Remodeling Magazine issues an annual Cost vs Value Report outlining the average return on investment for 21 home improvement projects. The 2018 report shows that the average return on investment (ROI) for home improvement projects dipped across the board, with “upscale” projects taking the biggest hit. This can be attributed to the strong housing market with low inventory and the increased cost in building materials and labor.
Improving your curb appeal brings the highest return on investment (ROI). Garage door replacement has the highest average ROI at 98.3%, adding stone veneer 97%, and replacing the front entry door averages 91% ROI.
Adding a deck is a good investment as well, at 83% ROI. This is an important improvement on a newer home where the builder installed a patio door with deck ledger. It is better to make this improvement long before you sell, so you can enjoy it, but if you don’t install a deck before you sell, it may take longer to sell and for less. Many buyers are using all their cash to purchase a home and don’t have extra money for remodeling.
Minor remodeling is far more cost-effective than replacement, This year, there’s a 20-point difference in ROI: 76 percent for replacement jobs, versus 56 percent for remodeling. For example, a minor kitchen remodel averages $21,000 with an 81% ROI, and a major kitchen remodel averages $64,000 with a 59% return on investment.
It makes the most sense to make repairs and improvements as they are needed rather than waiting until you are ready to sell. I have had many clients that have lived in their homes for 10 or more years and haven’t updated anything, and then when it is time to sell they are painting, replacing flooring, countertops, appliances, plumbing fixtures, light fixtures, etc. Sellers often comment that they wish they would have made the improvements for themselves, rather than for the new buyer.
Some sellers overspend on remodeling projects prior to selling and end up with a very low ROI. If you live in a neighborhood where the homes are similar, and the average value is $300,000 and you spend $75,000 on remodeling projects, you may get an excited buyer willing to pay $350,000, only to have the buyer’s appraiser value the home at $325,000. In this case the selling price typically gets dropped to the appraised value, and seller loses $50,000 in remodeling costs.
Contact an experienced real estate agent before you make a major remodel if you want to compare your resale value before and after a remodeling project.
Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to firstname.lastname@example.org. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.