Understanding Over-Improvement
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Understanding Over Improvement: What Real Estate Agents Need to Know
In the world of real estate, there’s a term that pops up occasionally during appraisals: over improvement. It might sound like a good thing—who wouldn’t want a property that’s “overly improved”? But in real estate, over improvement is actually a situation that can hurt property value. Let’s break it down into simple terms.
What Is Over Improvement?
Over improvement happens when a property has features or upgrades that go way beyond what’s typical—or needed—for the neighborhood or market. Think of it like putting a $10,000 sound system into a car worth $5,000. While it’s nice, it doesn’t mean the car is now worth $15,000.
For real estate, this might look like:
- Adding a luxury chef’s kitchen to a modest starter home.
- Building a 5-car garage in a neighborhood where most homes only have a single garage.
- Installing an Olympic-sized swimming pool in an area where few homes even have pools.
These upgrades might make the property nicer, but they don’t guarantee the owner will get their money back when it’s time to sell.
Why Does Over Improvement Matter?
Appraisers are focused on market value—what buyers are willing to pay for a property. Even if an owner spends a fortune on upgrades, buyers won’t necessarily pay extra for features they don’t need or expect in that area.
For example, if a home in a $300,000 neighborhood gets a $100,000 backyard renovation, it might still only sell for $320,000 because buyers in that market aren’t willing (or able) to pay more. That’s what appraisers call a lack of contributory value—meaning the improvements don’t “contribute” enough to the property’s market price.
What Real Estate Agents Can Do
As an agent, you can help your clients avoid the disappointment of over improvement by:
- Understanding the Market: Know what features and upgrades are typical—and valued—in the neighborhoods you serve.
- Advising Thoughtfully: If a client is thinking about making upgrades, help them focus on ones that align with the property’s price range and the local market’s preferences.
- Setting Realistic Expectations: If a seller has already overimproved, explain that while their upgrades might attract buyers, it doesn’t guarantee a higher sale price.
The Bottom Line
Over improvement isn’t about making bad upgrades—it’s about spending more than what the market will give back. As a real estate agent, your role is to guide clients to make decisions that will help them get the best possible return on their property.
The next time you hear the term “over improvement,” you’ll know it’s not about fancy upgrades—it’s about staying smart with real estate value!
Professional Career Center is a New York State licensed Real Estate School located in Syracuse, New York for over 30 years. Over those years we have trained thousands of Real Estate Agents, Brokers, Appraisers, and Assessors. We offer our New York State approved real estate licensing courses in three formats: classroom, live stream via Zoom, and fully online. Our online courses are ARELLO approved along with being approved by New York State. Our online instructors are experience New York State real estate professionals and are Certified Distance Education Instructors by idecc,