When Ready to Sell, Fix Up Outside First
The single most cost-effective investment you can make to increase the value of your house is to buy a roll or two of plastic trash bags. Stuff them with junk outside the house–from beer cans to raked leaves.
Nothing could be more common-sense than cleaning up the yard and exterior, right?
“You’d be surprised at how many people don’t recognize the importance of doing these kinds of items,” says Steve Berges, a real estate investor in Michigan who buys dilapidated houses, fixes them up and sells them for a profit. His advice: When renovating a house or preparing it for sale, spend money on things a buyer can see.
Any successful investor is adept at spotting hidden value, buying low and selling high. That’s what Berges does when he scouts properties, generally houses 20 to 70 years old. “One of the things that we like when we drive up to a house is what we refer to as high ‘Yikes!’ appeal,” he says. He defines “yikes appeal” as the state of a house in which a normal person would drive up, say, “Yikes!” and keep on driving.
A house with high “Yikes!” appeal has weeds, a boat parked in the front yard and an old car transmission on the side of the house, nested amid beer cans. A rain gutter hangs down. Overgrown shrubs obscure the front windows, creating a dreary interior. People actually try to sell their homes in such condition, creating opportunities for bargain-hunters.
Working the other side of the equation, Berges has written a book called 101 Cost-Effective Ways to Increase the Value of Your Home. The paperback from Dearborn Publishing ($18.95) will be in bookstores in June.
The book lists various kinds of exterior and interior improvements (improving the porch, replacing kitchen cabinets) and ranks each project’s “impact value.” A one-star impact value means the project won’t add to the home’s value and might actually lower it; a five-star impact value means the project could potentially add $1.50 or more to the home’s price for every dollar spent.
A lot of money is at stake. Homeowners spent $166 billion on home remodeling in 2001, according to the Harvard Joint Center for Housing Studies. “Families that spent more on home improvements also realize the greatest rates of price appreciation,” the Harvard study said.
Berges says the key to realizing price appreciation is thinking like a buyer. Buyers drive up to a house and look at it. If they’re not repelled by what they see, they step inside and look around.
Based on that typical experience, Berges formulated the following guidelines:
Spend money on what can be seen;
Fix up the exterior first, then the interior;
Focus first on what Berges calls the “Yikes!” appeal–clutter, trash and bad smells that drive down a home’s value.”Visibility adds value,” Berges says. “The improvements that are most visible are the things you need to focus on.”
This means that, if you have $10,000 to spend, and you can either spend it all on a new roof or all on repairing a cracked foundation, you should replace the roof.
Because an unkempt yard and ugly exterior can cause prospective buyers to drive away without going inside the house, you should work on those first. Clear up clutter, then concentrate on landscaping. Paint. Have the roof cleaned.
Inside, reduce clutter and clean everything. If you own a pet, invite a non-pet owner inside the house to sniff around. You might be inured to the smell of your Weimaraner’s urine, but the stench could make a buyer retch.
Berges’s book is geared toward middle-class homeowners. On the upper end, buyers often yearn for amenities that middle-class people might not expect. For example, one of the hot trends in the Hamptons on Long Island, says architect Marcia Previti of Gillis Previti Architects, is for two dishwashers in the kitchen. “You might reserve one for glassware and one for pots and big dishes,” she says.
Adding a second dishwasher might be a sound investment in the Hamptons or in Beverly Hills, but it would be a waste of money in Toledo or Peoria. Berges’s final piece of advice is to keep up with the Joneses, but “you don’t want to over improve.”