on these items, so you need to be careful of what you choose. Builders often give their buyers some money to spend in their design center as an incentive, but then buyers experience spending creep as they see all the options they want.”
Mr. Boucher points out that granite counters can cost anywhere from $3,000 to $20,000. His advice is to pick the most expensive-looking granite for the lowest price.
“Just don’t go crazy,” Mr. Boucher said. “Pick things that are good for you and for your family and try to spend a similar amount to what others are spending on options. If the typical buyer in your price range is spending $50,000 on options, then you should make your choices within that price range.”
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