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Home Improvements: Over Improvers Lose!
The Smith's just had their residence professionally decorated; the Johnson's had elaborate landscaping added to their back yard; the Jone's had an in-ground pool constructed this summer. The urge to improve your home is so strong it can be infectious. Caution to the wise homeowner: hang onto your checkbook and carefully analyze how you spend. More importantly, analyze where you allocate dollars to reap the greatest benefit from your investment. The following three rules may be helpful in determining if you are on the right track toward achieving maximum investment performance.
  The most common pitfall for homeowners is the urge to be "the best house on the block." Too often, homeowners blindly pour money into their home without regard to considering the contributory value of the improvement. Although your home may have all the "bells and whistles", return on investment will typically be disappointing. Homeowners who think they can simply "add" the cost of their improvements to the original cost of purchasing their home are often times in for a rude awakening when it's time to sell. Simply stated, lower valued residences within a given neighborhood have more room to grow (appreciate) versus their higher valued counterparts.
  If your home is atypical in any shape or form, it's probably going to translate into poor return on investment. The more your home conforms to your neighborhood, the more likely it is to sell for greater money in less time. The most glaring faux pas under this scenario is the addition of an inground pool to your home. This is the classic case of overimprovement -especially in the midwestern climates. Buyers perceive inground pools as a maintenance headache. Significant initial investment, added liability and difficulty in marketing this type of property are reasons for opting for a green yard in lieu of this item. Other examples which fall into the "Real Estate Oddity" category include greenhouses, hot tubs, strong contemporary architecture, and solar supplemental heating systems, to name a few.

Although it may take more time to complete a home-improvement project yourself, the benefits you reap may be well worth it. The return on investment can be staggeringly positive, even if you only partially participate in a home-improvement project. For example, it you insist on having your home professionally landscaped, only contract the professionals for the front yard. Complete the side and rear yard landscaping yourself. Other examples of possible "do-it-yourself projects include interior decorating and various painting items.

Our real estate markets are continually changing, and in many cases, have become characterized by oversupply of existing housing and intense new construction competition. More informed buying decisions, coupled by careful discretion when contemplating home-improvement projects would translate into far better investment performance for homeowners.
  Source: Authors Bryan A. Bomba, SRA, CRP and James R. Gargano, Jr., CPR
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