 So you're thinking about adding some enhancements to your home. You've looked at plans and umpteen magazines and have decided to roll up your sleeves and turn your home into your castle. But is all that work really worth it in the long run?
A recent study (the Cost vs. Value Report) published in Remodeling magazine compares the cost of home improvements with their recovered value when the house is sold. The publication compared construction costs for 12 projects and estimated the project's value in a one-year resale situation. In addition, the magazine consulted 300 real estate professionals in 60 residential markets across the country that provided return-on-investment estimates.
The study warns that estimated values for this year are from a higher proportion of appraisers, who tend to take the macro view of remodeling projects, and that ROI depends on the house, neighborhood and region where it is located. The study excluded basic, maintenance-related jobs and also said to expect smaller returns on investment for periods of longer that a year between the remodeling work and the home sale.
That said, there's good information for homeowners thinking about taking the remodeling plunge. For example, while landscaping and paint may enhance "curb appeal" of a house, buyers of existing homes look for functionality, durability and convenience. Essentially, they want a house they can live in. And they want it soon after they move in. A report from the Harvard Joint Center for Housing Studies' Remodeling Futures Program shows that most remodeling dollars are spent within the first two years of move-in.
Where to invest remodeling dollars
Homeowners who updated their most frequented rooms, such as the living room/den, kitchen and bathroom, and those who added on more living space enjoyed the highest return on investment.
In fact, kitchens and baths were the most popular home improvement projects, with minor kitchen remodels and bathroom additions offering the highest return.
According to the Remodeling report, Des Moines, Iowa, appraiser Alan Hummel says from the standpoint of selling the house, the kitchen facelift is one of the best improvements homeowners can buy, and other real estate professionals in the study agreed. They say minor kitchen remodels return more value than any other project: estimated construction costs of $8,655 return 81%, or $7,041, nationally.
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Rounding out the top remodeling jobs were second-story, family room and master suite additions. In addition, the real estate professionals in the study emphasized that large is in and that there is more value by having more space.
Guidelines for remodeling
Curb appeal is always good, and easy fixes like paint and exterior improvements are a simple way to add instant value to any house. After all, the first impression is what stirs a potential buyer's emotions as they consider the possibility of your house as their home. It's also what gets the prospective buyer inside to see your new wood floors and remodeled kitchen or bath.
But there are other factors homeowners should consider before loading up at the local home improvement store or calling a contractor. For example, if you live in a neighborhood of sprawling ranch-style homes and you decide to add a Victorian porch, your ROI might not be that great.
But if those ranch-style homes were built in the 60s and have olive green carpet and you switch it out in favor of those wood floors you always wanted, your home will most likely get a better price when you sell it than comparable homes with the original carpet. Bottom line: Additions that don't reflect what's been done to other homes in the neighborhood or aren't a significant improvement over what's there probably won't hit pay dirt when you sell.
In the end, if you want to increase your living space, avoid the expense of moving to a pricier neighborhood, prolong your home's life (and achieve a good return on investment) then just do it. The fact is that people spend a lot of time in certain parts of the home, especially the kitchen, the bedroom and the family room. These areas need to be comfortable, functional and durable to stand up to the demands of daily living. All in all, it makes good sense to remodel if it suits your lifestyle. Most likely it will suit potential buyers, too.
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