While renovations and upgrades can enhance a home's marketability to a wider range of buyers, making the right improvements can increase the selling price.
"Whenever I do an appraisal inspection, I ask what kinds of renovations have been made, and I ask what the cost was," says Jay Christensen, an appraiser with Medford's Appraisal Network of Oregon. "Renovations are always a big factor in a home's value."
According to Christensen, making sure a home's mechanical systems are up-to-date is a must in selling a home.
"Try to keep up with depreciation. That's the biggest monster," Christensen says. "Make sure your entire mechanical system is working properly — things like heating, HVAC system, plumbing and electrical. Appraisers look at the 'effective age' (age of a property based on the amount of wear and tear it has sustained). You can have a 1950s home and if the systems are up-to-date, it has the same effective age as a newer home. Anything to better the age on the house is smart."
Christensen says the next areas to look at are the most common, and often most expensive, home renovations. "Take a look at the wet areas — kitchens and bathrooms. People who do remodels here are going to recoup a lot more return on their investment," he says. "Those are generally the only two areas where you're going to get more than what you spend, at least a dollar-for-dollar return, if not more."
Kathy Bauer, a broker with John L. Scott's Medford office, says if you can't afford a complete kitchen renovation — which averages more than $50,000 nationally, according to Remodeling Magazine's "2008-09 Cost vs. Value Report" — go with a minor renovation.
"You might see fancy renovations in magazines, but you have to ask how that is going to work in this market?" she says. "With a minor kitchen remodel, you can have minimal costs for a great return. Replacing old countertops, cabinet doors and flooring are huge improvements for reselling."
Other minimal improvements that really boost a home's curb appeal include replacing siding and gutters. Don't underestimate simple enhancements such as new neutral paint and carpeting, sprucing up the deck and basic landscaping such as planting flowers, Bauer says.
"Sprucing up the home is an immediate improvement. Curb appeal is so important."
"Green" improvements are popular — and valuable — in today's energy-conscious environment and translate into bigger home values, according to Christensen.
"Right now energy-efficient improvements are doing really well. Adding insulation, windows and energy-efficient appliances are a big plus. These are all things that I look for in doing an appraisal inspection."
Contractor Rob Lund, of Robert Lund II Construction, concurs that energy-efficient improvements are a smart investment. "I advise customers making investments in things you actually use, like insulation and windows. It's a great return on money down the road. Most people want things like fancy bathrooms that don't really get used very much, but it's hard to get people to invest in something they can't immediately see."
Renovations to avoid — because it's harder to recoup costs — include swimming pools and spas, says Christensen. "These are nice to have, and you get a lot of enjoyment out of them, but you don't really have to have them," he says. "They depreciate so much faster than anything else. Over-improving 'wants' instead of 'needs' isn't smart, and you don't recoup your investment."
While the struggling economy has decreased home prices, it's also brought a benefit to the seller in that contractors are now more readily available to work on renovations.
According to Lund, who's been renovating houses for 18 years, "I usually work on five projects at a time, but now I'm down to one at a time."