Risks of Over-Improving Your Property

By
January 01, 2021

Considerations before customizing your property to suit your specific lifestyle

When you purchase or build a home, it’s tempting to customize it to match every home inspiration clipping you’ve saved from the magazines. After all, it’s your home. Why wouldn’t you want it to be perfect? If you’re planning to live there for the rest of your life, you should absolutely make all of the improvements you desire. However, over-improving your property becomes a problem when you increase its resale value above what people are willing to pay in your area. 

The perceived value of your improvements versus the actual dollar amount is very different. If you spend $100,000 on an improvement that is only relevant to your family or your occupancy, the market value of the home might not reflect the same dollar amount you put into the improvement. 

If your new home isn’t your forever home, keep these over-improvement risks in mind as you’re scrolling through Pinterest, watching HGTV, and stockpiling issues of Architectural Digest. 

Home Additions

Home additions are one of the most costly improvements you can make, so be careful not to add so much square footage to your home that it’s the biggest and most expensive on your block. 

Say your neighborhood primarily consists of 3-bedroom, 2-bathroom homes that sell for around $350,000. You add an addition that makes your home a 4-bedroom, 3-bathroom home and boosts the market value to $450,000. Chances are, the buyers looking for homes in your neighborhood don’t have $100,000 of wiggle room in their budget to consider your home over your neighbor’s. Additionally, buyers in the price range of your home might not want to purchase a home in a neighborhood surrounded by homes of lesser value.

If you still want to add a home addition, you should also consider how the addition might serve a dual purpose. Perhaps it will be used as a bedroom while you’re living there, but when you’re selling, it can be staged as a home office to appeal to a wider audience. 

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Personalized Renovations

While creating a personalized renovation will benefit you during your occupancy, potential buyers and future owners might not find the same value in something that served to benefit you. 

For example, say you had nieces and nephews who visited often, so you built bunkbed shelves into the wall of your study. However, your neighborhood and home-style appeal to young couples who are just starting out; potential buyers won’t understand how the feature appeals to them. Or, say you have a niche hobby like music production, so you create a recording studio and vocal booth in your second bedroom. Unless the potential buyers are also music producers, this feature subtracts value from the home. 

When you add a personal touch to your home, the best rule of thumb is to make sure it’s easily reversible. That way, you can remove it for the new owners and maybe even take it with you to your new home. 

Additions That Are Difficult or Expensive to Repair

Expensive and unique touches set your home apart from others on the market, but what happens when those little details need repair? When the custom countertop that you ordered from Europe cracks, how will the new owner order a new one, and how much will it cost? When a lightbulb goes out and the socket only fits a single, rare bulb, where will they purchase another one?  

If it costs too much to replace or repair a custom improvement to your home, the improvement loses its value and becomes a burden on the new homeowners. Consider this before you seek out rare pieces that are impossible to upkeep.

How to Avoid Improvements that Negatively Affect Resale Value

Before you make any significant improvements to your home, take steps to understand what it’s worth and how much buyers in your target market are willing to pay. You can research other homes for sale in your neighborhood and area to see what comparable homes are selling for, and which ones are selling quickly. Then, use that knowledge to inform which improvements you can enjoy and recoup. If the value of your area does not support the value of your home after improvements or additions are made, consider selling your home and buying a home that better suits your lifestyle.