Wealth Simple magazine contacted me last week with some questions about adding value to a home. The questions and answers are below:
How can I add value to my home once I own it?
Everybody wants to build but no one wants to do maintenance.
Keep you home well maintained inside and out. That means doing the non-sexy stuff like changing the furnace filters, sealing the driveway, keeping the windows clean and the landscaping in order. Homebuyers are very discerning. Sure they want granite countertops and hardwood floors, but they will not be fooled by style over substance anymore.
In your experience, what have you found are the five things that really make a difference in adding value to the home?
1) A clean and well maintained home with modern updates
2) Large kitchen island with seating for family breakfast of entertaining friends
3) Neighbourhood: A good school zone. A walkable neighbourhood. Family friendly or lifestyle suitable for young urbans. The value added will be a higher than average appreciation.
4) Luxurious ensuite
5) Backyard oasis
How much value can a kitchen renovation really add to a home? Is there a rough ballpark percentage you’ve seen over the years?
It is true that bathrooms and kitchens sell homes. A low cost kitchen reno can recoup more than 100% of its cost. I don’t think it can be simplified into a straight percentage, but lets say you were to knock out a wall and create an open concept kitchen to living room in an older home. That could add $40,000 to a $400,000 home.
What stuff is actually valuable in a house and what is put there into tricking potential buyers into thinking it’s fancy?
Painting has the best return on investment. Professional painters (rule of thumb) charge $400 a room. You can’t beet that for updating and freshening up an old place. Nice and modern light fixtures add a lot of fanciness at a relative low cost.
What is one thing that won’t help increase the value of our home? A pool? Home office? Outdoor fireplace? What kind of updates/renovations don’t add value?
You should never take out a bedroom. Taking out a bedroom to enlarge another bedroom, or a bathroom or kitchen is a bad idea
Some people don’t like pools but having a pool does not decrease value. Having a pool, disqualifies your home from those buyers who don’t want a pool.
People fear skylights leak. Installing skylights will not add the value of the installation.
It used to be that home theatres were popular. Now everyone wants a home office.
How do we close on a house?
In Ontario, the lawyers do that.
What exactly are closing fees? Like, what are we buying when we pay closing costs? Everyone always says “you’ll have closing costs when you buy a house.” But what are they? I can’t seem to figure out what the hell they are! Basically: What are the constituent parts of closing costs?
Closing fees are lawyer fees and their disbursements and land transfer tax.
And what parts of the closing costs are variable? Or are they the same always across the board?
Real estate lawyers charge a set rate. Disbursements are variable and land transfer taxes are calculated on a sliding scale.
What parts of the closing costs can we actually control or negotiate? Can we get out of any of them?
They are what they are
And what about inspections? How much ballpark should we expect to pay for an inspection? Any tips on what we should be looking for in an inspector?
Home inspections normally cost between $300-$400.
You are going to be spending 2 to 3 hours with the inspector. When you interview them you should try to determine what it will be like to go around a house with them. Recommendations from friends and family are best.
When looking at potential neighbourhoods in Canada, how can we compare it to other neighbourhoods?
Good neighbourhoods have good schools, walkable to amenities and shopping/nightlife and close to transit/transportation networks
What’s the best way to find out about particular school districts?
Fraser Institute schools report
And, in your experience, which neighbourhoods thrive over time and which don’t?
The neighbourhoods that do well have good schools.
One thing I’m trying to really focus on is what sort of things really matter when we’re looking for a house and going on tours and what don’t. What kinds of features and things are there to try and trick potential buyers into thinking it’s more valuable, nicer, or fancy? What sort of red flags should we be looking out for on that front? Most first-time buyers don’t really know how much things cost, so it’s easy for them to get duped by some features.
Flat surfaces sell houses: walls, floors, countertops. These are the important things.
Home buyers sometimes focus on the bells and whistles. They buy houses that appeal to their egos instead of what they truly need. Overly large master bedrooms, grand foyers, houses that are too big for what they really need. Neighbourhood is the most important thing. Buying a really beautiful house in a bad neighbourhood is a mistake that people make. Homebuyers are pretty discerning. Many of them know what to look for in a home. It is the environment that they forget to check out. They should be looking at the cars in the neighbour’s driveway and the state of the landscaping and the school rankings.
Also homebuyers forget to check out the age of the furnace, the condition of the roof, the age of the windows and the state of the driveway and the foundation. These are easy things to check out but most don’t know to do this.