Looking to Remodel Your House for Selling?

Posted by Office Staff on Friday, August 22nd, 2014 at 9:21am.

If you are, then the recently released 2014 Cost versus Value report by Remodeling Magazine will help you a lot in deciding on the remodeling projects as it clearly lays out the return provided by various home remodeling projects.

The 2014 report breaks the myth that investing in remodeling the house for selling purposes is always a winning proposition. In fact, nothing is further from the truth as on an average homeowner recovers only $.60 for each dollar spent on remodeling. Also, majority of the remodeling projects which provide excellent ROI are not the shiny glamorous ones you'll usually watch on TV like kitchen or bathroom remodeling.

The projects with the highest average return on investment include the practical but unglamorous ones such as replacement of old siding, garage door, old windows, front door and addition of a wood deck. We discuss below the remodeling projects which allow the homeowner to recoup the maximum percentage of their investment.

Mid-range Projects Recoup the Biggest Share of Remodeling Investment

The report released by the Remodeling Magazine tells a very different story when it comes to recouping remodeling investment. On an average, a homeowner is likely to get a better return on investment for spending money on items which give the home a facelift and contribute to the overall aesthetic.

The statistics in the report state that replacing an old door with the new shiny mid-range steel door which comes with a dual pane half glass panel as well as a new lockset provides highest return value at 96.6% of the cost. A new mid range steel door costs an average of $1162 but the seller is likely to get back an average of $1122 while selling. Similarly, a garage door replacement costing $1534 will allow the homeowner to get back $1283 on an average. Overall, these projects are not very costly and one does not need to take an additional home-equity loan to get these projects done. However, these small projects add a lot to the curb appeal.

Diana George of the reality brokerage firm Vault Realty Group based in Oakland, says that the most important factor in selling a house is the curb appeal. If the house does not look well kept on the outside, it gives an impression that things are not good on the inside too and buyers are not interested in such houses.

Wood Deck adds a lot to the curb appeal but it is a bit costly. On an average, it will cost a homeowner $9539 to add a 16 x 20 wood deck but the recovery is close to 87% of the cost. Replacing the old windows also adds a lot of value to the house. On an average, replacing 10 numbers of old 3 x 5 Windows with new wooden windows will cost around $11,000 or around $10,000 for vinyl but a homeowner will be able to recover close to 79% of this investment while selling the house.

Another project which provides a decent recovery on investment made is vinyl sliding which costs approximately $11,475 for 1250 ft.² but a homeowner is likely to recover close to $8975 while selling the house.

Costly Remodeling Projects

If you do have a bit of money to spend or can conjure up the home-equity loan to finance the home improvement, then spending money on basement remodeling and attic bedrooms is still relatively worthwhile. These projects may cost a lot but these are still the cheapest way to increase the usable square footage of the house.

The old adage that kitchen and bathroom remodeling sell houses is still true but you are not going to double your investment with such upgrades. Upgrading a 200 ft.² kitchen costs approximately $18,856 on an average but a homeowner with likely recover close to 82% of this investment. However, the recovery percentage keeps going down as the remodeling prices keep going up. It is estimated that a major kitchen remodel costs an average of $54,909 but a homeowner only recovers approximately 74% of this investment. Similarly bathroom remodel of a 5 x 7 space costs $16,128 on an average but the recovery is approximately close to 72%.

Therefore, one should think a lot before financing the above costly remodeling projects using home equity as almost all the above projects are going to give a negative return.

It is also important to keep in mind that the above costs are average costs and ROI may turn positive in case you are able to get the work done at a lower cost than above. Geographic region, size and scope of project and quality of finish affect the cost as well as the selling price.

Jeff Dumas of Tempe says that it is practical to do bathroom upgrades at minimal cost with materials which look expensive but do not cost too much. He says that an investment of $1500 to $2000 can provide a new tub, new vanity, new toilet, floor tiles for a bathroom remodel and the return on such low investment is amazing.

Remodeling Projects with Biggest Losses

Some of the remodeling projects lose so much money that these should never be initiated except in special cases. Remodeling Magazine suggests that spending money on a roof replacement and generator is not a good investment. On an average, money spent on a generator is only likely to provide back 67% of its value and similarly roof replacement is also likely to give back only 67% of the money spent.

Bathroom additions, sunroom additions and Master Suite additions are also part of the projects which are expensive and take a lot of time but provide the least value when selling the house. Also, a Home Office remodel is not worth it as on an average, a homeowner is likely to do recover less than 50% of the money spent on that remodel.

However, these projects do make sense in areas where such additions are in high demand. Addition of generator in storm prone areas in Louisiana, Oklahoma and Texas will provide recoupment of approximately 86% of the cost.

Exceptional Cases

There are always exceptions to the rules. You may see a positive return on your remodeling investment in case the area you live in is on fire (in terms of property valuations and sales) and the type of remodeling projects you have invested in are popular. It is estimated that San Francisco homeowners are likely to see a positive return on investments made in basement remodeling, kitchen remodeling and addition of attic bedroom.

Also, making some additions or changes to your house which brings it up to the standards of the other homes in your locality will most likely result in a positive return on investment.

Bottom Line

The bottom line here is that you need to look at real numbers while making home improvement decisions. Deciding to spend money on remodeling projects based on personal taste, emotions or TV shows without paying any heed to the real estate environment in your neighborhood will most likely result in waste of your money.

Therefore, it is always preferable to consult a real estate agent who is aware of the realities in the local market and knows what sells and what not. It is also recommended to consult the Cost versus Value report averages for your particular region and only spend money on the upgrades which are likely to bring you the highest return.

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