If you have ever done research on home improvements, you will be told that the more you spend on home improvements the more money your home will be worth. Is this actually still true in today’s market? We would like to suggest some new ideas to improving the value of your home that will actually change how it looks on the market.
$25,000 into my home MUST increase the value
Not so fast. With the state of the market now and first hand experience from home appraisers, we generally don’t see this being as true as it use to be. Before the collapse, it was pretty easy to install $3,000 in stainless steal appliances and up the price by $10,000. Before you go spending $29,000-42,000 on a major kitchen remodel, be smart with your money and try to use this money in areas that will appeal to home buyers today, or demands in your local market.
Remember, its not just how much you spend, its where you spend it and how much it is in demand
Doing major renovations to the kitchen or bathroom is not a guaranteed waste of money. Usually the most common outcome of this of these improvements is your house selling faster on the market, not necessarily increasing the appraisal value. The wealth of information on this type of stuff will make you frustrated. One group of people will tell you that its useless and a waste of money. While others will tell you that spending money on a major kitchen remodel will make its money back when you sell the home. We can’t tell you dollar for dollar value on these home improvements, even though some companies try to do it. The reality is that statistics don’t always take into account the motivation for why some people remodel their home. Some data shows that roughly 50 percent¹ of people consider re-sale value as a reason for remodel. Something to think about when reading reports that claim certain things.
Understand your market and neighborhood
You must consider your local market and real estate comps in your area if you want to consider home improvements. If the homes selling in your area all have nice new kitchens, it would be smart to upgrade yours if its not up to the competition. This is when you can ask yourself if a remodel of $20,000 or more will actually pay off when you decide to sell. Is a new kitchen the only difference between you and recent comps? What price was that comp sold for? Take the comp price and compare it to the appraisal value of your home and make a choice based on these numbers.
- Don’t upscale your home out of the neighborhood you live in, it decreases the chance of making a return on your investment
-An entire bathroom remodel? What about just an added second sink. A feature people really like.
- Thinking about an add on? Only do additions that make sense. Have a home with 1 bath? Adding another 1/2 bath would make sense. While adding a half bath with a home that already has 2 doesn’t provide the best return.
- Payoff for projects vary by condition. State of your home, neighborhood, and quality of the renovation all are factors
Emotional appeal provides the best value
Buying a car and buying a house all involve a level of emotional appeal to the buyer, if you try to hide or not. Sometimes all you need to do your home is increase these areas and watch offers come in for your home.
- Curb Appeal– the first impression of a home is often a crucial stage in the home buying process. Spend less money on landscaping for example, to make it shine as they pull up to your home. This is a real advantage. Its not as costly, and buyers will like the idea of having something to show off. Regardless if they ever plan to properly upkeep the yard in the future.
- New Paint & Floors – a smart buyer will often see these things as opportunity to bring down the price. But, some buyers just want a “new room” look. Several gallons of paint and hardwood flooring can do wonders to your ROI.
- New Windows & Entry Door – Not only does this save money to the home owner, but insulated windows can appeal to more energy-conscious buyers
Its not always about the looks
Consider the structural condition of your home along with the plumbing and electrical systems. Appraisers look at these things very carefully, while all the “luxury upgrades” get lumped into one category. Sure those things you did might get more people in the door, just be careful if you did these upgrades without proper research.
Update the vital parts of your home, Sometimes appraisers don’t even walk into your home. If you recently added a finished basement, make sure its right and any added square footage. Make sure listings include the CORRECT information about what people search for.
Take Away This for Home Improvements:
- It comes down to finding and researching houses in the area and what they are selling for from your real estate agent.
- Don’t underestimate “emotional” appeal
- Don’t always assume high dollar upgrades will have the same effect on your resale value
- Sometimes these remodels are driven by a contractor over selling his services. Remember how they make money.