The last half-decade has been a buoyant period for home sellers at all price points on the housing ladder -- including the highest rungs. An improving economy and inventory shortages have combined to create a strong sellers’ market for luxury properties.
But sellers of high-end homes now face a double whammy. The new federal tax law is limiting the deductibility of mortgage interest, along with property taxes. Meanwhile, mortgage rates have started to climb, gradually eroding the buying power of purchasers.
“Luxury home sellers are going to be in a tougher position. There will be a weakening of demand for homes over $750,000,” says Daren Blomquist, a senior vice president at Attom Data Solutions, which tracks real estate markets throughout the country.
Blomquist says those selling quality properties valued at stratospheric levels of, say, $2 million and higher, have relatively little reason to fret. That’s because many wealthy purchasers use cash rather than mortgages to buy property. But he urges caution for sellers with luxury properties around the million-dollar mark.
“Don’t make too many pre-sale upgrades. Limit yourself to cosmetic changes such as new paint, flooring and landscaping. Otherwise, you might not get your investment back,” he says.
Here are a few additional tips for sellers:
-- Request a checklist of recommended changes from your listing agent.
“Before you sell, the key is to distinguish between changes that give you a big bang for your buck and those that simply represent money burned,” says Eric Tyson, a personal finance expert and co-author of “House Selling for Dummies.”
To come up with a focused plan for pre-sale improvements, Tyson urges sellers to ask their agent for a written checklist.
“A good agent will know which improvements are needed and justified and which are excessive,” he says.
Also, Tyson suggests that budget-conscious sellers consider selecting an agent trained in the art of staging.
“(It) saves you a bundle over hiring a professional staging service,” Tyson says.
-- Let go of plans for a pre-sale addition to your property.
Have you long planned to replace your diminutive family room with a more spacious “great room” that adjoins your kitchen? Are you contemplating doing so now just prior to selling your property? Would that make sense?
“The answer is normally ‘no’. In most cases, it’s not cost-effective to knock out walls to build an addition,” Tyson says.
Those who attempt a pre-sale addition rarely recoup more than 50 percent to 60 percent of the money invested, he says. Moreover, any construction project that involves the removal of walls can be very time-consuming and stressful.
“Usually, the only time homeowners are smart to do a pre-sale addition is to replace an addition that was badly done or an eyesore,” Tyson says.
-- Avoid upgrades over neighborhood standards.
As your listing agent will likely tell you, your kitchen is a high-priority area when it comes to pre-sale improvements. If it’s a turnoff to buyers, many will pass on your place.
“But in your kitchen, as elsewhere in your house, the idea is to meet and not exceed neighborhood standards,” Tyson says.
For instance, if you have laminate countertops and the neighborhood standard calls for granite or quartz, you’ll want to upgrade. Still, if most other local properties still have laminate, you may not need to switch. Likewise, don’t replace regular kitchen appliances with high-end professional-quality ones unless your neighbors have the same.
Other kitchen upgrades are often less expensive. For example, new cabinet hardware is usually worth the expense. And the replacement of badly worn kitchen flooring also bears consideration.
Still, there are limits on how much you should spend in your kitchen, even if you’re living in a luxury community.
“Most buyers won’t pay you back for a major kitchen renovation,” Tyson says.
-- Focus heavily on the exterior look of your place.
The landscaping around your place is like the frame around a painting; it defines the entire image of the home.
But, as Tyson says, upgrading your landscaping need not be costly, assuming you’re resourceful and don’t inhabit a palatial estate.
“You’ll want to trim your shrubs and you’ll definitely, absolutely want to remove dead plants. A dead plant is a real turnoff,” he says.
For replacement plants, Tyson suggests you turn to a local nursery for free guidance on plant selection and design. Or look to a helpful neighbor with a green thumb. Most home sellers can dramatically improve the street-level appeal of their property by cutting back or replacing any overgrown shrubbery that shrouds their place. But no matter how majestic your home may be, it’s not necessary to install exotic plants or dazzling fountains to make it sell.
“Tearing out your whole landscaping plan and starting over is almost never called for and can be hugely costly. In this case, the perfect is the enemy of the good,” Tyson says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)