As the saying goes, you never get a second chance to make a first impression. In real estate parlance, that first impression is called curb appeal and it has taken on an increased importance in the current buyer's market.
In its annual "Cost vs. Value Report," Remodeling magazine suggested homeowners wanting to sell should concentrate improvements on exterior upgrades. That's a switch from recent years' focus of rehab resources on kitchen and bath improvements.
According to National Association of Home Builders surveys, kitchen remodeling, bathroom remodeling, room additions and whole house remodeling had been the top choices for homeowners. But shifting market conditions appear to have changed home improvements' focus and return on investment.
Of the six projects cited by the "Cost vs. Value Report" where national recovery rates exceeded 80 percent, only one was strictly an inside job, a minor kitchen remodel. Findings were based on 2007 surveys for the National Association of Realtors of real estate appraisers, sales associates and brokers in 65 markets.
"We don't have any hard data behind the shift," said NAR spokesman Walter Molony. "But it may indicate that with more options for buyers to choose from in much of the country, curb appeal and making a good first impression are even more important."
Nationally, the improvements that netted more than 80 percent recovery were:
— Midrange wood window replacement (81.2 percent).
— Upscale vinyl window replacement (81 percent).
According to the report: "In a typical real estate transaction, the 'cost recouped' for a given remodeling project depends on a variety of unpredictable factors, many of which are more important than the construction cost. These factors include the condition of the rest of the house, the value of similar homes nearby, and the rate at which property values are changing in the surrounding area. A home's urban, suburban, or rural setting also affects its value, as does the availability and cost of new and existing homes in the immediate vicinity."
While no project broke the 90 percent mark nationally, there were regional variations. In the Pacific region, Realtors estimate cost recovery of more than 100 percent for these projects.
"Consumers are spending less on their homes and are taking more time to sign on for large remodels," observed Kelly Mack of NAHB Remodelers. "Part of it may be decreasing available home equity, but it also seems just tightening on household spending." Even so, NAHB estimates that Americans spent $235 billion in home remodeling in 2007 — up from 2006's $233 billion.
"Our most recent consumer survey shows 55 percent of sellers remodeled or made improvements within three months of placing their home on the market, spending a median of nearly $3,000," said the NAR's Molony.
What is spent and how much is recouped depend on a number of things: condition of the rest of the house, value of nearby homes and the urban, suburban or rural setting of the house. There are also a number of regional variations. A bathroom remodel that recovered 85 percent of its value in the South only recouped 63 percent in the Midwest, according to the report.
"On most projects, the value of remodeling trended down in 2007 compared with 2006," observed the magazine. Even so, as the NAHB's Mack observed, "some value-increasing projects can be relatively small and inexpensive."
Molony concurs. "Historically, the biggest bang for the buck is simply taking care of cosmetics — painting, cleaning out clutter, trimming the landscaping, etc." he noted.
"Bringing a home that is substandard up to neighborhood norm generally provides a good return," said Molony. "However, overimproving a home to make it one of the most expensive in the neighborhood generally is counterproductive — you won't receive a proportionate return."
Complete city data from the Remodeling 2007 "Cost vs. Value Report" can be downloaded for free at www.costvalue.remodelingmagazine.com.