Every home seller who has considered a home improvement update or upgrade has probably asked how much the project would add to their home’s value. Will the improvement pay for itself? Or, at least, will it prevent my house from sitting on the market too long and therefore bring a much lower price?
According to the 2015 Cost vs. Value Report, most home improvement projects will add some value to your home. But—and I can’t emphasize this enough—your project probably won’t boost your home’s value enough to recoup the entire cost of the project. In some cases, the improvement may not add any value to your home at all!
The return on investment (ROI) on some home improvements projects is so low, you’ll be left holding the bag for about half the cost. That makes these particularly poor choices for homeowners planning to sell in the near future. The following are for mid-range projects:
These improvements aren’t always bad choices. As we said before, if you’ll be living in your home a while and would enjoy a sunroom, extra bathroom or home office, go for it and enjoy it! But think twice before you take on any of these projects for the sole purpose of increasing the sales value of your home.
Generally speaking, projects that add square-footage are best viewed as an investment in your family’s enjoyment of the home. At most, you can expect to recover just 64% of the cost of a family room, garage or second-story addition… less for sunrooms and bathrooms.
You’ll do a little better by converting unused areas like your attic or screened sunroom into living spaces. An attic bedroom, for example, is likely to return nearly 80% of the cost.
If you’re planning to stay in your home a few more years and need the extra space to keep family members from tripping over each other, by all means add the space! Your family will have plenty of time to appreciate the addition and, once you’re ready to sell, the increase in square footage will also increase your asking price.
An IMPORTANT NOTE about any improvements: Check with your county Building Inspection Division about projects that require permits. All too often, home owners think they can do projects themselves without pulling appropriate permits. Don’t be tempted… the cost of permits is relatively low and failure to get them will come back to bite you when you sell (if not sooner).
As we pointed out, large-scale projects seldom result in large increases in your home’s value. One exception would be in replacing a roof or HVAC system that is at or very near the end of it’s life. When you’re ready to sell, upgrades that make an impact for less money are the way to go. Often these involve mostly cosmetic features such as painting, replacing old, dated or worn out flooring and sprucing up the lawn for added curb appeal.
For several years, simply replacing your front door with a new steel entry door has had the best ROI. According to the Cost vs. Value report, this is a project that will pay for itself, returning nearly 112% of its $1,166 cost. Remember, you have one chance to make a great first impression… don’t waste it!
Other projects that improve your home’s curb appeal are also good bets:
Back inside the house… a minor kitchen remodel will earn back 77.8% of its $18,064 cost. That includes replacing outdated appliances, re-facing the cabinets and adding new hardware, updating the laminate countertop and sink and replacing the flooring. If your kitchen shows it’s age relative to the rest of the house, you should consider (at the very least) replacing countertops and painting dated wood grain cabinets – new hardware makes a huge difference too! Depending on how out-dated your kitchen is now, you may well recoup all of the cost (plus some) if you can do the work yourself. And, when done nicely it is sure to help you sell faster.
You can drop a huge chunk of cash on home maintenance projects like replacing your heating and cooling unit, hot water heater or even your septic system. Unfortunately, even when these updates are brand new, most buyers aren’t willing to pay more for them. Buyers expect functional features like these to simply . . . function, and they don’t feel like they should pay for wear and tear that occurred in the home while you owned it.
On the other hand, if any of these invisible parts of your home aren’t in working order, it will detract from your home’s value in a major way. Even if you plan to sell soon, you can’t avoid these problems since they will certainly turn up in a home inspection. These are considered deferred maintenance projects and buyers will not pay top dollar for your home if you don’t go ahead and tackle the problems now. Just remember — you’re maintaining your home’s value; not increasing it.
One update most homeowners would consider a maintenance project falls into a gray area of home improvement: a roof replacement. As we said before, if your roof is at the end of its life, the buyer may be required to replace it ASAP for the insurance company. Buyers always over-estimate the cost of projects and automatically deduct the perceived amount from their offer.
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