Home Improvement - Don't Exceed Comps In Your Area
By Raynor James, Fri Dec 9th

For most homeowners, the pride of ownership includes aconsistent home improvement effort. While this makes sense, becareful you don't improve the property so much that you can'trecover the costs when it is sold.

Home Improvement

You've picked up a heck of a deal on a home in a niceneighborhood. The purchase price was $200,000 and you put twentyfive percent down [$50,000]. The comparable homes, "comps", inthe neighborhood appraised for $300,000. Yes, your home is a bitrun down, but that's why they have Home Depot and weekends!You'll just fix the ugly ducking up and pocket a quick $100,000in equity when



all your projects are done. What a country!

This situation definitely has potential. The value of the homeis so low when compared to the comps that a relatively quickequity grab certainly looks possible if the home can be fixedup. Off to Home Depot we go...

Let's do an evaluation of our ugly ducking. Put another way,what needs to be done to get it on par with the other ducks inthe neighborhood? Okay, we need new doors, new windows andlandscaping in a very big way. The drive way looks like a toxicdump sat on it and we aren't even going to get into the peeling,ugly paint on the home. Pricing everything, deciding to usehomeowner labor as much as possible and so on, we find it isgoing to run roughly $50,000 to makeover our ugly duckling. It'sgoing to be a lot of work, but that's what weekends are for. Weshould still come out with a $50,000 gain and $100,000 in totalequity considering our $50,000 down payment.

Budgets and Temptation

The problem with the above scenario is it is very hard to stickto a budget. If you've owned a home, you're already familiarwith this problem. If you are buying a home for the first time,watch out!

With homeownership, the structure you own quickly evolves into"my home." Once this occurs, you tend to view the quality ofyour home as a statement to the world and you want to show theworld your best. Instead of buying moderately priced cabinetsfor the kitchen, you buy custom pieces that would make BillGates envious. Counter tops soon become marble counter tops.Refinishing the driveway evolves into putting in an entirely newone with brick inlays. And so it goes.

You are no longer trying to bring your home up to the standardof the neighborhood homes. You are trying to turn the home intoa swan and swans are expensive. After making all yourimprovements, you are distressed to find the total cost being$90,000 instead of $50,000. For all your hard work and effort,you've realized only a $10,000 gain in equity.

In Closing

Make sure you objectively budget improvements and stick to thosebudgets. While there is something to be said for making a homeglow, make sure it makes financial sense.

About the author:Raynor James is with http://www.fsboamerica.org - providing FSBOhomes For Sale By Owner. Visit our "sell my home?" page athttp://www.fsboamerica.org/seller.cfm to list and sell your homefor free for one month. Visithttp://www.fsboamerica.org/buyer.cfm to see homes for sale byowner.

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