Are Homes Becoming Over-improved?

As I analyze current market trends and sales data, I can not help but notice the number of over-improved homes on the market. First, the term "over-improved" is any property that has been updated in such a dramatic way that the current sales price is beyond what the market can bear. So, one can easily remove the "over-improved" label by properly pricing the property in relation to the current market, regardless of improvements.

Unfortunately, many real estate agents encourage "over-improving" and do not educate homeowners the reality of improving a home. That granite counter top or slate tile floor may be beautiful and the difference maker to sell a home compared to the competition, but it does not necessarily mean the home is worth more.

If a given area has home prices in a 200k-250k range, then a home really should not sell above 250k, especially in this market. What sellers should know is to improve their property wisely, and determine if it is to sell or for the seller to enjoy. I was watching a program on HGTV where the agent came back after improvements and gave an adjusted market price 5% higher than the improvement costs. This does not make sense, since improvements in real estate (structure) typically depreciate (like cars) while the land typically appreciates. So beware when you are making improvements. Choose them wisely and hopefully make them for your enjoyment and don't worry so much about the possible future gains the improvements may make.