That New Kitchen Won’t Beat Declining Land Values

CNNMoney has published a piece entitled It Doesn’t Pay to Remodel Your Home. Overall, I couldn’t agree more, and I have banged this drum for a while. Am I against home remodeling? Of course not. I am against the expectation that you’ll cash out handsomely in the current economy. One of the toughest jobs I have had the past few years is convincing home sellers that their improvements did not raise the value of their home, and that their value often declined.

For example, if the going rate for a raised ranch in a given market area is $450,000 and someone bought their home in 2003 for $425,000 and put $75,000 in improvements, they simply won’t get $500,000. Why? Because the buying public is skimming the cream off the top, and the homes that sold for $450,000 are by and large well matched to their place. Many improvements don’t raise value as much as they shorten market time. Equally priced homes will see the nicer one sell first. The article has a useful chart on the dollar for dollar return on improvements, and the top upgrade, cement fiber siding, only paid back 80 cents on the dollar.

In the example sited, the return on the improvements was only 33 cents on the dollar. The reason? The property the home rests on lost value for most of their ownership. Improvements seldom to never outrun property value declines. In the rock/paper/scissors of real estate, land value trumps everything. This is especially the case in fully developed New York, where land is scarce and land values are so relatively high. If the land goes down 20%, there is no improvement upon that land that can reverse the tide. As a result, many sellers who poured a ton of money into their home are understandably depressed.

Should people shun improvements? Not necessarily, no. If you have a 1962 kitchen, upgrade if you want. Just don’t expect to cash out as a result, and don’t splurge on every upsell thinking it will pay you back. It won’t for a long time, probably when styles have changed. The same goes for new roofs, furnaces, and other mechanical improvements, because buyers already expect roofs that don’t leak and furnaces that heat for their consumer dollar.

The idea is more in expectations. As I blogged recently about master bedrooms becoming absurdly opulant, improve your home for your quality of life, hopefully with an eye toward resale. But don’t expect the prospective buyers to appreciate your personalized amenities with their checkbook. In the current economy, dollar for dollar return on investment is negative until values get bullish again.

Originally posted on Active Rain

Eat & Learn: Buyfolio.com’s Matt Daimler on Customer Engagement & Collaboration in the Digital Age.

Announcing November’s Lucky Striker Social Media Club Dinner and Meeting. This month we’re fortunate to have Matt Daimler, from Buyfolio.com, whose topic will be learning how to trust & empower your customers to create stronger and more fruitful relationship with them.

“Buy-side brokers need to evolve their customer approach in an industry where data is a commodity and customers have the power of information,” says Daimler. “The buy-side brokers who focus on relationships and embrace new tools and technology that empower their customers will find success.” During the presentation, we’ll examine other industries and professionals that have successfully overcome similar challenges and relate their experiences directly to real estate.

When: Wednesday, November 9th
7:00 pm (sharp!)
Where: The Roger Smith Hotel
(Lexington & 47th St)

Seats are very limited. If you’d like an invite to the event, please click through to our Facebook page and post a request. We’ll be in touch ASAP.

About Matt:

Matt Daimler is the founder of Buyfolio.com, a new online platform for NYC real-estate brokers working with buy-side customers. Prior to Buyfolio, Matt founded the award-winning travel website SeatGuru.com, one of the first websites to monetize its content by displaying advertisements through Google AdSense. After years of significant traffic and revenue growth, industry leader Expedia purchased SeatGuru in early 2007. At the time of the sale, the site averaged 1 million unique users and 5 million page views each month.

Prior to SeatGuru, Matt worked for technology companies in San Francisco and Seattle. He has a BS in Computer Engineering with a Minor in Entrepreneurship and Management from Johns Hopkins University and currently resides in New York City.

About the Lucky Strikers Social Media Club:

We are NY/Metro Real Estate and technology professionals collaborating to maximize each of our web exposure and generate business referrals.

The LSSMC meets monthly for dinner to connect and discuss the issues and challenges in the industry and how to prosper by networking/introductions. Relevant speakers attend to provide value to members and to offer their unique perspectives.

Our site, Luckystrikersnyc.com is a cooperative content syndication portal.

Lucky Strikers know that Social Media means business!

Eat & Learn: Gotham Photo Company’s Vince Collura on Getting an Emotional Response from Buyers

Real estate might be one of the largest financial decisions a person makes, but it’s often not just about practical or rational choices. More often than not, buying a new home is a gut-decision where emotions rule.

At this month’s Lucky Striker Social Media Club dinner and meeting, Vince Collura from Gotham Photo Company will join us to speak about using media to create an emotional response from potential buyers.

And…..We’re back!

Just a quick formal announcement to let you all know that the migration from our old host to the new one is complete. We shouldn’t have anymore problems. Hope to see you all tonight at the event!

-Patrick