UB Insider #62: Boosting Value in a Seller’s Market
About this episode:
If you’ve glanced at the real estate market lately, you know it’s a sellers market. When it comes to the value of a home, it’s the little things that can make a big difference. Whether you’re looking to sell your home, or just thinking of improving its value for the future, Rob Howe, residential loan officer with Zions Bank, talks about how to best boost a house’s value, why buyers find those updates so valuable and when to install or improve those extras.
[The following has been edited for grammar and clarity.]
Lisa Christensen: Hello and welcome to UB Insider. I’m Lisa Christensen, online editor at Utah Business magazine. As anyone who has dipped a toe into real estate knows, it’s a seller’s market. Rob Howe, residential loan officer at Zions Bank is here to talk about why that is and how sellers can get the biggest piece of the pie that they can. Welcome.
Rob Howe: Hi Lisa, how are you?
Lisa Christensen: Fine, thank you. Alright, so it is a seller’s market. Why are things currently so stacked in favor of sellers?
Rob Howe: That’s a great question. Right now we’re seeing a huge demand for homes. It’s kind of that old supply and demand theory where you have a lot of demand with a low supply. That’s very true in the housing market.
You have a lot of buyers right now that are looking for homes, but not a lot of inventory. So it creates this kind of balance or this weight of increased values. Sellers know that there are a lot of buyers out there and fewer homes. They can keep their prices above or close to what they’re asking. That’s really been the market for the last several years. As more people come into the valley, into the state, it creates this pent up demand of people wanting to get into homes.
So it’s a wonderful time for sellers. It’s a little bit more challenging for buyers because they put in an offer and that offer might be the second or third. They might have to put in an offer at list price. That home might only be on the market for a day or two, maybe a week. If it’s priced right it will go pretty quick. And so that’s kind of why the residential real estate market very attractive right now. It’s that typical supply and demand theory that has held true this year. I also think that will continue on for the next year or two as we get more and more people coming into the state.
Lisa Christensen: Is there a particular range of house or area that seems to be doing really well?
Rob Howe: Yeah, that’s a good question. I think it’s overall throughout Utah County, Salt Lake County and up to Davis and Weber counties. All along the Wasatch Front you are seeing this growth happening. Typically the prices range anywhere from $400-$500 thousand and less. We’re seeing this huge market, huge demand.
First time home buyers are a big market right now but their price ranges are kind of lower, maybe in the $200-$300 thousand range. Those prices and those homes go very quick because you have a lot of people wanting to get into a home. So there’s not particularly one area within the Wasatch Front. It’s all along the Wasatch Front. In working with real estate agents and working with other clients it seems that the $400 thousand price range and less is tending to go quickly.
Lisa Christensen: You have talked about how when people are selling their homes there are certain things that they can do to increase the value of their homes. And you have talked about making intelligent choices about things to update and upgrade and add on to get the most value added to your house. When people are thinking about making improvements to increase the value of their house, what are some things that they should take into consideration?
Rob Howe: As I talk to clients that are current homeowners that are looking to do upgrades, the first thing to do is to look at your budget. It’s wonderful to dream. It’s wonderful to think we can do so much to a house, but there has to be a means to pay for those upgrades and remodels. And so I always look at and talk to clients about what funds they have. What have you done as far as research as far as looking at what’s it going to cost to do a remodel, whether it be significant or small incremental updates? It’s always good to look at those costs and then you can get online.
There are some wonderful websites, cost versus value websites to say okay, what’s going to give my best return on investment? So as I do upgrades and spend money, where’s it best to go? Where in the house am I going to get the greatest return on that cost? There’s many things you can do as a homeowner by yourself – simple improvements. As you get into bigger projects it might require some outside work by contractors, by sub-contractors that know how to manage some of the bigger projects.
I would again, first look at your budget. Think, okay, how much do we want to spend? What can we afford? You don’t want to get into a project and start spending money that you don’t have. You don’t want to have to have to find other means or resources to get those funds. Then you need to look at what’s going to give you the biggest return on investment. What areas? Again, there are some wonderful websites that you can go to assess cost versus value. They’ll give you latest trends. What’s good in certain markets? Being in the mountain region, what are people looking for when they’re remodeling a home or buying a home? Then you can just start kind of walking around the house and looking for areas that need improvement or that you want to improve. Just start small. If you want to go bigger you can look at those areas too.
Lisa Christensen: In terms of updating areas of the home, it seems like the bathroom and kitchen seem to have the greatest consistent return on investment in terms of adding value. Why is it more valuable to update your kitchen or your bathroom than it is your bedroom or your living room?
Rob Howe: I think it’s more valuable because that’s what the buyers want. When you look for a home most buyers want to buy something that has an updated kitchen and updated bathrooms. That’s great for a buyer, but for a seller, for somebody that already owns a home, those are the two areas that cost the most.
Lisa Christensen: Maybe that’s why buyers want it?
Rob Howe: Yeah, that’s why buyers want it. If it hasn’t been remodeled they know that if they’re going to buy the home and want to remodel things like bathrooms, kitchens, those can cost a lot of money. Now there’s certain things you can do in those two areas that wouldn’t cost much if you can do the work on your own.
You can paint rather than replace cabinets such as kitchen cabinets. You can paint over the existing cabinets to make them feel newer. But bathrooms and kitchens are very high in a buyer’s perspective when they’re looking for a home. There’s other areas in the home that you can update that don’t cost as much as having to re-tile a bathroom or putting in a new tub or shower. Those areas are what I call curb appeal.
These are things that you can do on the outside of the home to bring added value with minimal costs – upgrading landscaping or changing some of the features outside your home. Some people will look to add a siding type of look to the home which can bring a nice value. Windows are a big area where you can really get a good return on your investment. Again, it will cost a little bit but when a buyer comes in to a new, fresh coat of paint it can do a lot to add value. But again, you need to consider, what can I afford? What can I do? So again, the kitchen and bathroom are two areas that most everybody looks to have, but it costs the most.
Lisa Christensen: Which is interesting. It seems like you would want those areas updated because they have so many appliances. They have so many amenities. But the laundry room also tends to have a lot of things. It usually has a furnace or water heater. I think it’s interesting that that’s not an area of high priority for most people.
Rob Howe: As far as?
Lisa Christensen: As far as being recently updated. When I bought my house there was no mention of whether or not the laundry room had recently been updated.
Rob Howe: I think we spend a lot of time in our kitchens. You know, that’s where we spend time in the morning and during the day or in the evening. They might not think a bedroom, which you do spend some time in, needs much upgrading. I mean, there’s not a lot in a bedroom to upgrade. But in a kitchen you’ve got appliances: a refrigerator, stove, cabinet space, countertops. There’s quite a bit that can go into a kitchen.
The nice thing about being a homeowner is that you can always find something to do. You can always find an area that needs a little work or a lot of work. It just depends on what your skills are and then being able to find somebody at a reasonable cost that can help you get those items updated or fixed.
Lisa Christensen: The joy of home ownership.
Rob Howe: It is a joy, sometimes not so fun. But it is fun. It is overall a great investment.
Lisa Christensen: When I was looking at the list of what kinds of improvements or additions can add the most value to your home one that struck me was adding a deck. It’s one of the most valuable things you can do in terms of adding value. Your return on investment is over 81%. Why do people like decks so much? Why is that such a good investment?
Rob Howe: I think it’s because we have wonderful seasons here in Utah. Obviously you’re not going to sit out on a deck in wintertime, but in the spring, summer and this time of year, Utahns like to be outdoors. So having a deck in our market, where people can get out of the house and have a place to relax, have a place to visit with family and friends can bring a lot of satisfaction and joy. And so when people are looking at homes and they have a nice deck outside that can bring a lot of value to that homeowner. It’s become almost an added room to your house and doesn’t require a lot of upkeep.
Lisa Christensen: No heating.
Rob Howe: No heating, yeah. It used to be that you’d have a wood deck, and over time, if not treated properly, it would kind of fall apart. But now we have other types of materials like vinyl, where if treated properly the deck could last for your homeownership. Again, it’s just about finding the right cost and not going overboard.
Obviously for people that want to spend time outside, you can really get into a lot of costs and expensive ways to put in a deck. In a lot of homes, whether you have a deck or not, there are fire pits. Many people and manufacturers build or have these portable fire pits. People just want to be outside sitting around a fire and enjoying the seasons that we have here in Utah.
Lisa Christensen: Getting that outdoor feel without actually having to go…
Rob Howe: Without camping. Without having to pack up a tent and sleeping bag. But that’s a great area. And again, it’s one that you will result in a good return on investment.
Lisa Christensen: So when people are thinking about making these updates, when is the best time to do that? Should they do that sooner rather than later so that they can enjoy them themselves? Or should they wait and think about it as an investment for adding value to their home and do it right before they’re ready to sell?
Rob Howe: Great question. I believe it’s always best to kind of do projects, small projects, incrementally. I mean, if you’re going to make updates to your home or remodel you might as well enjoy it. You might as well enjoy that process and enjoy the amenity of having a new bathroom or whatever it might be. You can enjoy it and then later get that return on investment when you sell the home. My philosophy is to always look for incremental improvements. Just do something small. It doesn’t have to be every week.
I have a list of improvements that I want to do at my house. I try to cross off certain items and the list just keeps getting longer and longer. But I like to do it because I like to enjoy it. I like to enjoy seeing that change take place. Even if it’s just a simple bedroom that we’ve repainted, it just adds a new feeling. It feels like it’s new again. So I’ve always felt like if you can do it while you’re living there, you’ll enjoy it. But some people want to hold off. Maybe funds or means to pay for those items aren’t available and they have to wait till other events happen in order to do those things. Waiting isn’t a bad option, but you’ll wish you would have done it earlier. I know I’ve done that in the past. We did some improvements and I thought, why did we wait so long to do it?
Lisa Christensen: Alright. Well thank you so much for coming in and for talking to us today.
Rob Howe: Thanks, Lisa.
Lisa Christensen: Thanks also to Mike Sasich for production help. Make sure to keep up with us on social media at @utahbusiness and drop us a line at email@example.com. Thanks for listening.