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Office Location 795 Rockville Pike,
Rockville, MD 20852
Phone: (301) 613-7253
Fax: (301) 424-9290

The Buyer’s “Fear Factor”—What Upgrades Should I Make?

Posted by Thomas Powers on Wednesday, April 22nd, 2009 at 2:03pm.

paint_1024It’s been said that “fear is a greater motivator than the opportunity to gain.” That’s definitely true when it comes to real estate sales from a seller’s perspective, but it applies equally to buyers—especially in our current market. Sellers should understand that buyers might walk into a beautiful home with a gorgeous kitchen and many other upgrades, but see a significant flaw—say, a basement that’s wet and moldy—and decide it’s too much to overcome. Maybe they’re afraid of what else they’ll find, or maybe they just don’t want a project to tackle right away.

With that in mind, when choosing which home repairs and upgrades to make, always opt for projects that will relieve buyers’ most pressing fears. This is important whether you’re planning to sell right away or are trying to increase future equity and value.

I’ve been watching a home that’s been on the market for awhile and has dropped significantly in price. I don’t know the sellers personally and have nothing to do with the sale, but I’m sure they’ve been wondering what the problem is. I think I have the answer. Although their home is generally clean and nice, upon closer inspection, the basement looks untidy and may have some mold or dampness issues. A relatively small amount of money is all it would have taken to help retain the home’s value. Specifically, investing between $2,000 and $8,000 in the basement to replace light bulbs, clean up moldy walls, paint, and replace the carpet would have addressed potential buyers’ “fear factor.” The house could have sold before the market declined further and could have netted the owners a huge return in the form of a $50,000 to $60,000 increase in sale price.

It always amazes me when people say they can’t afford to make a small investment in their homes that will prevent them from losing at least 5 times as much when they sell. That kind of investment makes perfect sense, especially if you’re planning to sell in the near future. If money is an issue, you might be able to take out a short-term loan, either from equity lines of credit or relatives or friends. Remember that you’ll be able to repay the loan upon the sale of your spruced-up home that fulfills the buyer’s expectations and meets his or her security needs.

The bottom line, especially in a flat or declining market, is to make sure you prepare your home by: (1) removing the fear factor (always disclosing what you’ve done); and (2) going after the main areas where  buyers most frequently look for upgrades, which are, in order of importance, kitchen, master bathroom, other bathrooms, master bedroom, family/recreation room, and curb appeal/yard. 

As always, I invite and encourage your comments on this or any other real estate subject.

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