REMODELING FOR VALUE
Nearly every day I have homeowners ask me about what they should remodel in order to add value to their home. But like the beauty of artwork, remodeling can be in the eye of the beholder. It is subjective. And that’s where things can go wrong.
To begin with, remodeling or updating your home can have its advantages to you and increase home value at the same time. If you want to add more than the typical home in your area because you will enjoy the update or remodel, or plan on living at the home for years, then these tips may not apply.
Just keep in mind that some remodels may not recapture their cost. If you plan on selling within the next couple of years you want to be sure that any updates or remodels are consistent with the market area.
Many remodel and updates may have a 25%-50% depreciation almost as soon as you do them, so consider the cost versus the value that your items might have. One thing you can do for ideas is to check out open houses in your area and see what remodels or updates sellers are putting in. If you decide to add more updates than the average seller you may be “over-improved” and may get a lower return on investment (ROI).
The same principles apply to adding square footage to your home, or as appraisers call it, “gross living area” or “GLA”. If your home is 2,000sf and the typical sizes in your neighborhood range from 1,700sf to 2,300sf, you may want to reconsider adding that extra 1,200sf. Your ROI on having a 3,200sf home may not be as high as you thought it could be.
Here are a few things to consider:
Will you get use out of the remodel or update? Will you be adding a pool that your family and friends will enjoy? Or remodel the kitchen with a new island and appliances for all your cooking endeavors?
Are your remodels consistent with the architectural style of the home and/or neighborhood? Will you be adding an IKEA inspired kitchen to your traditional colonial style home?
Do other homes selling in your neighborhood have similar remodels or updates? Or, are you the only homeowner adding expensive European imported marble floors?
Are the remodels/updates consistent with the median price point of the neighborhood? Or will you be overbuilt?
Now of course there will be exceptions to the rules. Your market may be different, or going through changes in size or remodels. You may have a unique location, waterfront or golf course, where the differences in size, style and amenities may break the above guidelines.
So, consider your neighborhood market area. Research open houses and see their updates. Get several price quotes bids from contractors. And be sure to check with your city or area for building permits.