How would you know if you are overbuilding or not? Here are five questions to ask and then five golden rules of real estate to keep in mind. What do you think?
Five Questions to Ask to Make Sure You’re NOT Overbuilding
1) Will buyers pay for this feature in the resale market?
2) Is what you’re doing consistent with the neighborhood or will your property stand out too much in a bad way?
3) How much value will you recover in the resale market from the cost of your project? Is it worth it to you from an economic standpoint?
4) Will people think, “wow, I would NOT want to live next door to THAT house”?
5) What do buyers really expect in your neighborhood for both size and upgrades?
Five Golden Real Estate Rules to Remember
1) Be in Touch: What are buyers really looking for in your neighborhood? There is a place for making your home comfortable and doing some things that are just for you, but try to stay in tune with the expectations of buyers also. Do buyers really want that Olympic-sized swimming pool or an underground Bat Cave guest house? (well, I would want that).
2) Principle of Conformity: There is something about blending in with the neighborhood that is desirable for buyers. Generally speaking, be a nonconformist in life, but a conformist in real estate.
3) Cost Vs Value: There is a difference between what buyers will pay for a feature and how much it costs. A $100,000 remodel in a $200,000 neighborhood does not make a home worth $300,000. Likewise, a $70,000 backyard remodel probably doesn’t make your home worth $70,000 more.
4) Ugly Ducking: Nobody wants to live next door to an ugly duckling of a house. There is something about being artistic, but be careful to not become so odd that people start passing up nearby homes because of what you did.
5) Don’t be the Largest: Larger homes tend to have a lower price per square foot, so let someone else win the “You Built the Largest House” prize in your neighborhood. Besides, there is a price ceiling in a neighborhood market where buyers will simply begin to look at similar-priced homes in a better area rather than buy the biggest house in an inferior area at the same price.
This post wouldn’t be complete without an example of an overbuilt house I saw a few years ago. See if you can spot it in the short video clip below (or here):
Any thoughts or stories to share? Comment below.