BY MARILYN WILSON, THE OTTAWA CITIZEN April 3, 2015
When it comes to upgrades and renovations, particularly in kitchens and bathrooms, choosing timeless finishes will help hold value if you later decide to sell.
All buyers decide to purchase based on their perception of value and there are many ways of attributing value to a piece of property.
According to the Real Estate Negotiation Institute, a buyer determines value by evaluating benefits compared to price. Benefits of a condo might include proximity to schools, entertainment, shopping and transit, as well as amenities, security, parking, prestige of the development and many other attributes that will vary from person to person.
For new condos, it’s the developer who determines the value and there is little room for negotiation. The developer’s valuation will largely be driven by the economics of the project.
For sellers other than a developer, the process is much more subjective. This often leads to situations in which the seller’s valuation system does not align with that of the potential buyer.
Sellers tend to rely on the price they paid for the property plus what they have invested in additions and improvements. This is where subjectivity creeps into the process.
The problem is that improvements are highly taste-specific. The seller may have chosen unpopular and not easily changed design elements or appliances. Worse still, they may have redesigned the layout to reflect personal needs that may not be shared by others.
To compound the matter, regardless of how tastefully alterations were carried out, they may not stand the test of (design) time, a process that starts shortly after implementation. Kitchens and bathrooms, the frequent recipients of renovations, are particularly susceptible to this process. When you go to sell in a few short years, your “very now” kitchen may have morphed into a “remember when.” Often when this is the case, the seller thinks the design choice is still state-of-the-art.
As a new condo buyer, you may not have a lot of power to negotiate price but you will have the benefit of choosing your finishings. You can visit the model suites to see how the basic unit will look, and you can embellish with upgrades, colours and other elements.
You can opt for moulding packages and interior design themes that have been developed by design professionals. There are definite benefits to using these to customize a condo, as they tend to avoid potential “remember when” trends. This is great for the buyer who is decisive and not preoccupied with the minute details.
On the other hand, resist the urge to express yourself with overly unique design features unless you are sure they will pass the test of time. You may want to work with your own designer as a check on your design decisions and to take some of the pressure off the pre-building process. One caveat is that over upgrading is not likely to return value in the long term.
When considering the listing price of your condo, remember that in a balanced market the primary consideration is what you paid originally and what you have invested in renovations, but keep in mind your view of those renovations may be stuck back at the date they were done. And in the meantime, developers have been creating newer, slicker condos and their prices will be in the same competitive price range. A buyer may not want to pay you a premium for dated finishes that they’ll want to redo if the same result can be obtained for less by purchasing a new condo.
All is not negative when thinking of condo resale valuation. Ottawa’s current buyer’s market boasts many listings in condo buildings and other residential enclaves.
Tax assessment is one of the valuation methods listing agents look to when determining prices. These assessments are determined based on previous sales in the neighbourhood and development. Some assessments are more accurate than others, but in general, condo assessments are more accurate than residential ones as they are based on a larger sample of comparable units.
But it should be noted that Ottawa properties often sell for less than their assessed values and, in many cases where upgrades have been made, more than their assessed value.
When you get down to setting a price or negotiating a sale, be aware that your valuation criteria may be very different from those of a purchaser and beware of going over the top with taste-specific design features.
Marilyn Wilson has been selling real estate for more than 25 years and owns Marilyn Wilson Dream Properties Inc. Brokerage, an Exclusive Affiliate of Christie’s International Real Estate. Reach her through dreamproperties.com.
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