Picking the Features for your New Home – Balancing Personal Wants with Resale Potential

For those that are building a new home or renovating an existing home one of the best parts is deciding which features you want in the home.  These features, if chosen wisely, will help improve your enjoyment of the home while also hopefully improving the resale value of the house.  I once talked to an architect that said the purpose of the exterior of the home is to bring in prospective buyers, but the features and layout on the inside are what will sell the home.  There within is the challenge to new home buyers: the need to decide which features will be most satisfying to you personally while being conscientious of how they affect the resale of the home.  We’ll explore the ins and outs of selecting home features in this writeup.

Before getting too far, let’s talk about home values and marketing strategy for resale.  The old theory that you don’t want to be the most expensive home in the neighborhood is generally true.  For purposes of brevity, we won’t get into the details of that reasoning.  For now, let’s agree that it’s good to have a general goal of having a home with maximum resale potential.  Some things to consider to help resale:  a home with attractive features, a home price that is in-line or a little lower than others in the community, a home with low operating costs, and a well-maintained home.  In analyzing the resale considerations in the previous sentence, you can see why every feature you consider should be compared to the goals of resale.

First, we’d suggest making a list of items that you will not build or buy a house without.  You don’t want to move into a house without these features and then regret it for the rest of your time in the house.  Just be aware of the cost of these items.  The cost of the item will drive up the cost of the house which may push your home into being one of the more expensive homes in the neighborhood.  By knowing your “must have” features and the cost of doing them, you can look at the total house value and determine an appropriate neighborhood to support the cost.  In a nutshell, if your chosen features will push your house up to $400k, you would be well served to look at communities in which other homes will be in that range.

For non-essential home features, there are a number of things we would suggest you to consider before choosing.  One such concern is how much of the initial investment in the feature will be recaptured in selling the home.  There are both good and bad investments in this manner.  A good investment, as an example, is appropriately placed landscaping.  Landscaping improvements can add more to the home’s value than the cost of the added plantings.  On the other hand, the addition of a swimming pool generally only adds a fraction of the initial cost to the home value.  If an improvement costs $20,000 and you can only recapture 50% of the investment in the home’s overall resale value – the net loss is $10,000.   That “loss” should not be the determiner as to doing the improvement or not, but rather it should be a guide in making the final decision.  We would agree that sometimes having the improvement (such as a pool in the example above) may be the difference in your home getting an offer to a party interested in that feature.

An important factor in picking home operating improvements is the payback period.  For this discussion, home operating improvements are features that help reduce the operating costs of the home; primarily related to energy and water usage.  Examples of home operating improvements are things such as “smart” thermostats, HVAC unit improvements, solar panels and low flow toilets.  Take the amount of time you expect to live in the home, determine yearly savings of an improvement and then figure out if you will recapture or surpass the investment during that time frame.  Use the Nest Smart thermostat as an example.  Let’s say that the thermostat installed costs you $300 extra.  Depending on usage, if the unit saves $100 a year in electric costs, you would know you need to be in the home for three years to pay back the investment.  That’s a good choice.  By the same token, if you were only staying in the home another 2 years you would not get the payback period to create the overall savings.  Just balance the desire for a good payback period with the improved enjoyability of the house.  The smart thermostat from the above example above comes with many easy living features (remotely changing the temperature, intuitive auto temperature adjustments, etc) that can improve quality of life.  Also, with respect to the cost “recapture” element from the previous paragraph, you can often recapture operating improvements costs within the home sales price.

Regarding decorative selections in your home, always be mindful of the price relative to other options.  A decorative selection would be one that is strictly for aesthetics.  Again, with years of custom home experience we have seen it all in the upgrades department.  Most of these upgrades help the value of the home by providing a unique and appealing look that draw in buyers.  However, some decorative upgrades come at a price that will not be perceived as being as expensive as the actual cost.  As a real-world example, we once had a customer upgrade from a standard brick for their new construction home to a brick with a more complex manufacturing process.  The net result of the more expensive brick added several thousand dollars for the house.  The problem is that the same brick home next door would have a significantly lower total price (all other things being equal).  On a resale basis, that one cost point may not hurt you, but given a few such choices it could dramatically raise your house above comparable selling prices.  As we said earlier, there is nothing wrong with picking things that you “must have”, but it may behoove you to pick a different community than you originally had in mind in order to fit the price range.

Remember that the layout and size are important.  Perhaps you don’t want a dining room, but you could use that room as an office.  When you are ready to sell the house later the ability to market your home with certain rooms can only help you.  On real estate searches, some search engines are sophisticated enough to exclude homes without certain rooms; for that reason, it’s best to have “flex” rooms for easy change over.  Even if you don’t need 2 guest bedrooms, future buyers often look at 2 guest bedrooms as a must.  For your enjoyment, those 2 rooms could be an exercise room and a media room while maintaining the 3 bedroom status for resale.  Home size is also very important for resale.  A larger home will usually have a better price per square foot. But if the home gets so large that the price surpasses the neighborhood it becomes an impediment to making the sale.

Final thoughts – if you are building a home that you intend to live in, try to strike a good balance between home features that you want and maximum resale potential.  There are extremes where this is not important; one extreme being to buy or build strictly for investment with the other extreme being that this will be the final home you intend to live in.  For everyone else in between those extremes, make wise decisions, enjoy your home and then reap the rewards later.  Your builder and Realtor should be of great assistance in helping you make these decisions.  Happy planning!

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