Tuesday, January 19, 2010

You Spent HOW MUCH to remodel the kitchen? - The Value of Home Improvements, Part 3

Each year, the National Association of REALTORs publishes a report as a guide for homeowners who are wondering how the value of their home will change based on home improvement projects. 

The report publishes numbers by region and by national averages.  But, the regions are large - for example, the South Atlantic includes DC, DE, FL, GA, MD, SC, VA, and WV; and real estate is local, sometimes hyper local.  So, I encourage you to contact a REALTOR in your area for more specific advice before starting your upgrades

However, as a point of interest, the NAR report will tell you in general which improvements will have what returns.  In this post, I reference the recouped costs as reflected for the South Atlantic area., but they are not too different from the national averages - just a little higher in most cases.

The NAR report shows the costs of the improvements and the increase in the sales price of the home after the improvements as a percentage.  For example, the highest return value was for a midrange replacement of an entry door.  The job cost is listed at $1065, and the home value increase at $1562, therefore, the job is expected to return almost 147% of the invested dollars.  (Please note, it is the ONLY improvement listed that was expected to return more than 100% of the invested funds.)

Improvements that rated best (meaning 75% or more of the job cost could be recouped), included:
*  Adding an attic bedroom, or a wood sundeck
*  Remodeling a basement or doing a minor kitchen facelift
*  Replacing entry doors, vinyl siding, and new windows

Improvements that had expected returns of less than 65% included:
* Adding a back up generator, a bathroom, sunroom, garage or master suite.* Remodeling a home office, or doing upscale remodels of bathrooms or major upscale kitchen remodels.

A few other points of interest for our area:
*  All of the listed improvements and replacements returned at least 50% of the costs to do the job.
*  Midrange materials faired better than high end materials.
*  Replacements of doors, windows, roofs, and siding all returned 65%-75% of the costs, but I want to remind you here that this is really "maintenance" in some cases, and it's an "upgrade" in others... it all depends on what the Jones's are doing next door - in other words, how your home compares with it's comps.

Underlying themes:
After reviewing the report in its entirety, it reinforces certain themes I share with my customers, clients and friends all the time....
* First impressions count.
* In resales, people are not usually expecting the latest, greatest in finishes - they are looking for "good", "well kept", "loved", "well maintained" property - spending the luxury dollars on improvements is not usually going to provide you with same return as choosing solid, classic finishes... and it usually costs you less, too.
*  Being the nicest house on the block is only good for showing off to your neighbors.  As far as financial investments are concerned, you're always best off having the smallest, least upgraded house in the most expensive neighborhood rather than the largest, most upgraded house in a lesser expensive neighborhood.

If you missed my prior posts in this series, consider visiting them (just click on the links below):
Understand the difference between maintenance and upgrades.
Learn WHY the only improvement that returns more than 100% of its cost is replacing the front door.

Again, I remind you, real estate is local, HYPER local in some cases, so if you're in the Loudoun/Dulles Area, please contact me to provide you with information on what's going on in YOUR neighborhood - or order your own automated report (with sales information on YOUR neighborhood) by clicking HERE.
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