If you’ve dreamed of a sparkling new kitchen and finally open the wallet and make it happen, enjoy it! But if you’re hoping it will add major dollars to the sale of your home, well, time to think again. Buyers want all the goodies, for sure, but remember the adage “the best we can get for our money”, the qualifying phrase being “for our money.”
Yes, we want everything, but we also don’t want to pay for it. And herein lies the rub. My topic this week is over improvement, putting more money into remodeling a home than the market value will permit. It is a very rare occurrence that the money you invest in home improvement is returned to you dollar for dollar when you sell. Only a percentage of it will likely come back to you, and remodeling experts have calculated those improvements that tend to promote the highest return.
It’s primarily your location that determines the base value of your residence. If you are in a subdivision where homes are selling between $400,000 and $500,000, you’re unlikely to get $600,000 even with that new kitchen; the neighborhood just won’t warrant it. That $600,000 buyer will probably be seeking the worst house in the $700,000 neighborhood, which will probably be a better investment in the long run. Isn’t it great to have the most attractive, amenity-laden house in your vicinity? The answer is yes, but only if that house is at the same price, or slightly higher than its competitors.
So, OK, you want to give yourself the best chance to sell, and are willing to invest some money to do so. What’s the best place to park those extra dollars? First, there are lots of relatively inexpensive things you can do to improve the salability of your residence: clean till it shines, plant, prune, mow and trim your front and rear yards; neaten and minimize, and yes, paint. Nothing adds more value than a fresh coat of paint!
Now we get to the big stuff. Adding a room – expensive, think twice. But adding a deck, yes; this is something to consider. According to Remodeling Magazine, a wooden deck can recoup almost 88 percent of its cost. Only 88 percent, you say? Well, yes, no improvement will generally recoup 100 percent. A kitchen remodel, which no one will dispute is highly desirable, only returns about 83 cents on the dollar and a new bath even less.
Often, some less expensive additions will be the best; experts suggest replacing a wooden front door with a steel one is a best bet, making it the number one project in Remodeling Magazine’s 2014 cost vs value report, returning a whopping 96 percent of its cost. Skylights, too, which add light to a home, and are relatively inexpensive, make the top of the list.
For the least cost effective additions, we found the following. Adding a home office. Offices are quickly going bye bye, with laptops and cell phones turning a park bench or restaurant or the couch into a regular work space. An extra bedroom would be much more preferable. Other no no’s include the sunroom – too expensive; the super upscale master suite – who wouldn’t want this, but this is much too expensive for the meager return of about 52 percent; and even the bathroom addition, desirable but returning a comparable return to the master suite. And lastly, the garage – nice to have, but no one will spend a lot extra to have a nicer one.
So, there you have it. If you’re making improvements for your own enjoyment, go for it. But if you prefer to be sensible and strategic and contemplate a sale in the near future, probably less is more. Do the cosmetic changes to prettify your space and leave the big changes to the new owners, who will be happy to have paid less for their new home, and can make their own plans to spend on improvements.
Del Phillips is a California Licensed Real Estate agent. He is a member of the National, California and San Diego Association of Realtors. You can reach Del at Ascent Real Estate at 619-298-6666 or at Del@DelPhillips.com DRE LIC #01267333.
