Property owners who are thinking of renovations as a means to increase the value of their property could be opening the door to having financial problems, this according to an article in news.com’s property section.

Over-capitalizing on one’s property is one of the risks owners are rising every time they add something to their house. People who have sold their renovated property have often been disappointed with the sale outcome.

Patrick Bright, EPS Property Search director and author shared, “Those homeowners who have overcapitalised are being exposed more than ever, leaving many at risk, particularly in areas where the market has softened quite significantly. The number one cost people try to avoid by renovating is stamp duty. Unfortunately, they don’t realise they can tear up just as much, if not more, by overcapitalising on a renovation.”

Activities in the renovation sector have been picking up according to recent government records while new home constructions and prices of real estates have been on the other hand, falling.

An Australian consumer satisfaction ratings company has found that people are following the do-it-yourself approach with renovating.  With the majority of people doing their own house painting.

The falling house prices however seemed to be slowing down, according to data from Rismark and RP Data which showed property prices in capital cities only down 0.2% in September.

Patrick Bright shared a tip on how to know if the owner has overcapitalized on renovations.  “One tell-tale sign that a homeowner has overcapitalised is when you ask the sales agent how the vendor came up with the asking price. The sales agent quotes the amount the owners spent on the renovations and the price the property was worth prior to the renovations, adds the two together and there’s the expectation to sell the property at that price.” Property owners would normally have asking prices 10% more than the property’s true value so as to get back on their cost for renovations.

People who dead set with plans to renovate their property should seek mortgage broker’s advice so as not to go beyond their budget. Renovations could either make or break a property.

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