Advising clients on home improvements

Before you start advising homeowners on home improvements, remember these two rules:

* First of all, never give advice before you are hired. Counseling occurs after a relationship with the client is established. Lawyers do not offer legal advice before their services have been officially contracted. Doctors do not diagnose without a guarantee of compensation. Real estate agents should do the same. Wait until the listing agreement is signed. Then begin giving tips on how the homeowner can make a faster sale or higher price by making the recommended home improvements and implementing the staging tips.

Too often, agents provide their expert advice during quote presentations in hopes of demonstrating their skills and experience to sellers. However, more often than not, sellers simply take the advice with them when they link to an agent who is less skilled but promises a cheaper rate.

* Second, tell the truth. If the sellers need to clean the house, tell them so. If they are smokers and the house smells like cigarettes, tell them so.

I once had to convince some clients to hire professional cleaners to remove the smell of smoke that permeated the carpets, walls, and furniture throughout the house. Then I made them promise not to turn it on again as long as they owned the house. They agreed under protest, but we sold the house, so they were happy. A bad smell in a house can really reduce the chances of a sale.

Likewise, appearances can kill buyer interest. If the house is cluttered with too much stuff, say so. If the pink color of the exterior will make people walk by, express it. Biting your tongue will only delay the day of reckoning. Also, it’s easier to be totally upfront when you first become aware of the problem, though only after the listing contract is signed. If you advise before you get the commitment, your advice could offend sellers and cost you the quote. This is another reason to follow Rule #1 and get a signature before giving advice.

Improvements that contribute to the sale price

When it comes to preparing a home for sale, necessary and worthwhile improvements fall into three categories:

* Upgrades that bring a home back to standard.

* Improvements that correct defects

* Improvements that improve curb appeal or first impressions.
The following sections provide guidelines in each area.

Bringing a home back to standard

Before presenting a home with horribly dated decor, advise sellers to modernize the interior look to align with buyer expectations in today’s market. Sellers don’t have to overdo it; they just need to install a reasonable color scheme and implement enough of an update that the new owners feel like they can move in without an immediate facelift. Share the following tips with sellers:

* Keep upgrades simple. A total redecoration is neither necessary nor advisable. The goal is to arrive at a widely acceptable and reasonably current color scheme in paint, countertops, and floor coverings.

* Do not try to create a design masterpiece. Keep in mind that after purchase, buyers will often significantly change a home to make it their own. Vendors’ goal is to allow them to feel that their changes can happen over time for years to come; that are not obviously and immediately necessary

* Focus on the big things. If the interior of a home looks current and the landscaping, landscaping, decks, and patios are well-maintained and in good repair, the onus on buyers to make significant and immediate changes is lightened. As a result, they will be more likely to buy the house. They will also be more likely to make a more competitive initial offer than would be the case if the home had obvious exterior or interior repair or color issues. Any change a buyer has to make to a home comes from money he must have, not money he can borrow. Many buyers will use that fact as one of the factors of which house they will buy now.

* A little paint makes a big difference. Repainting is one of the most cost-effective ways to refresh the look of a home and even cover up design deficiencies.

* Stay away from the latest trends. Advise clients to stay away from the current trend with deep colors for the walls. Advise them to create a warm, blank canvas that any prospective buyer can work with.

Correction of defects

If a house has defects, the seller has two options: repair them or provide proportional monetary compensation to buyers.
For example, if a roof needs repair or replacement, both the bank and the buyer will expect the improvement. The seller can offer one of the following two remedies:

1. Process and pay for the repair or replacement.

2. Provide buyers with sufficient compensation to cover the cost and inconvenience of correcting the defect themselves. Nuisance compensation is money on top of what it costs to professionally correct the problem. The amount extended for nuisance compensation differs depending on the task and the buyer. However, in most cases, if buyers have to collate and decide between bids from contractors, organize repairs, and verify the contractor’s work, they will want compensation for their time and effort.

Improving first impressions

Any cost-effective upgrade that adds curb appeal or improves first impressions can increase the selling price. Follow these tips:

* Create dimension to the exterior of the home by adding shutters or fish scales over the garage pediment, selecting a better color palette, and no doubt spending a few hundred dollars to plant annuals to color outside walkways. The effect will increase the probability of sale and will positively influence the sale price.

* Inside the home, after upgrading the home’s paint color scheme, advise sellers to evaluate the quality of the home’s hard surfaces, including carpet, tile, vinyl, and countertops. Replacing surfaces is often much less expensive than buyers anticipate. Many options seem tasty but they are not. A vendor doesn’t need to put granite slabs on kitchen counters; simply upgrading old, cracked, chipped Formica will provide a huge improvement and be worth it when it comes to negotiating price. Choose a light and bright surface and the change can contribute to the feeling of a larger and brighter room.

* When working on a limited budget (as most sellers do), advise sellers to improve surfaces in core areas first. Focus on the areas most used by buyers, which include the kitchen, family room, dining room, and master bedroom.

Jump Improvements

As a general rule, I encourage sellers to skip any upgrades that aren’t simple or don’t affect curb appeal.

Improving curb appeal—that is, the home’s ability to show up well on a test drive—is essential because you want the prospect to walk in the door. After that, limit improvements to needed repairs, fresh paint, new hard surfaces, and a good cleaning.

When sellers ask about replacing cabinets, remodeling rooms, building shelving, replacing siding, adding decks, and even finishing basements, share the following facts:

*According to Remodeling magazine and the National Association of Realtors, the average upgrade on a major home investment recovers 81% at resale, or just four out of every five dollars spent.

* The highest average rate of return results from a minor kitchen remodel, which accounts for 93% of costs incurred.

* The lowest average rate of return comes from finishing a basement, which generates a 76% return.

* The more money you spend, the higher the risk for the seller and the less chance of making a return or even breaking even.