Improving your home through renovations is an excellent, and sometimes necessary, way to make your house feel like home. Choosing to add a master suite addition instead of rebuilding the bathroom usually comes down to personal preference. However, the game changes when you’re planning to sell your home. Saving money on renovation work and controlling the cost of selling becomes crucial to getting the most out of your investment.
Much talk centers around a seller’s return on investment, and the ROI percentages vary depending on who’s doing the estimating. Some home improvement projects produce excellent ROI values, while some are just ways to spend money. The best investments when getting your home on the market provide strong returns along with big-impact selling points.
1. Don’t Put on an Addition
A good rule of thumb when searching for high ROI values is to avoid big-ticket reconstruction projects. The cost of home additions or major remodels is almost never worth it in dollars in the end. With ROIs averaging around 45% for a master suite addition, save the project for your forever home. Additions and major remodeling projects are excellent for improving the comfort and utility of a house but aren’t great at producing monetary returns.
Do Paint the Walls
Instead of spending loads of money and months of work moving walls and building a home addition, grab a paintbrush. Painting is the least expensive and most effective way to make a good impression. Repairing holes in the walls and painting the interior with neutral colors doesn’t add a lot of monetary value, but it doesn’t cost much either. Expect ROI values of over 105% for interior painting and 80% for the exterior.
2. Don’t Reconstruct the Foyer
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Similar to other big-ticket remodels, some small remodels don’t fare well on ROI value either. Specialty remodels such as creating a mudroom or adding a grand foyer may look nice to some, but turn some buyers off. Many buyers have visions of what an entryway should be, and it’s hard to guess what they’re thinking. Mudrooms and entry remodels will return less than 60% of your investment.
Do Replace the Front Door
On the other hand, the entrances to your home can be significantly enhanced by replacing the doors or windows. Garage door replacement can fetch returns of 95% of the cost at selling time. Window replacement ROI often depends on the climate in your location. Cold weather areas see greater returns of up to 70%, while moderate temperature locales realize less return.
Front door replacement is another ROI winner. Sellers with new front doors can see returns of 80% or more. If you have the time and patience to strip and refinish an older, but solid, front door, you could do even better.
3. Don’t Remodel the Kitchen
As fantastic and functional as a perfectly outfitted chef’s kitchen can be, remodeling one with ROI in mind comes up a few ingredients short. Due to the necessity of moving mechanical systems during remodeling, kitchen renovations are pricey. Worse, your return on investment could be as low as 55%.
Do Update Fixtures
If your kitchen needs help before selling, focus on the little details. Cheap renovations often go a long way toward increasing your home’s value without breaking the bank. Instead of remodeling a worn-out kitchen, spend no more than $350 to replace the faucet and a few hundred to replace the lights. Your best bet is to look for relatively inexpensive, but attractive, items while avoiding extravagance.
4. Don’t Rebuild the Bathrooms
Everybody loves a brand new bathroom. New bathrooms don’t help at selling time, though. Bathroom remodeling suffers the same troubles as kitchen remodels, with ROI values in the 55% range.
Do Update Faucets and Lighting
Similar to your kitchen, spend a few dollars on updating the plumbing and lighting fixtures. Avoid demolition and replacement of tile work, but replacing moldy-looking tile grout helps. And, don’t forget the paint.
5. Don’t Install a Pool
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Many potential buyers simply scroll past home listings with inground pools. Especially in colder climate areas, trying to sell someone a long list of pool maintenance chores is a daunting task. Besides ROI values that hover around 50%, buyers looking for a functional backyard will look the other way. Like other big-ticket renovations, build your pool when you’ve found your forever home.
Do Add a Patio or Refresh the Deck
Although building a patio or deck will only return 66% on your investment, they are good selling points and may be the difference between selling quickly or slowly. And, they cost far less than an inground pool. Decks and patios that are in lousy shape are definitely on any buyer’s con list. If your deck needs attention, look at refreshing it with new deck boards instead of total replacement if possible.
6. Don’t Replace the Siding
The old saying that you only get one chance to make a first impression is true in home selling. However, spending many thousands of dollars replacing the exterior siding may not be the best use of your money to make that impression. If your siding is in good shape, consider painting it or simply power washing it until it shines. Always fix any holes or damage, but a bit of refreshment might be all it needs.
Do Add a Stone Veneer Instead
If your house needs a new look to sell, leave most of the home’s siding alone and replace part of it with a stone veneer instead. Popularized in the 1950s, the look still sells. Relatively inexpensive to install, stone veneer improvements can realize 92% ROI.
7. Don’t Build Extra Storage Spaces
Closet space and storage areas are nice to have. The trouble with spending money on renovations to increase storage spaces to gain a return is that everyone, including your potential buyer, has a different idea of what storage should look like and how it needs to function.
Do Downsize
Save your money trying to impress buyers with vast storage options. If it looks like your home has inadequate storage space, spend some time downsizing or removing excess items before it goes to market.
8. Don’t Install Major Landscaping Features
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Outdoor kitchens, ornate gazebos, extravagant water features, fountains and putting greens are all on the “no” list when it comes to ROI. Your current landscaping may need a little refresh, but that’s where it should stop to get the most bang for your buck.
Do Focus on Curb Appeal Instead
If you’ve already replaced the garage door and added a stone veneer, you’re nearly done. Before the first day on the market, mow the lawn, power wash the walkways and trim the hedges. Make sure that you’ve had significant cracks in the concrete repaired.
To really make an impression with very little investment, consider hiring a reputable lawn care service to get your yard looking its best. Returns of 80% and more happen when sellers focus on curb appeal over major landscaping projects.
9. Don’t Buy the Latest Fixtures
You’ve decided to upgrade your bathroom and kitchen plumbing and lighting fixtures. Expensive, trendy faucets and lighting can sell for well over $1,000 each. The ROI on them is zero from a buyer looking for something more traditional. Save the guesswork and the cash you’d otherwise spend on expensive fixtures and find lesser-priced options.
Install Good-Enough Fixtures Instead
Faucets and light fixtures can be found in any price range. Except for some specialized functions, they all do the same thing. If your kitchen and bath need new equipment, aim for products in the $100 to $200 range. These fixtures are priced reasonably and provide functional attractiveness.
10. Don’t Replace Mechanical Systems
If your furnace doesn’t work and your roof has holes, they need replacement. But, when replaced, HVAC, plumbing and electrical infrastructure, water heaters and other unseen systems don’t add home value. However, they can bring down the value if they don’t operate. Roofing ROI hovers around 55%, and they aren’t cheap to install. If you can sell your home without putting money into replacing mechanical systems, you’ll have more money in your pocket when you move out.
Do Keep Up On Maintenance Tasks
Neglected maintenance tasks will be discovered quickly by the buyer’s home inspector. Instead of spending hard-earned cash on replacing systems, spend that money on keeping your home’s existing systems in top shape. Cheap, easy and high ROI fixes include replacing worn doorknobs, cleaning out the rain gutters and repairing sidewalk cracks, among other similar items.
If you’ve got a move on your mind, you may be wondering whether you should wait to sell until mortgage rates come down before you spring into action. Here’s some information that could help answer that question for you.
In the housing market, there’s a longstanding relationship between mortgage rates and buyer demand. Typically, the higher rates are, you’ll see lower buyer demand. That’s because some people who want to move will be hesitant to take on a higher mortgage rate for their next home. So, they decide to wait it out and put their plans on hold.
But when rates start to come down, things change. It goes from limited or weak demand to good or strong demand. That’s because a big portion of the buyers who sat on the sidelines when rates were higher are going to jump back in and make their moves happen. The graph below helps give you a visual of how this relationship works and where we are today:
As Lisa Sturtevant, Chief Economist for Bright MLS, explains:
“The higher rates we’re seeing now [are likely] going to lead more prospective buyers to sit out the market and wait for rates to come down.”
Why You Might Not Want To Wait
If you’re asking yourself: what does this mean for my move? Here’s the golden nugget. According to experts, mortgage rates are still projected to come down this year, just a bit later than they originally thought.
When rates come down, more people are going to get back into the market. And that means you’ll have a lot more competition from other buyers when you go to purchase your next home. That may make your move more stressful if you wait because greater demand could lead to an increase in multiple offer scenarios and prices rising faster.
But if you’re ready and able to sell now, it may be worth it to get ahead of that. You have the chance to move before the competition increases.
Bottom Line
If you’re thinking about whether you should wait for rates to come down before you move, don’t forget to factor in buyer demand. Once rates decline, competition will go up even more. If you want to get ahead of that and sell now, talk to a CA Real Estate Agent.
Let’s connect and plan your next steps. Find out if we’re the right real estate team for you!
Are you thinking about making a move? If so, now may be the perfect time to start the process. That’s because experts say the best week to list your house is just around the corner.
A recent Realtor.comstudy looked at housing market trends over the past several years (with the exception of 2020, since it was an unusual year), and found the best week to put your house on the market this year is April 14-20:
“Every year, one week stands out from the rest as that perfect stretch of time when it’s great to be a home seller. This year, the week of April 14–20 is the best time to sell—that is, if sellers want to see lots of interest in their homes, sell quickly, and pocket some extra cash, according to Realtor.com® data.”
Here’s why this matters for you. While the spring market is a great time to sell no matter the week, this may be the peak sweet spot. And if you’ve been putting your plans on the back burner and waiting for the right time to act, this could be the nudge you need to make your move happen. As Hannah Jones, Senior Economic Research Analyst at Realtor.comexplains:
“The third week of April brings the best combination of housing market factors for sellers. The best week offers higher buyer demand, lower competition [from other sellers], and fewer price reductions than the typical week of the year.”
But, if you want to get in on the action, you’ll need to move quickly and lean on the pros. Your local real estate agent is the perfect go-to when it comes to figuring out a plan to prep your house and get it on the market.
They’ll be able to offer advice to balance your target listing date with what you need to do from a repair and renovation standpoint. And they can walk you through exactly how to prioritize your list so you know what to tackle first.
For example, if your house is already in good shape, you’ll be able to really focus in on the smaller things that are easy to do and make a big impact. As an article from Investopediasays:
“You won’t have time for any major renovations, so focus on quick repairs to address things that could deter potential buyers.”
Here are some specific examples from that article:
Just remember, even if you’re not ready to list within the next couple of weeks, that’s okay. The window of opportunity doesn’t close when this week ends. Spring is the peak homebuying season and it’s still a seller’s market, so you’ll be in the driver’s seat all season long.
Bottom Line
Ready to get the ball rolling? Connect with a real estate agent to schedule a time to go over your next steps.
Buying a home this spring? You’re probably navigating today’s affordability challenges and dealing with the limited number of homes for sale. But, what if there was a solution that could help with both?
If you’re having a hard time finding a home you love, and mortgage rates are putting pressure on your budget, it may be time to look at newly built homes. Here’s why.
New Home Construction Is an Inventory Bright Spot
When looking for a home, you can choose between existing homes (those that are already built and previously owned) and newly constructed ones. While the number of existing homes for sale has increased this year, there are still fewer available than there were in more typical years in the housing market, like back in 2018 or 2019.
So, if you’re looking to expand your pool of options even more, turning to newly built homes can help. As Danielle Hale, Chief Economist at Realtor.com, explains:
“The shortage of existing homes For Sale has opened up the possibility of new-home construction to more buyers who may not have once considered it.”
And the good news is, there are more newly built homes to pick from right now. The graphs below use data from the Census to show how new home construction is ramping up in two key areas (see most recent spike in green):
Starts, or homes where builders just broke ground, have seen a big increase lately. And completions, homes that builders just finished, are also up significantly. So, if you want a new, move-in ready home or you want to get in early and customize your build along the way, you have more options right now.
Builders Are Offering Incentives To Help with Affordability
And to sweeten the pot, builders are offering things like mortgage rate buy-downs and other perks for homebuyers right now. This can help offset today’s affordability challenges while also getting you into your dream home. Mark Fleming, Chief Economist at First American,explains why you may find builders have more wiggle room to offer more for you than the typical homeowner:
“Builders aren’t rate locked-in. They would love to sell you the home because they’re not living in it. It costs money not to sell the home. And many of the public home builders have said in their earnings calls that they are not going to be pulling back on incentives, especially the mortgage rate buydown, so that will help the new-home market continue to perform well in the spring home-buying season.”
An article from HousingWire also says this about what builders are offering right now:
“. . . the use of sales incentives still shows some momentum as 60% of respondents reported using them, up from 58% in February. “
Just remember, buying from a builder is different from buying from a home seller, so it’s important to partner with a local real estate agent. Builder contracts can be complex. A trusted agent will be your advocate throughout the process.
They’ll be your go-to resource for advice on construction quality and builder reputation, reviewing and negotiating contracts to get you the best deal, helping you decide on which customizations and upgrades are most worthwhile, and a whole lot more.
Bottom Line
If you’re struggling to find a home to buy, or with today’s affordability challenges, connect with CA Real Estate Group to see if newly built homes could be the solution you’re looking for.
This report specifically benefits our Single Women Home Buyers to provide insight into the demographics, financial profiles, home buying motivations & lending experiences of women who purchase homes on their own.
We’d be happy to walk through this report with you.
Let’s connect and plan your next steps and find out if we’re the right real estate team for you!
Debt-to-income ratio shows how your debt stacks up against your income. Lenders use DTI to assess your ability to repay a loan.
Nerdy takeaways
Debt-to-income ratio represents the percentage of your monthly income that goes to debt payments.
Lenders use DTI — along with credit history and other factors — to evaluate if a borrower can repay a loan.
Lenders have different DTI requirements. Personal loan companies may allow higher DTIs than mortgage lenders.
Debt-to-income ratio divides your total monthly debt payments by your gross monthly income, giving you a percentage. Here’s what to know about DTI and how to calculate it.
How to calculate your debt-to-income ratio
To manually calculate DTI, divide your total monthly debt payments by your monthly income before taxes and deductions are taken out. Multiply that number by 100 to get your DTI expressed as a percentage.
Here’s an example: A borrower with rent of $1,200, a car payment of $400, a minimum credit card payment of $200, and a gross monthly income of $6,000 has a debt-to-income ratio of 30%. In this example, $1,800 is the sum of all debt payments. When you divide $1,800 by $6,000 and then multiply that answer by 100, you get 30.
To get the most accurate DTI ratio, make sure to include all your debt payments and income sources.
Debt payments can include:
Rent or mortgage payments.
Auto loan payments.
Student loan payments.
Minimum credit card payments.
Personal loan payments.
Other debt payments, such as the minimum payment on a home equity line of credit.
Child support, alimony, or other court-ordered payments.
Don’t include other monthly expenses, such as:
Groceries.
Gas.
Utility payments.
Phone bills.
Health insurance.
Auto insurance.
Child care payments.
Recreational spending.
Include all sources of income, such as:
Salary from full-time work.
Part-time wages.
Freelance income.
Bonuses.
Child support or alimony received.
Social security benefits.
Rental property income.
How lenders view your DTI ratio
Lenders look at debt-to-income ratios because research shows borrowers with high DTIs have more trouble making consistent payments.
Each lender sets its own DTI requirement, but not all creditors publish them. Generally, a personal loan can have a higher allowable maximum DTI than a mortgage.
You may find personal loan companies willing to lend money to consumers with debt-to-income ratios of 50% or more, and some exclude mortgage debt from the DTI calculation. That’s because one of the most common uses of personal loans is to consolidate credit card debt, which can help you pay off debt faster and lower your DTI.
Does your DTI affect your credit score?
Your debt-to-income ratio does not affect your credit scores; credit-reporting agencies may know your income, but they don’t include it in their calculations.
Credit utilization, or the amount of credit you’re using compared with your credit limits, does affect your credit scores. Credit reporting agencies know your available credit limits, both on individual loan accounts and in total. Most experts advise keeping the balances on your cards no higher than 30% of your credit limit, and lower is better.
How to understand DTI ratio
DTI can help you determine how to handle your debt and whether you have too much debt.
Here’s a general breakdown:
DTI is less than 36%: Your debt is likely manageable, relative to your income. You shouldn’t have trouble accessing new lines of credit.
DTI is 36% to 42%: This level of debt could cause lenders concern, and you may have trouble borrowing money. Consider paying down what you owe. You can probably take a do-it-yourself approach; two common methods are debt avalanche and debt snowball.
DTI is 43% to 50%: Paying off this level of debt may be difficult, and some creditors may decline applications for more credit. If you have primarily credit card debt, consider a credit card consolidation loan. You may also want to look into a debt management plan from a nonprofit credit counseling agency. Such agencies typically offer free consultations and will help you understand all of your debt relief options.
DTI is over 50%: Paying down this level of debt will be difficult, and your borrowing options will be limited. Weigh different debt relief options, including bankruptcy, which may be the fastest and least damaging option.
Ways to lower your DTI ratio
Reduce your debt-to-income ratio to improve your chances of qualifying for future credit.
Increase your income. Make more money by selling items online or starting a side gig, even for a short period, like babysitting or dog walking.
Reduce your debt. Paying down your credit card balance can reduce your minimum monthly payments. Your DTI will also go down if you pay off installment loans, like student loans or a car loan.
Refinance or consolidate debt. Refinancing or consolidating debt at a lower interest rate could lower your monthly payments and therefore reduce your DTI. Negotiating a longer repayment term could also lower your monthly debt payments, though you may wind up paying more interest over time.
Avoid taking on additional debt. Try not to add to your credit card balance or take out additional loans if you want to lower your DTI.
Keeping Current Matters | Feb 26, 2024
If you’re planning to buy your first home, saving up for all the costs involved can feel daunting, especially when it comes to the down payment. That might be because you’ve heard you need to save 20% of the home’s price to put down. Well, that isn’t necessarily the case.
Unless specified by your loan type or lender, it’s typically not required to put 20% down. That means you could be closer to your homebuying dream than you realize.
“Although putting down 20% to avoid mortgage insurance is wise if affordable, it’s a myth that this is always necessary. In fact, most people opt for a much lower down payment.”
According to the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. In fact, for all homebuyers today it’s only 15%. And it’s even lower for first-time homebuyers at just 8% (see graph below):
The big takeaway? You may not need to save as much as you originally thought.
Learn About Resources That Can Help You Toward Your Goal
According to Down Payment Resource, there are also over 2,000 homebuyer assistance programs in the U.S., and many of them are intended to help with down payments.
Plus, there are loan options that can help too. For example, FHA loans offer down payments as low as 3.5%, while VA and USDA loans have no down payment requirements for qualified applicants.
With so many resources available to help with your down payment, the best way to find what you qualify for is by consulting with your loan officer or broker. They know about local grants and loan programs that may help you out.
Don’t let the misconception that you have to have 20% saved up hold you back. If you’re ready to become a homeowner, lean on the professionals to find resources that can help you make your dreams a reality. If you put your plans on hold until you’ve saved up 20%, it may actually cost you in the long run. According to U.S. Bank:
“. . . there are plenty of reasons why it might not be possible. For some, waiting to save up 20% for a down payment may “cost” too much time. While you’re saving for your down payment and paying rent, the price of your future home may go up.”
Home prices are expected to keep appreciating over the next 5 years – meaning your future home will likely go up in price the longer you wait. If you’re able to use these resources to buy now, that future price growth will help you build equity, rather than cost you more.
Bottom Line
Keep in mind that you don’t always need a 20% down payment to buy a home. If you’re looking to make a move this year, reach out to a trusted real estate professional to start the conversation about your homebuying goals.
Are you on the fence about selling your house? While affordability is improving this year, it’s still tight. And that may be on your mind. But understanding your home equity could be the key to making your decision easier. An article from Bankrateexplains:
“Home equity is the difference between your home’s value and the amount you still owe on your mortgage. It represents the paid-off portion of your home.
You’ll start off with a certain level of equity when you make your down payment to buy the home, then continue to build equity as you pay down your mortgage. You’ll also build equity over time as your home’s value increases.”
Think of equity as a simple math equation. It’s the value of your home now minus what you owe on your mortgage. And guess what? Recently, your equity has probably grown more than you think.
In the past few years, home prices skyrocketed, which means your home’s value – and your equity – likely shot up, too. So, you may have more equity than you realize.
How To Make the Most of Your Home Equity Right Now
If you’re thinking about moving, the equity you have in your home could be a big help. According to CoreLogic:
“. . . the average U.S. homeowner with a mortgage still has more than $300,000 in equity . . .”
Clearly, homeowners have a lot of equity right now. And the latest data from the Census and ATTOM shows over two-thirds of homeowners have either completely paid off their mortgages (shown ingreen in the chart below) or have at least 50% equity (shown inblue in the chart below):
That means roughly 70% have a tremendous amount of equity right now.
Be an all-cash buyer: If you’ve been living in your current home for a long time, you might have enough equity to buy your next home without having to take out a loan. If that’s the case, you won’t need to borrow any money or worry about mortgage rates. Investopediastates:
“You may want to pay cash for your home if you’re shopping in a competitive housing market, or if you’d like to save money on mortgage interest. It could help you close a deal and beat out other buyers.”
Make a larger down payment: Your equity could also be used toward your next down payment. It might even be enough to let you put a larger amount down, so you won’t have to borrow as much money. The Mortgage Reportsexplains:
“Borrowers who put down more money typically receive better interest rates from lenders. This is due to the fact that a larger down payment lowers the lender’s risk because the borrower has more equity in the home from the beginning.”
The Easy Way To Find Out How Much Equity You Have
To find out how much equity you have in your home, ask a real estate agent you trust for a Professional Equity Assessment Report (PEAR).
Bottom Line
Planning a move? Your home equity can really help you out. Let’s connect to see how much equity you have and how it can help with your next home.
