Monday, August 1, 2011

Will My Renovations Pay Off?

I am going to go against every marketing strategy in the book now. What I am about to tell you could ruin every potential home renovation contract I may ever get involved in.

What you don't know about home renovations: Most of them don't pay off.

That's right. According to Remodeling Magazine's 2010 annual cost/value survey, only replacing a garage door can be counted on to boost home value enough to recoup 100% of your costs. Obviously, the value of a renovation doesn't depend on your home resale price alone. This is why deciding if you're going to do a renovation project more complicated than just crunching numbers.

If the purchaser walks into a home and says, 'Wow, look at this kitchen, it's great,' and if that home sells quicker, the seller still gets value from the renovation, whether or not they get the return on investment. A home might sell quicker, or the buyer might be so excited about a particular feature that they ignore other issues, like water damage or other necessary maintenance in other parts of the home.

If you are trying to decide whether to take on a home renovation, here are five simple tips to remember that might help make your decision a little easier:

1. Think about what you, as the current homeowner, want from your home.

As a homeowner, you can find a lot of value with renovations or upgrades before they even put the home on the market. If you have a dated kitchen or an appliance that doesn't work, you can invest money now to glean some enjoyment as well as make the home more appealing when you sell it.

Some simple ideas for your home is to upgrade or replace baseboards, window trim, or floors. You can also upgraded the cabinet hardware in the kitchen and bath. For a little more expense, install new fixtures in your bathroom, or new lighting fixtures. Dated ceiling & wall lights can be a deterrent when a potential buyer walks into the home, the light coming from older fixtures isn't as brilliant and it is often a strange yellow glow - making everything in the room look....well....yellow.

2. Consider maintenance costs separately from renovations.

If a roof needs to be fixed, that must be looked at that as routine maintenance rather than a renovation. That means it might just help the home sell for its existing market value, as opposed to adding extra value. Similarly, if parts of the home are in disrepair and in need of maintenance, sellers can subtract the cost of those upgrades from what they consider the home to be worth.

3. Don't forget about cheaper upgrades, like landscaping and staging.

Realtors don't slip apple pies into the oven before an open house just in case they get hungry you know. Inviting smells, sights, and sounds are believed to put buyers in a home-purchasing mood. So, do what you can to make your home look AND smell inviting when potential buyers are going to be walking through. (I don't need to go into great detail about that do I?)

When looking at homes, many people form an opinion from the sidewalk. If potential buyers see weeds, broken sidewalks, and unkempt shrubbery, then they might not even want to go inside. But if they see a well-cared-for exterior, they might get excited about the property before they even see the kitchen or master bedroom.

This is why renovations that affect your "curb appeal" (see BHG's 20 ways to add curb appeal or watch HGTV's Curb Appeal for some ideas) can go the farthest. According to Remodeling Magazine, replacing a home's siding can recoup up to 80 percent of its costs, on average, and window replacements replace just over 70 percent of costs. Both of those types of renovations are mostly visible from the road and leave a lasting initial impact. While the average kitchen remodel recouped only 60% of its cost, with an average cost of around $113,000. Similarly, master suite additions, bathroom renovations, and deck additions also recouped less than 60%.

4. Cleaning up can help as much as building bigger closets.

Buyers like to see clear spaces without a lot of clutter. When selling and staging your home, can I suggest getting rid of clothes and other items you are no longer using to make your homes seem bigger, without doing a single dollar's worth of renovating. This also helps when you are ready to move. If your things are already packed and in storage - then you only need to pack those things that you are currently using in your home.

5. Think like a buyer.

When you walk into your home, think as if you were the buyer.

What are the things you notice when you are walking up to the home? You should focus on the kitchen, appliances, and curb appeal. Today's buyers are particularly interested in common spaces for the family to gather, such as outdoor living area and family rooms, as well as open-floor plan kitchens. That way, parents who are preparing meals can keep an eye on their children as they play or do homework. Buyers seem to care less about formal spaces today, which means a formal dining room could offer more value as a study or playroom.

In conclusion:

I have been involved with a number of home renovation projects. Some are intended for the current homeowner, while others have renovated with the resale in mind. We need to remember that home renovations aren't just about the numbers and making the sale. But if we follow a few basic guidelines we can help homeowners decide how to get the best value for your dollar.