Making Home Improvements

You watch that TV channel. The one with all the stories about real estate and what improvements you can make to your home to increase its value. It all sounds great — simple even. Add a room, get better counters, slap down some hardwood, command top dollar at closing. Sorry to have to say this, but slow down. It’s not that simple.

Do Home Improvements Really Increase the Sale Value

The average return on home improvements will, of course, follow the ups and downs of the real estate market itself. In 2006, for instance, every dollar spent on improvements raised the value of the home by 76.1 cents. In 2007, the figure was 70 cents, and by 2008 it fell to just 67.3 cents.

Looked at in terms of recouping the expense of the improvement itself, the ratio is rarely 1 to 1. You’re not going to get $20,000 more for a home you’ve put $20,000 into. There are, however, regional exceptions to that rule. In San Francisco, the addition of a deck, the number-one-rated improvement for that city, often returns more than 100 percent the cost of the work. This raises an extremely salient point.

If you are making improvements specifically to increase the value of your home before selling it, talk to a real estate professional first and find out what upgrades the local market values. Even if you’re thinking of selling within five years, take the time to visit with a real estate agent. Some improvements are widely accepted as being of higher value than others, but each market may put a different emphasis on what constitutes “value” and what does not.

Kitchen Renovations Are Always a Winner

It’s difficult to go wrong with kitchen improvements since, for most people, especially families, that’s the room that is the heart of the house. At minimum, fresh paint, new or refreshed cabinets, and new flooring will go a long way. Higher end improvements might include granite counters or stainless steel appliances. On average, kitchen remodels return 75 percent of the amount invested.

Bathroom Makeovers Are a Close Second

Let’s face it. No room in a house has the potential for a bigger “ick” factor than the bathroom. No one wants to buy someone else’s dirt. Even the cleanest tub in the world is going to look dirty with peeling, moldy grout or rust stains around the drain. Most of us never look twice at our own bathrooms, but will recoil in horror at one in a listing we’re viewing.

At the very least, a bathroom in a home for sale should be so clean it sparkles. If there’s no way to get sparkle, then get new tile, a molded sink, marble vanity, and nice fixtures. So whatever you have to do to make the bathroom look pristine. You’ll easily see 75 to 80 percent of the cost coming back to you at the time of sale.

New Emphasis on Green, Energy Efficient Improvements

Especially in Texas and the Southwest where brutal summer heat saddles residential customers with astronomical electric bills, green improvements to a home can significantly add value to a property. This could be anything from insulating doors and windows to a roof with a radiant barrier, high-performance insulation, and potentially alternative energy systems. The latter are most likely to be solar panels or small, residential wind turbines. At present, these sorts of modifications appeal to a highly select clientele, but such additions are likely to grow in acceptance and value rapidly over the next decade.

Upgrades that Generally Don’t Add Value

Not all home upgrades are created equal. In picking things like counter tops, cabinets, and fixtures, try to match the overall “quality” or “range” of the home. Ultra high-quality upgrades in a fairly “normal” or “modest” home stick out like the proverbial sore thumb.

Avoid adding rooms that make no sense in terms of the basic floor plan. Always preserve the flow from one room to the next, and don’t do things like adding on a family room only to cut off any view from the dining room. Worse yet, don’t add on a room that can only be accessed by going through the master bathroom! You get the idea. If it feels “tacked on” to you, the potential buyer will experience that same feeling to the tenth power.

Finally, it’s best to avoid pools. Once seen as a premium enhancement to value, most buyers now perceive a pool as a home maintenance albatross. This is especially true in climates where the pool is only usable a few months out of the year. You might be able to make a case for a pool being a selling point in Florida. That likely won’t fly in South Dakota.

Always Understand the Local Market for Upgrades

These are the kinds of factors that make a consultation with a real estate professional essential before you start knocking out walls. Find out which upgrades sell in your area and try to match a dollar figure to what “sell” means. Only undertake the improvements that make the most sense for your property and the ones that will largely pay for themselves when you sell the home.