The Value of Home Renovations The Value of Home Renovations
Thinking about doing some renovations to your home? Ready for the aggravation, inconvenience as well as the dust and noise not to mention the cost of your renovation. Good for you. A renovation or addition will add functionality and enjoyment to your home and studies show that renovations can add significantly to the value of a home at resale. However, if you’re thinking about taking on a reno to add more value than it cost at resale, you’re making a mistake.
What’s that, you thought most renovations would more than pay for themselves when it came to sell? Don’t kitchen and bathroom remodels and upgrades always return more than they cost? Well in spite of what some people might tell you, that’s not the case in the real world.
According to a study done by Hanley Wood LLC in conjunction with “Remodeling Online” in 2005, there were substantial differences in the size of the returns on different home renovations. In fact, many renovations didn’t come anywhere near to recovering their original cost when it came time to sell.
Just some examples using nation average figures...
- A minor kitchen remodel with a cost in the $15,000 range returned 94% of its cost at resale. However, a substantial kitchen remodel with a cost in the area of $80,000 returned just over 75% of its cost at resale or in other words, the kitchen cost the owners $20,000 that they didn’t get back.
- Bathroom remodels do much better. A midrange bathroom remodel that costs around $10,000 would have returned over 100% of its original cost (102% to be precise), while a more upscale bathroom remodel with an average price of just over $25,000 wouldn’t turn a profit, but would return over 90% of it original cost.
- What about a basement remodel? The national average cost of this upgrade is in the $50,000 range and at resale it would return just over 90% of its original cost.
What about some other common renovations?
- A deck addition returned about 90% of its cost, adding an attic bedroom just over 94%, replacing your windows about 90%, replacing your roof, less than 85%, and a very popular renovating choice - adding a home office, just over 73%.
- In addition to the midrange bathroom addition, the only other home renovation that more than paid for itself was replacing and upgrading a home’s siding, that return over 103% of its original cost.
So, what can you take from this report?
- The report shows quite clearly that in spite of common wisdom, kitchen and expensive bathroom renovations don’t more than pay for themselves, in fact they end up costing owners money.
- Renovations that add to the amount of usable space in home (basement remodels, attic bedrooms) do have substantial returns, although they don’t pay for themselves at resale either.
- Buyers don’t see renovations to areas like roofs and windows as being upgrades, more as being required maintenance a homeowner would be expected to do. The only exception to this point is upgrading the siding of your home and the value here likely comes from improving the appearance more than the purely practical value of new siding.
What does this mean to you?
- Don’t take on a major renovation if you are thinking it will provide a substantial return and ensure a quick turnaround of your home. The added value (and increased price of your home) may well limit the number of buyers who can afford your home and the extra value at resale likely won’t cover the cost of the reno.
- If you are considering a major upgrade, do it for the added space or functionality it will provide for you and your family.
- Modest scale renovations come closest to providing significant paybacks. It appears buyers aren’t particularly interested in paying for your upscale counter tops or appliances so if you are going to upgrade some parts of your home, don’t splurge.
It’s quite likely that the reno that will have the largest potential payback is probably one of the least expensive. De cluttering and adding a new coat of paint will only cost at most a few hundred dollars, and it will probably return thousands in the selling price.