Interior designer working on hand drawing sketches on plan blueprints

The Dangers of Over-Improving Your Home

Interior designer working on hand drawing sketches on plan blueprints

Is there such thing as having a home that’s too good for its surrounding neighborhood?

Sure, most homeowners want their home to be up-to-date and attractive, and often that means making some changes and improvements to it. But while many projects can have positive effects on the functionality of a home, its visual esthetics, and the overall value of the property, others, on the other hand, are just over-the-top, and can actually have a negative impact on how prospective buyers see your home.

Putting too much money into upgrades that go way beyond what the actual area calls for can easily translate into lost money. 

Before you make any major improvements to your home, make sure your surrounding neighborhood calls for such features. Be smart about how your renovation budget is spent, and the exact types of improvements you plan to make. The value of your home won’t necessarily reflect the amount of work and money you put into expensive and excessive projects.

If you’re planning on staying in your home for the long-haul and are looking to make improvements that suit your needs and will provide you with years of enjoyment, go for it. However, if you’re planning to move over the next three to five years, you might want to think twice about those extravagant updates and additions.

What Does Your Neighborhood Call For?

Before you dump a lot of your hard-earned dollar on a specific project, take a look at the best house on the block. You likely won’t recoup that money by improving at or beyond that level. The odds of your home’s value appreciating to the point that you’ll get back just as much of that investment money are pretty low.

For instance, you will probably have a tough time finding a buyer who will pay the price you want to recoup the money you spent adding a huge pool, outdoor spa, or sunroom to your home if the homes on the street don’t have these types of amenities. Buyer agents aren’t going to encourage their clients to buy the best house in the neighborhood, or a property that sticks out like a sore thumb. Not only that, buyers will be a little intimidated by a home that is clearly the priciest in the area.

Buying the most expensive home on the block will give buyers little wiggle room to add equity to their home, which would become a problem if and when they decide to sell at some point in the future.

If homes in the neighborhood are selling in the $500,000 to $600,000 range, you’ll be hard-pressed to get $750,000 for your home just because you spent an extra $150,000 adding extra-fine features and finishes to it. Don’t expect to recoup that money upon the sale of your home. An over-improved home might impress buyers, but that doesn’t mean they’ll be willing to shell out the big bucks for it.

Overdoing Certain Spaces in the Home

Certain rooms in a home hold a lot of importance when it comes to its overall value, especially kitchens and bathrooms. Renovating and updating these spaces can boost property values, make them more attractive to potential buyers, and command more money come sale time. However, the increase in sale price will hit a cap.

While it’s important to ensure these important rooms are up-to-par, it’s also possible to over-improve them. A $500,000 home warrants a kitchen that reflects this value, just as a million dollar home deserves a kitchen that matches its value. A room that’s completely out of place in a home based on its value won’t do much at resale.

Be Careful With Additions

More square footage in a home tends to increase property value, but how you go about adding such space to your home is an important consideration. Reconfiguring the layout and space that you already have to make it more functional can increase the value. For instance, converting a 2-bedroom home into a 3-bedroom home by moving some walls can add value if the neighborhood calls for 3-bedroom homes. However, if you start making large additions to your home that sacrifice a lot of your yard space, this can have the opposite effect.

While the size of a house is a big factor for buyers, so is the useable size of the yard. It’s not such a good thing when the physical structure takes up far too much space, especially if it’s way off scale compared to other homes on the street.

The Bottom Line

Renovating and upgrading your home is a fantastic idea, especially if it’s starting to get dated and just isn’t working for you and your family. However, before you start taking hammer to nail, make sure you’ve given your project a lot of thought. Even though you have a vision in mind that you know will bring you enjoyment, make sure you’re realistic about the kind of return on investment you’ll get, and whether such improvements are just too much for the neighborhood you are in.