Cost vs. Value Home Improvements
Home improvements are often very costly, both in money and the time it takes to undergo a renovation. I’ve had
clients who actually moved out of their homes while the home was being redone, thus absorbing a double cost of living, in addition to the cost of renovation.
When you are spending money like that you want to be sure you 1) really love what you are doing to the home 2) understand what the ROI will be when you go to resell 3) the renovations will appear to others, not just you and your family! Many times the cost of renovations far exceed the return on investment upon sale. When that occurs the homeowner must understand the renovations are for his pleasure only.
Recently I was showing a daring home an investor had purchased as a "fix and flip". As I toured the home with my clients, we were excited about it possibly being The Home! Then we got to the main bathroom. This is where our excitement ended.
The bathroom was very narrow. It was an old house where the main floor bath was the bathroom that serviced the house, including 3 bedrooms and the visiting guests. In the bathroom there was a toilet, sink and a bathtub, all very normal appointed, but the issue was the space.
The toilet was squished very close to the tub. A person of normal height could not easily use the toilet without their legs being pressed up against the tub.
Why on earth would any builder in their right mind complete a renovation with this very obvious negative arrangement? Perhaps the builder himself was 4′9"! A person of this height might be able to use this toilet in comfort.
Functional Obsolescence occurs in real estate frequently because styles change, tastes change and in the case of the squished toilet, people get bigger!
When renovating a home, take into account today’s taste in style and what is appealing to the broadest audience. They are your future buyers, ignoring them may cost you.
There are other faux pas home renovation homeowners make when trying to improve their homes. Most recently I’ve been seeing many beautifully finished basements with game rooms, extra bedrooms serviced by a 1/2 bath. Yikes! The rule to follow here, if you have a bedroom the bathroom needed to make a completely sweet finish must be at the very least a3/4 bath. The best scenario would be to have a full bath, that means a toilet, sink and tub/shower.
My clients have passed up at least 4 lovely homes that didn’t follow this rule!
Yes, full bathrooms cost more, but if you are going to renovate, do it right or don’t do it at all!
Another important rule to remember in real estate is one we Realtors learn early on.
Cost does not equal value.
Just because a renovation cost "$X" doesn’t mean your home will increase by "$X!" In the cases above, I would venture to guess the renovations SPOILED the home, not improved it!
Before you renovation, do your research. Talk to your Realtor about the lastest trends and styles. Pretend the renovations are finished and you have to sell your home. Will the neighborhood uphold the current value you have in the house? If not, are you OK with that?
Over-improving for the neighborhood is a fatal sin that cannot be forgiven. Well it will be forgiven if you throw enough CASH at it! Only the homeowner can determine if that is OK, it’s his cash after all!
Remodeling Magazine publishes the latest Cost vs. Value Reports each year. The values vary in different parts of the country, so they compile the trend reports accordingly. Research into the appropriate renovation will provide valuable insight as to whether the whole idea is a good one or not.
If after you examine the facts and the renovations are for pure personal enjoyment because you plan to live in the home for a long time, then go ahead renovate. A home is a castle, if we can’t enjoy living there what’s the point. Just remember when you go to sell, your enjoyment may have come with a bigger price tag than expected.
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10 Responses to “ Cost vs. Value Home Improvements ”
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This site brought to you by Kristal Kraft, a licensed Colorado Real Estate Broker
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Isn’t it amazing how sellers expect to get every penny back, some of their value is their use and enjoyment of the updates. Didn’t know that about sunrooms, good information.
Nice information Kris. I don’t believe I had seen the remodeling magazine website. Good information to have for the future when talking to sellers. Thanks.
I just discussed this with a seller last week. “But it cost us $x to put that in.” I said, “I sure hope you enjoyed it!”
Are you going to DC in mid may?
Yes, Missy it is amazing. I liken it to buying a really nice pair of shoes, wearing them for a year or two then expecting to get the same price I paid when I sell them at a garage sale!
It’s not going to happen!
Kristal - I also run into this in this market where homes have been remodeled recently (last year or so) and the seller thinks it should be a 1:1 increase in value. I feel for those people who took out home equity loans to improve homes when things were rising and now can’t get that money back out. I tell buyers if you’re going to make improvements do it sooner rather than later so you get to actually ENJOY the improvements while you live there.
I can tell we are working with buyers, Kristal; I was browsing the Magaazine site last night to see if the 2007 report was out! One of my buyers is a six foot gentleman who would not have been able to utilize the shower in either the first or second floor baths of the first home we saw; and yes that was the deal killer, so to speak. It’s almost not worth it to do a bath addition if the ceiling is too low. Love your new look too!
Kristal, With the cost of heating oil what it is, upscale window replacements would be a priority remodel on any home north of the Mason Dixon! As for some of other additions, like they say one man’s remodel is another man’s unnecessary extra! These lists have been available for so long, it amazes me that so many homeowners are not aware of them!
As Cyndee said, I find many sellers want that 1:1 value, and some even try to add compound growth to it.
Great information! I am learning what to look for from bossy sellers
cant wait to look up the remodeling magazine website.