To Move or Improve?

By on 14 August, 2013 in Sandra Nickel with 2 Comments

Recently, Stephen and Kate emailed me that they were considering trying to buy the house to the rear of theirs. Why would they do it? Because they wanted to make their backyard deep enough to add a pool, basketball court or studio. (Editor’s note: or horseshoe pit, or shuffleboard, or …)

My responses to them caused Stephen to suggest that I share my thinking on the move/improve topic with you all, so here goes.

In a perfect world, we love our homes.  After all, it’s our home — isn’t it? Just the word “home” usually conjures up all kind of warm, fuzzy feelings and stirs deeply felt emotions, so it’s no wonder we sometimes consider less-than-prudent improvements rather than think the unthinkable — move!

I understand those feelings all too well. In 1995, I felt I could not live another moment with my tiny master bathroom, so I had it expanded. I now have a bathroom in which I can move around and plenty of bright light, too, thanks to a skylight addition. And it’s still only a bathroom. It has no “bells and whistles,” just a fiberglass tub-shower unit and imitation marble counter top. The bottom line: We added 25 square feet to the tune of $12,500 or $500 per foot. And we added darned-near nothing to the market value of our home!

You’d think I’d have learned, but no. Since then, we’ve also added a covered patio which connects our detached 3-car garage to the house. We no longer get wet going from house to car and may have added $1,000 to the home’s value — at a cost of just under $3,000.

I tell you these stories so that you’ll know I truly do understand the instinct to improve. Hopefully, you’ll remember when you’re hit by the notion to throw good money after bad, which it no doubt one day will if you stay put long enough!

If you just “have to have” a swimming pool, buy a house with one already in place. If you put one in yourself, you might just as well stand in the back yard and set fire to the $4,000 or $5,000 of the cost that you’ll lose before your brand new vinyl-lined hole in the ground fills with water. That’s right — the typical in-ground pool adds only $4,000 or so in resale value to a Midtown Montgomery home. So if it costs you $8,000, you’ve just tossed $4,000 away.  The higher the upfront cost, the more you lose.

And I wish I had $100 for every time I’ve had to tell homeowners with a garden cottage or detached rental unit that it contributes a maximum of $15,000 to their home value. If I did, I could take the European vacation that I long for! You see, the value of an “amenity” is determined not by its cost, but by how many people will actually pay extra for it. And in the case of a rental unit on the property (or a swimming pool, for that matter), for every person who thinks it’s great, there is one (and often many more) who think just the opposite.

If you’re thinking about jazzing up your nest, look around first to see if you can’t find another home with the jazz already there. Ask a REALTOR how much your planned improvement will add to the value of your home before you actually do it. And if you hear what I expect you’ll hear (“a lot less than the cost”), the decision to move/improve may be an easy one.

If you don’t trust us salespeople for fear we’d say anything in order to earn a commission on a listing and sale, call an appraiser and get two appraisals — one of your home as-is and a second as if the planned improvement were already in place. If you’re a reasonable person, the reality of what you’re about to do to yourself financially may bring you to your senses.

Then again, did I mention that hubby and I have been thinking about moving some walls?

Sandra Nickel has been listing and selling residential real estate for over 29 years, most with an intense focus on Montgomery’s Midtown neighborhoods. Sandra serves on the Mid-Alabama Coalition for the Homeless, the Cloverdale Business Coalition, Historic Southview, the Volunteer and Information Center, Landmarks Foundation and her own neighborhood Garden District Preservation Association.

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There Are 2 Brilliant Comments

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  1. Rose La Pira says:

    Great post! So true for all of us. We always want more and then not really use everything that we have.

  2. Rich says:

    Interesting article, Sandra. I think that there is an entirely rational reason to make improvements that don’t increase the net equity in your home, however. Namely, the intangible gain from enjoyment of the improvement. Your bathroom improvement might not increase the value of your home, but you will enjoy it every day right up until you sell. The only situation in which a pure cost/equity calculation should be the determining factor is in making improvements to investment property.

    Thus, I’m not certain that it’s “throwing good money after bad” to make improvements, so long as you can justify the cost as a “consumable” expense, rather than an investment. Think of it this way. If you pay for that vacation to Europe, you have nothing to show for it, no increased equity in anything. Thus, a consumable expense. Yet, we still take trips, no?

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