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To Remodel or Not to Remodel: Some ‘Upgrades’ May Detract from the Sale

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By Marilyn Kalfus

closet_installation(MCT)—Nancy and Thomas James’ Dana Point, Calif., home has expansive ocean views, four bedrooms, a wide deck for entertaining, solar paneling — even an elevator.

But until recently, the 3,258-square foot house — now on the market for $2.29 million — lacked something basic. It had just one bedroom closet.

That setup had suited the Jameses just fine. Over the years, the couple tore out closets to repurpose bedrooms they weren’t using. Thomas and Nancy James, both chiropractors, weren’t focused on whether that could be a stumbling block to a sale someday.

Without closets, though, the rooms could not be counted as bedrooms, prompting their listing agent to observe, “You do realize this is a really expensive one-bedroom home?”

A house that’s outside the norm for a neighborhood can hobble the owners when it’s time to sell. Some real estate agents and appraisers, however, say many sellers these days feel too much pressure to remodel even standard homes, whether it’s because of popular TV shows and flashy home design websites, or because friends or agents recommend it when it’s not really needed.

In the case of most homes being readied for sale, “You shouldn’t remodel the home,” said Mac Mackenzie, an agent at Coldwell Banker Residential Brokerage in Irvine, Calif. “People (looking to sell) are paying too much attention to television, and they’re not getting the proper evaluation.”

The value of real estate depends on the location, market segment and cycle, said appraiser Steven R. Smith of Redlands, Calif., who has conducted appraisals of homes in the Los Angeles area and throughout the U.S. over his more than 30-year career.

“The exact same (remodeling) money spend in the wrong location or market segment may not be recaptured, while in the right location or market segment it may be more than recaptured,” said Smith, who has evaluated such homes as a 249-acre Rancho Mirage, Calif., estate with an 18,400-square-foot main house and its own 19-hole golf course. Software billionaire Larry Ellison snapped it up three years ago for just under $43 million.

Many houses about to go on the market could use clean windows and perhaps carpet and paint. Maybe a new roof and some other repairs.

Even contractors find themselves pushing back on home sellers’ urge to upgrade.

Paul Paniagua, owner of All Pro Builders in Fullerton, Calif., said he’s persuaded people about to put their homes up for sale not to remodel, even if their agent suggested it.

“I try to talk them out of it,” Paniagua said. He tells homeowners, “Why don’t you put the house up on the market for what you’re asking for and see what type of offers you get? If you’re absolutely being low-balled and truly believe it’s the kitchen, we can talk about some things we can do.”

He added, “Some people can just throw a countertop on and that’s night and day.”

Often times, homebuyers are looking for the total package — a home with modest upgrades throughout, said Ryan Lundquist, a Sacramento, Calif., appraiser who writes about the housing market.

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