Beware of Over-improving Your Home
Originally Posted at Riverfront Appraisal Blog
Owensboro’s most expensive home has sold: 16 Stone Creek Park. And it sold at almost a $2 Million loss.
According to MLS records, the home located at 16 Stone Creek Park in Owensboro sold in May for $2.2 Million to a local businessman, making it the most expensive residential property to ever sell in Daviess County.
The home has seen quite a few changes over the past several years.
The original home was built in 1983, but in 2009, a local doctor purchased the home for $1.1M and rebuilt it. He then sold the basically brand new home to Michael Dell (yes, that Michael Dell) in 2012 for $2.3M.
Obviously, this wasn’t Dell’s primary residence, and after staying in the home off and on for the last several years, he put it on the market. Originally listed at $3,850,000, after 653 days on the market, it sold for $2,200,000. And did I mention he spent a reportedly $1.8M on renovations?
Now, if your mind is working, you’re already doing the math and realize that the home sold for $100,000 less than what Dell paid for it. But that’s not the best (or worst) part. When you take into account over-the-top upgrades spent on this property, his loss looks more like $2 Million. Now that’s a chunk of change.
We often speak in appraisal terms about over-improving a property. Anyone can do this because if you’re not careful, you can get carried away and over-improve your home, no matter the neighborhood. If homes in your neighborhood generally sell for $90,000 and you spend $40,000 on a kitchen remodel, you will have over-improved your home. It becomes an over improvement when you spend more on the home than what you can sell it for. Exactly what our Mr. Dell did.
Now there’s nothing wrong with this, of course, if you’ve got the cash to blow. Want to spend $70,000 on that inground pool? Knock yourself out! Want to put all kinds of granite and quartz countertops and Wolf appliances in the kitchen of your $145,000 house? Go right ahead. But don’t expect to get all of that investment back when you sell it.
When you take into account over-the-top upgrades spent on this property, his loss looks more like $2 Million.
If you don’t have a truckload of cash to throw at your home and want to make improvements that actually help your home’s value and that you can mostly get back when you sell, no one is better suited to help you than an appraiser. If you’re planning a $20,000 addition to your home, or a $2 Million renovation, don’t rely on your contractor to tell you how much your home will be worth after construction. The appraiser is the only one who can help you in a way that provides you with an independent, unbiased, and objective opinion of value.
Born into the appraisal business, Ryan Bays was around the industry from his very first breath. His father owned the finest real estate appraisal business in Southern Illinois and had Ryan working with him on jobs as soon as he could hold the other end of the measuring tape. Holding various positions within his dad’s company as he grew up, Ryan took some time off to sell real estate while at the University of Alabama, but eventually made his way back into the business after college. In 2005, Ryan began his formal training to become a real estate appraiser. After receiving his certification, he and his family moved to Owensboro, Kentucky in 2008 and began a new chapter in their lives. Ryan officially started Riverfront Appraisals in the summer of that year. He formed Riverfront Appraisals in 2008 and received his SRA designation (the highest designation given to residential appraisers) in 2014, followed by his AI-RRS designation in 2015