Home and Hearth:

Protecting Your Home Investment

By David L. Smith
As appeared in Money Magazine - May 1997

According to Bill Asdal, chairman of the National Association of Home Builder's Remodeler's Council, there are 106 million housing units in America, but we're replacing them at the rate of only 1.4 million units annually. The fact is, good housing is still in short supply in this country.

"The average age of housing is 28 years," says Asdal, "and only 1% of the market is new each year."

So given the realities of supply and demand, housing can still be a very solid investment for the average family. However, you're going to have to work harder in the '90s to make your investment grow - especially if you're depending on home equity to help finance retirement or the kids' college expenses.

First, and foremost: you're going to have to manage your home as carefully as your stock portfolio. In order to strengthen your home investment, you must know where it pays to remodel; how regular maintenance can keep your home from depreciating; and, finally, when it's time to sell and move on.

MOVE OR IMPROVE?   Deciding whether to remodel your existing home or to move is one of the toughest decisions you can make. But it's not impossible if you're willing to do a little homework.

First, ask yourself why you're dissatisfied. The answer usually comes down to wanting more space and more modern amenities such as master bedroom suites and live-in kitchens. In years past, this automatically meant moving up to a larger and more modern house, but today more and more homeowners are deciding to stay in their homes and remodel.

If you've got your heart set on a new addition, have your house appraised to find out how much it's worth compared to other houses in your neighborhood. According to real estate agent Rosemarie Morgan of Virginia Beach, Virginia, the majority of today's agents would be happy to help you appraise your house.

"When people come to me talking about remodeling, I do an in-depth market analysis with my computer," says Morgan. "I can tell them what their house is going to be selling for within one or two percent. If they love their home and want to stay there because of schools and neighbors, I caution them not to overbuild for the neighborhood."

The rule of thumb is that it doesn't pay to be the most expensive house on the block. Ideally, you should undertake significant remodeling only if your home is of average or below-average value for your area. Even then, you should limit your remodeling in order to stay within the overall profile of the neighborhood - if you expect to get a significant part of your investment back at resale.

REMODELING WITH TODAY'S MARKET IN MIND.   What kinds of remodeling proects make the most sense? According to building contractors, real estate agents and industry associations alike, it's hard to beat remodeling your kitchen. Depending on where you live, you will recoup anywhere from 90 to 150% of your investment in an updated kitchen when you sell your home.

Adding an additional bathroom especially if you currently have only one bath, is a close second, typically returning to the homeowner something between 90 and 125% upon resale of the house. Even a remodeled bath makes a pretty wise investment these days, returning 75% or more, especially if it's part of a roomy master suite - one of today's hottest features in new home construction.

"Master bedroom and bathroom suites are the big thing," agrees contractor Philip Bransetter of Lansing, Michigan. "People seem to want a private area away from the rest of the house for lounging and relaxation."

FINDING A CONTRACTOR YOU CAN TRUST - AND LIVE WITH.   Unfortunately, most of us spend more time looking for a good hair stylist or auto mechanic than we do checking out contractors. But spending a little time at the outset of your project can save you a lot of money down the road and keep your dream house from turning into a nightmare.

A key part of this process is soliciting and comparing bids from remodeling contractors, and here's where it pays to spend extra time.

"The fallacy in the marketplace is that you get three bids or five bids and then you take the lowest one," says the NAHBs Asdal. " But that has absolutely nothing to do with this business. This is a service business and not a product business."

Asdal goes on to say that the lowest price is not necessarily the best value since a higher bidding contractor may use better quality materials and more skilled labor in his crew than the lowest bidder. Furthermore, you want to make sure that your contractor is making enough money to not only finish the job, but to warranty the work and do follow-up visits as necessary.

Bill Sutton of Sutton Siding and Remodeling, in Springfield, Illinois, underscores the importance of good customer service - for both the contractor and the customer. "Good remodelers go back on call-backs and complaints, because they know that even if a customer was somewhat dissatisfied with prior service, if they can take care of the problem quickly, efficiently and professionally, that customer is much more likely to give them repeat business than someone who had a small problem and didn't complain."

According to Sutton and other remodeling professionals, your happiness with your remodeling project will vary according to how much preliminary effort you've put into assessing your needs and selecting the right contractor for the job.

"If you're going to protect you home value, protect it just like any other investment and do your homework," says Sutton. "And when you think you've done your homework, do a little more."

GETTING THE RIGHT PRICE WHEN IT'S TIME TO MOVE.   Whatever the reason, there comes a time in every homeowner's life when it's time to sell, and traditionally, the best time is during the spring and summer months. Families are anxious to move before the new school year starts, and the lush green lawns and colorful flowers of summer will help your home with what real estate professionals call "curb appeal."

"Curb appeal is the exterior packaging of your home," explained Rosemary Chiaverini, a real estate agent with RE/MAX Preferred in O'Fallon, Illinois, "and packaging is what sells any product emotionally, whether it's groceries or a new suit."

Virginia Beach broker Rosemarie Morgan also stresses the importance of first impressions. "Buyers are looking for that sparkling house that will grab their hearts, because most people buy on their emotions."

Although all real estate agents seem to have a favorite gimmick or pet peeve when it comes to getting a house ready for sale, everyone seems to agree on a few basics:

• Make your front door sparkle. Give it a fresh coat of paint and consider adding a new brass knocker and kickplate.
• Powerwash the siding and give your windows and trim a new paint job.
• Cut the bushes back and keep the lawn mowed and trimmed. Plant some cheerful annuals around the house for color.
• Paint the interior of the house in light, neutral colors. As real estate agent Chiaverini says, "you get more bang for your buck in paint than anywhere else."
• Declare war on clutter. Store extra pieces of furniture to make rooms look larger; and clean out your closets and cabinets to show off storage space.
• Make your kitchens and bathrooms sparkle. Regrout tiling, scrub and scour sinks and toilets. Clean extra appliances and other clutter off the countertops.
• Fix everything that drips, squeaks and rattles: railings, faucets, light switches, stairs and floorboards are the big offenders here.
• Shampoo your carpets - especially if you have pets, and if the carpets are worn, replace them. Choose light, neutral colors such as taupes, grays, and creams. A favorite broker's trick: add heavy padding to make economy carpeting seem more luxurious.

Most items on this list will cost you more elbow grease than cash, but don't stint on necessary repairs. They can make the difference between a house that sells quickly, and one that languishes on the market for many months.

If there's a secret to selling your home quickly and painlessly, it's this:

"You should begin preparing to sell your house the day you buy it," sums up Rosemary Chiaverini. "That way you can enjoy living in the nicest home you possibly can afford, and be proud of it."