The Pitfalls of Pricing Your Home Out Of the Neighborhood

Can there be such a thing as improving your home too much? It sounds ridiculous, but there’s also some truth to it. Major home improvements can end up pricing yourself right out of your neighborhood. Home remodeling can do wonders for adding value to the price of your house, but it’s crucial to understand in what ways it impacts the value of the house. Let’s say your home is already priced at the high end in your neighborhood. If you were to add on an addition, or tackle a major home remodeling project, then there may be a risk that your house has become too pricey for your surroundings. This will make it much more difficult for a realtor to sell.

If you remodel your home, you must make sure that the changes are aesthetically attractive to the rest of your home, and doesn’t completely look out of place inside your neighborhood. If you change the style of your home to something that doesn’t match the feel of the current neighborhood, then you will be doing a financial disservice to both you and your neighbors. The most common home improvement normally takes place in the kitchen. Kitchen remodeling is one of the best ways to improve your home’s interior aesthetic, while also increasing its resale value. According to a recent housing report, minor to midrange kitchen remodeling costs around $18,500. The good news is you can recoup around 75% of the remodeling costs during resale. Just like with any other room in the house, go easy on the upgrades. Having a state of the art kitchen will certainly price it out of the neighborhood, when it comes time to sell.

I understand why homeowners think about remodeling just before putting their house up on the market. They want it to look fresh and attract the eyes of potential buyers. After all, not every one on the house hunt is keen to buy what appears to be a fixer-upper. Usually those who are interested in purchasing a fixer-upper, do it because they can acquire it a reasonable price, and have already set aside a certain amount of money for repairs and renovations.

This isn’t you though. You are simply making some changes to your home, in order to bump the price a bit, while not pricing yourself out of the neighborhood. It’s interesting and shaky tightrope to walk. This is more about what people can afford to buy, and has less to do with your actual home improvements. If a prospective buyer can’t afford the asking price of this newly remodeled home, then they usually won’t even look at the house twice. They know in their hearts, and more importantly in their bank accounts, that they can’t afford the price range now matter how good it looks. The house will end up sitting on the market for months and months, until you have no choice but to reduce the asking price. Then you will begin to think that you not only wasted money on home improvements, but now the price of your home is dropping all because it looks too good for your neighborhood. How soon before you start blaming your neighbors for not having homes as nice as yours?

I know, this sounds like “first world problems”, but it’s still a pain in the ASSets nonetheless. Sellers who remodel or improve their home will mention to their real estate agent about what they think they deserve, or are entitled to. Unfortunately, it doesn’t always work out that way. If you don’t take into consideration the unintended consequences of pricing yourself right out of your neighborhood, you can find yourself in a real estate quagmire.