how many home-owners have no equity?

[rose-colored-coolaid]

[Alan]

I agree that people have been expected better returns recently

[deejayoh]

what is amazing is that the REALTORs do an annual survey on cost vs. value for remodeling - and they continually show data that the BEST payback is around 80%.

http://www.costvsvalue.com/index.html

For the "pacific" region it looks like their data has a few things paying back

http://www.costvsvalue.com/pacific.html

but nothing on the scale of "invest $50k, make $200k" that flippers have thought was a new business model.

[rose-colored-coolaid]

[Alan]

I find it terribly ironic the idea that putting $50k of work and materials into a renovation caused a house's sales price to rise $100k when without the investment it would have risen $60k.

I consider the $50k investment to be "guilt payoff" because people don't really like getting something for nothing. They did "real work" to earn that money. It wasn't just handed to them on a silver platter.

[perfectfire]

[kpom]

[deejayoh]

[rose-colored-coolaid]

[redmondjp]

I think you guys hit the nail on the head--there are many RE-related 'reality' shows on TV right now which pound this idea into people's minds that:

a) You buy a POS fixer for $500K.

b) You 'invest' $150K in new kitchen, master BR/bath addition, etc etc, and

c) Presto! Your house is now worth $750K -- WOO HOO!!! (high-fives all around)

You are not likely to get all of your money back on any kind of renovation (and yes, I realize that this flies in the face of almost every RE agent's advice)--what I will say is that having certain renovations or repairs done (updated kitchen/bath, new roof, new vinyl windows, etc) will make it much easier to sell your house, provided that it is priced properly. And this is why RE agents will readily suggest that you do such things--because it makes their job easier (always easy to spend other people's money) and if in fact it does result in a higher selling price, then it means a higher total commission for them!

Let's say that I replace my single-pane aluminum windows with new vinyl ones, and pay a contractor $20K to do the whole job for me. Does this necessarily increase the value of my house by $20K? I doubt it. Does it decrease the likelihood of a buyer saying "ewwww, aluminum windows" when they first see the house? Yes. Is that worth my $20K up front? That's the $20K question, isn't it?

[Alan]

I hadn't considered the RE commission angle. Those $20k windows, if they did increase the sales price by $20k, would be worth around $600 to your selling agent.

That is more than the total amount Ray makes on a house!

[kpom]

[Alan]

There would be no commission downside to changing the suggestion. Suggest the improvement: If the owner does it the agent wins. If the owner doesn't do it the agent is no worse off. If the owner proposes dropping the commisionable sales price then the agent then the agent is still no worse off.

[Tejas]

[mukoh]

The recoup cost depend on how much you took the seller off his "market" price for those bathrooms/bedrooms remodels.
Lets say you walked into a house that was listed for $450k and you got the price down to $425k, then post inspection you knocked it down another $400k for the bathroom that needs repairs/remodel. You then put that $25k into the bathroom. You are ahead.