Are any projects are worth the investment? It’s time to weigh the costs
If you’re thinking about selling your home soon – or eventually – giving your abode a partial or extensive facelift can be a smart way to attract a potential buyer. But be careful, say the experts – pour too many dollars into an undervalued living space and you may not be able to recoup much of your investment. According to an Opinion Research Corp. study published in late 2007, 74 percent of all homeowners agreed that making home improvements or renovations now will help them obtain the most money when they choose to sell. Projects that homeowners believe will help get top dollar at resale include painting the interior or exterior (67 percent), a kitchen update (63 percent), bath remodel (58 percent), carpet replacement (54 percent) and new or refinished hardwood floors (49 percent). Findings from Remodeling Magazine’s 2007 Remodeling Cost vs. Value Report, however, indicate that the most profitable improvements are exterior projects, with an upscale siding replacement, wood deck addition, and windows replacement recouping, respectively, 88, 85, and 81 percent of costs upon resale. The sole interior project to return more than 80 percent of remodeling costs in 2007 was a minor kitchen remodel, at 83 percent. A closer look at this report yields an alarming trend: Only 16 of 29 projects listed in the report returned at least 70 cents on the dollar in resale value, down from 23 of 26 projects in 2006 and 22 of 22 projects in 2005.
“You can’t expect to receive a 100-percent return on any home improvement investment, especially in this type of market,” says Mario Greco, an agent with Rubloff Residential Properties, Chicago. “But these projects will go a long way to help sell your home. They can add value and likely decrease the amount of time your house is on the market.”
Short-term downturns and market fluctuations “should not concern people, and homeowners generally should view upgrades as strategic, long-term investments,” says Cliff Robertson, founder/CEO, The Champions Group, Plano, Texas.
Melissa Galt, an independent interior designer and remodeler in Atlanta, says that bathrooms and kitchen updates traditionally have the highest recoup values. “Americans are also enamored with storage, and any kind of closet remodel with the hottest, latest and greatest can be a selling feature,” she says. “Women drive the buying decisions and we weigh our decisions heavily on bathrooms, kitchens and closets.”
Sometimes a very small investment can yield a large return – for example, a whole-house cleaning, repainting and de-cluttering, as well as simple landscaping, says Emmy Sarica, an agent with RE/MAX Heritage, Westport, Conn.
Mike Evans, owner, Evans Appraisal Service, Inc., Chico, Calif., says that adding square footage to your home – such as a room addition or expanded garage – can yield a great return.
Ask Joseph A. Roche, president/CEO of East Coast Investment Solutions, Braintree, Mass., and he’ll tell you that major renovation projects like room additions usually are unwarranted.
“Our company would sell a house for a lower price before putting on a new roof or replacing the windows,” says Roche. “Of course, if the roof is shot and leaking, it has to be replaced. If not the house won’t even sell. Structural changes and additions should only be done if you’re going to be in the house to enjoy them for some time.”
Living areas that are probably unworthy improvement investments include sun rooms, home offices, media rooms and bedroom remodels, Galt says.
Instead of throwing money away on lesser-valued projects like room additions, consider making the existing square footage of your house more efficient and inviting to essentially add the benefits of more space without the expense of adding on, says Fernando Pages Ruiz, author of “Affordable Remodel” (Taunton Press, 2007). “Consider that a house of 1,800 square feet with 300 square feet of hallways and dead space is actually smaller than a 1,600-square-foot house with only 150 square feet of ‘dead space,’” he says.
“I think value declines when we sense outdated trends in design,” says Eric Stromer, host of HGTV’s “Over Your Head.” “If you choose a classic style that is relatable over time, like honed Carrera marble countertops and subway-tile backsplashes in a kitchen, then I think values will hold well. Be wary of getting seduced into the latest fashion. If resale is your motive, think simple and elegant. Do your research and choose color palettes, appliances, fixtures, tile and countertops that reflect today’s design style.”
The biggest mistake homeowners make is over-improving for their area, says Sarica. “If you purchased a house for $250,000 in a neighborhood of homes selling for about that price, you can’t expect to put $30,000 into a new kitchen and bath and recover your investment.”
To avoid this mistake, “look closely at your neighborhood, get comps on nearby houses and if anything is for sale in the area, go check it out,” says Galt. “Pay particular attention to finishes, fixtures, appliances and brands being used.”
“The best advice is to seek out a Realtor,” says Sarica. They can let you know the low and high end of pricing in your neighborhood so you can make a wise and informed decision about where your money should be spent.”
Galt says now is a great time to consider a home-improvement project because contractors and vendors “are slow right now and hungry for work. Deals can be made that in better times could not. Doing the work now means taking your time and being ready when the market rebounds.”
© CTW Features