Increasing Your Equity
Last week on the blog we discussed common terminology every home buyer and seller should know. One of those terms was home equity. Knowing your equity is essential to the buying and selling process. This week we will discuss ways you can increase your home’s equity to get the most bang for your buck.
In simple terms, your equity is found by subtracting mortgage loans from the value of your home after appraisal. Having negative equity means you owe more than your house is worth. Equity tells you how much of your home that you technically own and it can be applied toward other assets. You can use the equity you have after selling your home toward buying your next home. The more equity you have, the more buying power you have as a homeowner. One of the most common ways you can build your equity is by increasing the value of your home.
Increasing Home Value
These projects often appear as financial burdens to some homeowners. If you allow them to drain your wallet and take out more than you plan for, they can become just that. However, it is important to focus on the bigger picture of increasing your equity in the long run. Determining the extent to which you are willing to increase your home’s value depends on the amount of time you have before your home’s value is determined by a third party. Setting a timeline and a budget are imperative to keeping your home improvement projects on track.
A timeline should be realistic with room for error. If you run out of paint at the end of your designated painting day, be prepared to buy more and continue working the next day. The worst scenario would be running out of time to make these necessary improvements before buyers walk through your home.
Your budget should also include a cushion. Set a realistic monetary amount and prepare for the possibility of going slightly over or under budget. Decide which improvements will require a professional who costs more than "doing it yourself". Also take into consideration the improvements that you value more than others so they are completed before projects of less priority.
Once your timeline and budget are set, happy equity building!
Painting can be a daunting task if you do it yourself. Hiring a professional painter is an option if it is within your budget. However, buying paint brushes and cans of paint is one of the cheaper ways to internally update your home. Unless buyers are specifically looking for a "fixer-upper", they will be more drawn to the homes that don’t need thousands of dollars worth of improvement. Painting a room can make the world of a difference in a buyer’s decision to fall in love with your home.
Be cautious in your paint choice. Painting a room can change the look and feel of your home, but it also has the capability of changing the look for the worse. Make sure that you are paying attention to the current paint trends. An easy way to find trends in wall color is by walking through model homes in your area. Take notice of the rooms you “oo” and “ah” at when taking your first step inside. Looking at these homes will give you a better sense of what colors can help sell your home.
Make external landscape improvements
The outside of your home is just as important as the inside. Potential buyers will drive passed your home and make assumptions about the inside based on what they see on the outside. If there are multiple homes in your neighborhood for sale, this is especially important. You want your home to stand out from the others while still capturing the essence of the internal qualities it can provide buyers.
Landscaping can make or break your home’s outdoor aesthetic. The most challenging part about landscaping is finding a nice balance. Too many bushes and trees can make your home look overgrown. However, having one lone tree in the front of your house won’t make it stand out from the rest. Maintaining this balance may mean planting a new bush by your porch or adding a small flower bed next to the mailbox. The landscaping opportunities are endless in the grand scheme of increasing your home's equity.
Landscaping is not the only way to make external improvements. You can also look into power washing your home, adding light fixtures, buying a new front door or even investing in painting your shutters. The length to which you want to make these external improvements depends on the budget you set for yourself.
Similar to walking through model homes for paint inspiration, looking at houses online that are currently on the market will give you ideas about how to improve the look of your home. Look further into the details of the homes that impress you, but also take notice to the ones that make your head turn the other way.
Check old appliances
When is the last time you looked into the longevity of your appliances? Replacing home appliances can come at a high cost, but an easy way to lower their hold on your bank account is by looking into how long they last. This will tell you if your appliance's lifespan is nearing the end. The best way to do so is by taking into account which appliances are near the brim and go from there to identify the importance of each in your home.
This chart from www.lifehack.org outlines how long your appliances last and the average cost of replacement. This is a good place to start before grabbing your phone and calling a specialist. The chart can help you determine the appliances you value enough to spend a chunk of your home improvement budget. Seeing as some appliances have a very long lifespan, a replacement is very likely to increase your home's equity.
Allow the market around you to improve
This is perhaps the most passive approach to increasing your home’s value. If you don’t have the time to make physical home improvements, wait for your neighbors homes on the market to boost your home’s value. During appraisals, the third party will determine your home’s value based on several key factors. One of these influential factors is the current condition of the market in your area. If homes are selling at higher prices, the value of your home will get an extra boost. Since equity is the difference between your home’s value and how much you still need to pay off on your home, this is a simple way to increase your equity.
If you don’t have the time in your day to conduct these internal or external home improvements, talk to your mortgage broker to learn about building equity by diminishing your debt through payments.