Think about all of the things that we buy. Now, think about which of those things we use on a regular basis, and can then turn around and sell–at a profit.
It’s a very short list. But there’s a remarkable item on it–your home.
Especially in the last year it has become clear that a home is one of the best investments that a person can make.
Nationally, the average home price in the United States went up nearly 7 percent last year, according to the Federal Housing Finance Board. In the Chicago market, home prices went up by nearly $28,000, an increase of nearly 13 percent, to an average of $247,000-plus. Not bad for something that we use on a daily basis.
In fact, it’s rare that people lose money on a home, except when they do something that’s known as “overimprove.”
Bad investment
What exactly does it mean to overimprove? In a nutshell, it means putting too much money in a home, money that you won’t get back when you sell the house.
For example, it could mean taking a modest home, say a 1,400-square-foot ranch house, and remodeling it into a 3,200-square-foot two-story. If the ranch is the only ranch home in a neighborhood of two-story homes, that’s not a bad thing. You’ve just brought the ranch in line with other homes.
However, if it’s a ranch home in the midst of nothing but ranch homes, then you’ve created a Frankenhome. Be prepared to have the local villagers attack it with torches and clubs.
“I’ve seen people take a home that’s worth $300,000 and turn it into a million-dollar home,” said Jim Philbin, the second vice president of the National Association of the Remodeling Industry’s Chicago chapter and a contractor in the Chicago area. “That’s over the top.”
Philbin pointed to a home in Palos Hills that was recently remodeled from a three-bedroom ranch to a four-bedroom two-story, complete with a six-car garage. “What was put into it moneywise was twice what it was originally worth,” he said.
Overimproving a home that way also means you’re limiting your potential buyers to last week’s lottery winner or Bill Gates, if he got a sudden urge to live in the southwest suburbs.
There are also certain amenities or upgrades, when added to a home, that basically say you’re putting too much money into a home.
A contractor once told me that adding a bidet to a bathroom was the heavens’ way of saying you’re overimproving your home.
Whirlpool tubs
In the 1980s, a rash of homeowners felt compelled to add gigantic whirlpool tubs in their master bathrooms. After running those whirlpools once, and basically draining their hot water heaters for three weeks in advance, these oversized tubs usually became oversized laundry hampers.
Here’s a few other items to consider as overimprovements:
– Pools. Although you will be the hit of the neighborhood on a hot day (especially if you string up those colorful little tiki lights), a pool can be a maintenance nightmare, one that few potential buyers are interested in. They also cost a fortune to heat.
– Pool tables. Although the dream of any Chicago-area male who was taken into a corner bar as a kid, pool tables don’t often return their value, said Philbin. “What can be especially detrimental are those pool tables that have been built into a basement,” he said. “Good luck getting those out.”
– Tennis courts. Yes, they’ll keep you healthy. But they’re big, flat cement pads that require some upkeep and are hard to blend in with back-yardlandscaping. Most home buyers would instead prefer a Ping-Pong table that they can fold up and sort laundry on.
– Greenhouses or solar rooms. These airy spaces bring in sunshine and tie a home to the outdoors. But they also cost a lot to heat, cool and maintain. Instead, invest in window boxes.
– Four- to six-car garages. While three-car garages are quickly becoming the norm, most potential homeowners aren’t interested in anything bigger–unless you’re Bruce Wayne and you’ve got to store a batcycle, a batcopter, a batboat, etc.
