Occasionally friends or neighbors will get in touch to tell me they’re considering a home renovation and ask for my opinion as a Realtor. I’m always happy to go over to anyone’s home to talk about possible renovations or to provide a referral for a contractor. I’ve found there are several questions that anyone thinking about major renovations to their home should ask themselves — and their Realtor.
1. Is this renovation going to add value to our home and if so how much?
Great question – this is where your realtor can help!
How much value a project adds to a home depends on a few factors: how much you initially paid for the home, the type of project, how much the renovation will cost, and how much you can reasonably expect the home to sell for after the renovation. Your agent can show you the average list price and sales price of homes that would be most similar to yours after the renovation. With that information, you can fairly easily determine how much value would be added to the home. The same type of analysis would be true for most any other major home renovation project.
2. What projects get the most return on investment?
When I take clients through a listing some of the most common things that stand out to potential buyers are the condition of the kitchen, bathrooms and amount of living space in a home. Typically, adding or renovating a bathroom, renovating or giving a kitchen a face lift or adding living space can add significant value to your home if done well. There are certainly MANY other home improvement projects and the National Association of Realtors breaks down cost vs. value for specific projects in this article. Don’t expect to get a 100% return on your investment. Even the best renovation projects will most likely yield less than your costs when it comes time to sell the home.
Also, remember that style matters. If you’re remodeling a kitchen choose colors and finishes that are going to be attractive to the most people when it comes time to sell your home. Always strike a balance between personal tastes and broad appeal, even if you think it will be years before you sell your home.
3. Will the cost of this renovation put our home over market value?
Very important question, and yes, it could! In an attempt to increase the value of a home, some home owners make improvements to the property that unintentionally make their home fall outside of the norm for the neighborhood. While a large, expensive remodel, such as adding a second story with two bedrooms and a full bath, might make the home more appealing, it will probably not add significantly to the resale value if the house is in the midst of a neighborhood of small, one-story homes.
In general, home buyers do not want to pay $250,000 for a house that sits in a neighborhood with an average sales price of $150,000; the house will seem overpriced even if it is more desirable than the surrounding properties. The buyer will instead look to spend the $250,000 in a $250,000 neighborhood. The house might be beautiful, but any money spent on overbuilding might be difficult to recover unless the other homes in the neighborhood follow suit.
4. How many estimates should I get?
I’d recommend getting at least two to three estimates for the work you plan to have done, especially for major projects. It’s always best to get multiple estimates so you can get a handle on the true cost of the project. For major renovation projects always use licensed contractors who are familiar with the local building codes. Certain projects may require a contractor to pull permits from the local municipality to do the job properly. Ensuring local building codes are met will save you headaches down the road when it’s time to sell your home.
5. Is moving a better option than a costly renovation?
Maybe. So, you desperately need more space for your growing family and your dream renovation plan is hella expensive. On top of that your Realtor has told you the cost of the renovations to your home is going to put your home over market value for the neighborhood. In other words, you’re going to lose some serious money when it comes time to sell the house. Perhaps it’s time to call your Realtor and discuss the possibility of selling your current home so you can purchase another that will fit your family’s needs.
Are you thinking of renovating your home? I would be happy to talk to you about your plans, provide you with some excellent contract referrals (check out My Handy Directory) or even offer you a special discount that I have access to at LOWE’S (if you’re tackling the renovations yourself!)