Why I lectured some relatives about their smoke detectors over Thanksgiving…..

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I just returned from LA where I visited some relatives over Thanksgiving weekend. Good trip, great food and awesome weather. Some retired relatives have lived in their house for over 30 years. They’ve updated some items inside the house but other parts of the house have original details. One part of the house, they have unwittingly ignored is their smoke alarms. They do not work, and the smoke alarms are probably 10-20 years old – none of them have working batteries and it’s not certain the detectors even work at all. When asked why they don’t replace the batteries or detectors, they indicated that the ceilings are too high or that they simply forgot to do so. I spent the next 10 minutes lecturing them on the importance of smoke detectors/alarms and how dangerous it is to live without them.

In selling real estate, one of the California state laws require that “every single-family dwelling and factory built housing unit sold on or after 1/186 must have an operable smoke detector, approved and listed by the State Fire Marshal, installed in accordance w/the State Fire Marshal’s regulations….”  In fact, some local cities impose even more stringent smoke detector requirements. When I recently completed a bathroom remodel to my own house, the city inspector checked my house for working fire alarms and even instructed me to add a smoke detector to a part of the house before he issued the final approval. I was happy to comply.

As part of closing a real estate transaction, one of the disclosure documents that must be signed is a Certification of Compliance with Water Heater, Smoke Detector and Carbon Monoxide Device Requirement. Simplistically, the Seller/Owner signs the certification that they/the house is compliance prior to close of escrow. On the deals that I close as either the listing or buying agent, one of the real estate agents on the transaction ends up providing a working smoke detector on behalf of their client literally the day before close of escrow. Obviously, this is not the ideal scenario because it means the owner had been living on the property without proper working detectors previously.

Nowadays, it’s not just smoke detectors but also carbon monoxide devices. There are many brands that sell single units that detect both smoke and carbon monoxide.

The “chirping” of low battery life is annoying. Over the years, I’ve had to wake up in the middle of the night to dismantle the battery to stop and then procrastinate for weeks before replacing the batteries. I can only imagine the extra hassle it would be for an elderly person to carry a stepladder up the stairs and then have to replace batteries. Low and behold, they now make detectors that come with a 10-year battery life – hooray!

Smoke/carbon monoxide detectors are relatively inexpensive these days. You can see the link below from Homedepot.com that a combination smoke/CO2 detector with a 10-year battery life only costs $40. This investment now lasts for an expected 10 years and replacing the units is very easy. Below is a link for an example of one such unit.

http://www.homedepot.com/p/Kidde-Battery-Operated-Combination-Smoke-Carbon-Monoxide-Alarm-with-10-Year-Sealed-Lithium-Ion-Battery-21010262/204249510?N=5yc1vZbmgjZua

My relatives who I had to lecture were probably annoyed at me for the tone I took, but I am completely comfortable with having done so. It’s a safety issue, and I lecture only because I care and am concerned about their welfare. The only redeeming outcome of the exchange is that I now know what present to get them for the holidays. I will probably purchase nine new units and install if for them throughout the house. No, it’s not a fun gift, but one of necessity to all households alike. I don’t believe they read this blog so hopefully it’ll still be a surprise gift!

Have a fun, safe holiday season!

 

Cost and Return on Investment Estimates for Home Remodeling

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As a real estate professional, I get asked regularly the following question…”what is a rough estimate to upgrade/replace/fix <fill in the blank> in my house?”. I love talking real estate. I am passionate using data and analyzing information to discuss options with people. I enjoy brainstorming home projects with people, and am good at providing insight to my clients on potential ways to modernize, change floor plans, and remodeling options on houses they own or are considering making an offer on.  But, it is incredibly difficult to answer very specific question around cost estimates or ROI, primarily due to a huge range in quality of finishes, labor cost, unexpected costs, differences in people’s houses, individual ability to negotiate, geography, space layout, and myriads of other factors. I thought I would write a bit about this dynamic after I just read an article on Yahoo News on “what is the rough estimate of a Return on Investment of a specific home project”. The reason is all these various articles estimating ROI in the United States is not as relevant in the heart of SF Bay and in particular in mid-Peninsula cities where average condo/house sale prices is almost $800,000 and a small 3bd/2ba starter house that requires work in San Carlos, Burlingame, San Mateo, Foster City, Redwood Shores, Millbrae, Menlo Park, and Belmont surpasses $1+ million.

http://news.yahoo.com/home-remodeling-projects-worth-money-155500763.html

http://money.usnews.com/money/personal-finance/articles/2012/10/25/renovations-that-yield-the-best-return-on-investment?page=2

You can see in the article that states the home improvement projects yield below 100% return on investment (ROI) from a re-sale perspective. In the San Francisco Bay Area where homes are selling from between $600-900 per square feet and demand outstrips supply (see previous post, https://taosiliconvalley.com/2013/08/26/microeconomics-101-for-real-estate-2/)  projects such as a kitchen or bathroom remodel generally will yield well above 100% return on re-sale. I don’t like providing blanket statements like that, because the homeowner can certainly “over improve” a space relative to the neighborhood/house, or design to a very specific taste whereby the ROI may be under 100%. When the $/sq.ft. and the average price of a home is so high, the threat of not seeing a good ROI is significantly mitigated relative to other parts of the US where $/sq. ft is much lower than what we see in Silicon Valley.

I indicate kitchen and bathrooms since those projects require more of an upfront investment to do the project but also since these are key rooms that buyers pay attention to and homeowners have pride over. There are other projects that should easily see an above 100% ROI in our location – new paint (interior/exterior) and flooring readily comes to mind.

In terms of cost estimates, I get asked the most about bathroom and kitchens….surprise, surprise. Let’s start with bathrooms, this has a big range for a complete “gut job” remodel project. For a Master Bathroom (for a smaller “regular bathroom” cost estimates are lower), let’s go with anything from $3000 to $50,000. For $3-5k, you are likely doing most of the work yourself, it’s off the shelf big box store vanity/mirror/lighting with no moving plumbing or electrical around and no special tiling work, and is only a small, basic bathroom. I was recently at a high end bathroom showroom store looking at what I thought was a “higher end” vanity. It was around $6k for a 60″ vanity/countertop. It was beautiful. Then, I looked around the showroom and was a kid in a candy store. Everything was so shiny and awesome. First, that vanity the salesman told me was the “least expensive” in the showroom. They had small 30″ half bath vanities for $10-15k, bathroom faucets for $3k, standalone tub for $2,500, a steam shower set up for $4k. You could easily spend $50,000 (or even much more) for a sweet set-up that you probably see on the old TV show “Cribs”. But more realistically for us regular people, a part of your cost component will be whether you are moving plumbing, do you need to upgrade electrical, new lighting, are you doing custom tile work, type/brand of fixtures, jacuzzi tub or just soaking tub or a tub/shower combination. Clearly, each variation adds $$.

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No question, a kitchen is higher cost and has even higher variability. Just a quick example on simple appliance choices, you can buy a nice refrigerator for $2k, dishwasher for $750, stove/oven for $2k, and range hood for $300. There are more basic and cheaper options available at maybe half that pricing. However, if you wanted to get a “higher end” kitchen appliance set, the starting prices could be as follows…6 burner 36″ Viking/Thermador range for $7k, Chimney hood for $1,500, dishwasher for $2k, wine fridge for $1k, Miele built-in expresso machine for $3,500, and a sub-zero refrigerator for $15k. For just the appliances alone, the cost of a good set can be had for $5k or go up a tier or two and add in a couple other appliances (wine, expresso) and you are now in for $25k. You haven’t started construction yet, picked out cabinets, countertop, lighting fixtures, changed the floor plan, upgraded electrical, or paid for any contractor labor. Thus, when I get pressed on providing a “cost range” for an “average” kitchen remodel that is still not an easy question to answer.

And as anyone can guess, the skill and efficiency and cost of a general contractor and sub-contractor run a wide range range. Often, labor is a big component of the overall budget. Lots of dynamics impact labor cost. Highly experienced and professional full service general contractor with a full team will be more expensive than a one person unlicensed person. Your timeline and how quickly you need it completed will impact cost. Type and complexity of project impacts many decisions. How well do you negotiate? How much risk in the project if something goes wrong? How are you structuring the arrangement with the contractor – fixed cost or cost+ markup. Who is paying for materials. Geographic location. Thus, when a friend from Denver asks about estimating costs vs. a client from Palo Alto, I can safely assume the labor cost for a contractor in Palo Alto will be higher than someone from Denver for the same work.

So a key question to ask yourself in evaluating whether to start a home remodeling job is how important is the “financial ROI” aspect of whatever you do vs. doing a remodel purely because this is the house you will be living in for the next 20 years and you don’t care about the specific style, taste, budget of your remodel and how others will perceive and value your work. That dynamic may help determine and drive what you decide to do, how you design your plans and what finishes/colors you end up choosing.

Again, for those who know me, know that I am not someone who likes to just throw out random numbers and prefer to provide lots of details and assumptions when I do use numbers whether to help provide comparable sales information, to analyze sports statistics or to provide direction on a project. When you do read articles online about home remodeling ROI, keep in mind, the statistics are for national averages/estimates and does not necessarily reflect the SF Bay Area’s valuations. But as always, feel free to contact me if you wanted to brainstorm anything regarding real estate or get my expert opinion about the upcoming March Madness college basketball tournament bracket!