- The Washington Times - Thursday, June 10, 2004

Some new-home buyers know exactly what they want in their property, from the hardwood flooring on the main level to the granite counters in the kitchen and the exercise room and media room in the lower level.Others are less certain of their desires or whether their budget can handle everything they might want.

Choosing options based on factors such as family size and lifestyle makes the most sense, but buyers should also be cognizant of the impact their decisions have on the future resale value of their homes

Sales representatives and design specialists can offer some advice.

“One of the things we encourage people to do is to do as much as possible at the time of purchase of their home because it is much cheaper in the long run,” says Earl Robinson, vice president of sales and marketing for Ryland Homes in Maryland.

“For instance, if you are interested in having a finished lower level, which would cost about $30,000, it makes more sense to wrap it into your mortgage at the beginning,” Mr. Robinson says. “This allows you to take advantage of low interest rates, you can write off the interest on the loan, and anything the builder does is covered by a warranty. Plus, there are no family disruptions to be concerned about, the way there are if you choose to do this later.

“If you choose to wait and finish the lower level later, you’ll need the cash or to take out a home-equity loan to finance it,” he says.

Flooring is a good example of work best done when the home is built, Mr. Robinson says.

“The cost to tear up the carpet or ceramic-tile flooring to add hardwood later far exceeds what it would cost initially, and there’s that peace-of-mind benefit of knowing that what you want has been done,” he says.

“Plus, you have to look at the reliability of an outside contractor versus a builder that you know and trust. Sometimes, even if you find a contractor, it can take up to a year to get them to come and do the work because they are so busy,” Mr. Robinson says.

Sales representatives at new-home developments and the lender can help determine the difference in monthly pay- ments created by adding various options.

Buyers often need to determine which of the big-ticket options they want because choosing all of them could send the monthly payments over their budget limit. Choosing between a sunroom addition, a finished attic, a finished lower level, a brick front and hardwood flooring can be complicated for buyers who would love to have all of these expensive optional features.

“Our recommendations are always that people should do the type of things that are cost-efficient during the building stage of the home,” says Nina Goldstein, director of marketing for Winchester Homes.

“For instance, adding a sunroom is a lot easier to do initially, and a three-car garage or a side-entry garage can usually not be added later at all,” she says. “If you want a finished lower level, it is convenient to have it from the start and nice to be able to roll over the cost into the mortgage, but this is one thing which can be done later without too much difficulty.”

Decks are another option that homeowners consider.

“If your budget allows it, it’s great to have a deck, but if it’s a matter of expanding your living space versus a deck, then you should choose the option that expands your space,” Ms.Goldstein says.

Sue Martinez, vice president of sales and marketing for Edgemoore Homes, recommends keeping appearances in mind.

“Buyers should choose options that not only expand their living space, but also add architectural beauty to the house. Living space should be expanded in rooms that are the most frequently used, so for many families, that means the breakfast room, which can be expanded with a sunroom addition,” she says.

“Family-room extensions also usually make sense, especially if the extension involves more interesting sightlines from the windows, Ms. Martinez says. “Another optional feature that makes sense for many families is the three-car garage. Gaining a three-car garage is frequently a reason people do move up, especially those with growing families, so it can be a valuable addition to a home.”

Debbie Rosenstein, president of Rosenstein Research Associates, suggests that buyers work closely with sales representatives when determining which options to choose.

“People need to be careful not to overshoot what they can afford,” Miss Rosenstein says. “It’s up to the salesperson to work with people to help them make choices and yet still stay within the budget to make sure they can still qualify for the needed loan.

“The first things to look at are the structural upgrades because these are often the most expensive items,” Miss Rosenstein says. “Depending on the pocketbook of the buyers and the number of children, buyers often decide to add a sunroom or an attic or loft, and they can choose to finish the lower level later. Sometimes people will choose not to expand the structure because they want to spend more on the little items, upgrading finishes and trim.”

Upgrading finishes can be cost-effective in the long run because often the most popular optional features eventually become standard features on new homes, fueling buyers’ expectations for what they want to see in a home.

“Five years ago, most builders were not including fireplaces, but now they almost all include at least one fireplace,” Miss Rosenstein says. “Granite and Corian kitchen counters are standard now at least 40 percent of the time. If buyers choose to upgrade in their options, the market will often follow.”

Says Ms. Martinez: “As the number of standard features goes up, the number of options chosen often goes down. You have to look at the price point of your home to help you decide how much to spend.

“There are different expectations of what features you’ll find in a $700,000 to $900,000 home compared with a $300,000 to $400,000 home. You’ll naturally get a higher a return for your dollars in a higher-end home, and it may hurt your resale value to not choose to add things like hardwood flooring and Corian counters,” she says.

“Obviously, you’ll get back the money you put in on Corian counters, and formica counters might be objectionable and lower your home’s value if it is a high-end property,” Ms. Martinez says.

“If you are purchasing a starter town home priced in the mid- to high $200,000s, your future buyers may be more price sensitive and you might not want to put in as many optional features. Buyers in that price range may want to buy something less expensive and won’t want to pay extra for hardwood flooring and Corian counters,” she says.

Clearly, the amount of money spent on options will vary broadly depending on the included features in a home and the price range. Generally, many builders are seeing buyers spend more money on options than in the past.

“We’ve seen a 50 percent increase in the number of requests by buyers to use the Your Home, Your Way customization program of Winchester just in the past year,” Ms. Goldstein says. “Low interest rates are helping people afford to do more with their homes, plus homes are appreciating so much so fast that people really believe that their own home will appreciate, too.”

Mr. Robinson says, “We estimate that spending 10 percent of the base price on options is pretty much the minimum, but it’s often closer to 20 percent now due to the lower interest rates.”

Ms. Martinez agrees.

“Most people spend about 8 to 12 percent of the list price on options, but on high-end homes, that can go up to 20 percent,” she says.

While adding living space to the home can be the most financially rewarding in the long term, the most popular options also include interior upgrades.

“Buyers are focusing a lot on the kitchen as the place they want to upgrade the most, customizing their kitchen islands, upgrading appliances, adding granite or Corian counters and glass-front cabinets,” Ms. Goldstein says.

“When they can fit it on the lot, buyers are adding three-car garages and extending living space with rear solariums,” she says. “Hardwood flooring is popular for both the first and second levels, and a lot of buyers are choosing to add things like custom closets and blinds, too. Buyers in this area have always loved traditional brick fronts, but stone fronts and porches area gaining in popularity now.”

At Ryland Homes, buyers are choosing hardwood flooring for the foyer and kitchen, although ceramic-tile flooring is also gaining in popularity because it is so durable. Adding living space is also common.

“Nothing replaces square footage, so if you are looking at increasing the value of your home, adding square footage should be done right away,” Mr. Robinson says. “A lot of our buyers are choosing to add a sunroom off the back of the house, which at times can extend to all three levels, with an exercise room off the lower level, a sunroom on the main level and a garden bath or a sitting room off the master suite.

“If you want to add a deck, it often makes sense to wrap it into the mortgage because the monthly additional cost can be so small that you never even feel it, yet you get an extra room outside,” Mr. Robinson says.

“Buyers need to be educated about how to spend their money on options and to weigh the pros and cons based on their lifestyle,” he says. “While it generally makes sense to spend the money on exterior finishes such as a brick front, which often cannot be added later, sometimes that’s not the right choice for the family.

“Some people will tell us that they grew up in a home with a brick front so they need to have a brick front. But if I ask them if they had a finished lower level growing up, they’ll say yes, that’s where they spent all their time,” he says. “So if it comes to a choice between having a brick front and an unfinished basement or siding out front and a finished lower level, it often depends on the buyer deciding what they will use and enjoy more.”

When thinking about future resale value, some homeowners are concerned about staying in line with the rest of the neighborhood rather than having too few optional features or too many.

Although sales representatives usually will not specify which homes have particular options, they can give a general picture of what the neighborhood will bear.

“The higher-end buyer is usually looking for true architectural styling, looking beyond simple square footage to find a home which adds to the streetscape and blends with the rest of the neighborhood,” Ms. Martinez says. “Buyers who are looking for value would rather see larger living space for their money than greater architectural style.”

Says Miss Rosenstein: “It’s the job of the design consultant and the salesperson to guide clients a little and help them decide what’s best for their budget, their lifestyle and the future value of the home. It can take three or four hours or longer just to do the color selections and choose faucets and things like that, so buyers should rely on these experts to help them make the best choices.”

Sometimes the luxury of choice can seem more of a burden than a benefit, but buyers should realize that almost any option they choose will add value to the home and, one hopes, to their enjoyment of the home, as well.

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