I’ve noticed after numerous listing appointments and talking with people that it’s not clear why home improvements help sell a home faster, and for top dollar. In many cases, people feel these improvements are an expense and not an investment. I want to share this food analogy below, as I believe this will help show how conditional improvements will make you more money when selling your home. A low supply market does NOT equal Top Dollar.
Scenario 1 Look at this single beautiful ripe banana. Let’s say in a grocery store this banana normally sells for $0.50/banana. Let’s say there were 10 customers walking into a very small grocery store. This group of people all just got done hiking, and all were wanting a banana after their midafternoon hike. But this little store only had one banana. Naturally, the cost of that banana will go up. There’s high demand, low supply. It’s like at an auction, or one customer may buy it from the other at a higher price. Multiple people are desiring this one banana. So to win it, they may have to pay the grocer or another customer a little more money for it. It may require someone to pay $0.75 – $1.00.
Scenario 2 You now add a rotten banana with a beautiful ripe banana and still have the same 10 customers all returning from a hike desiring a banana. The supply has now increased in this scenario. What do you think happens? Does the cost of the ripe banana go up? Or does it stays the same? It goes up!! Nobody wants the bad banana, the grocery store has to discount the rotten banana until they can find a customer willing to buy it.
That rotten banana by itself is undesirable for the general public. However, there is a market for that. That rotten condition is what investors are looking for. They’ll take that rotten banana, and improve its condition, by turning it into a banana cream pie, and then will resale that product for a profit. But again, low supply and bad condition will still require a discounted price.
Scenario 3 there is a bunch of bananas. The hikers come back from their hike and the majority of them are able to each get one banana. Ultimately the price of that banana will stay the same, as there are nearly half the amount of bananas as hikers. This is what you would call a normal or balanced market.
Some of you are probably saying “Yah, but Brandon…C’mon. If they’re in a grocery store there are a ton of other options for food. Many would just find an apple or another item instead of paying more.”
And my reply to you is Yes! You are correct, those are what we call renters. They have a certain level or expectation of what they are willing to pay to satisfy their hunger. That customer will spend money the same amount of money on the apple instead of the banana to satisfy their hunger. They are not concerned with the potassium benefits that the banana has after a hike, just as a renter may not be as concerned with the financial benefits that homeownership provides. At the end of the day, they just want to satisfy their hunger and will find another option to satisfy their need.
I hope these three scenarios show you why making improvements before listing your home the importance condition makes. If you’d like to learn more about cost-effective ways to get a return on the money you invest, give me a call. I’m happy to consult or help. Advice is always free, as I’m here to help. Contact me today at (602)428-7200.
