Making Home Improvements That Pay Off
Numerous studies have been done on what improvements will add the most value to a home. Homeowners become attached to their houses, and will frequently attribute more value to an improvement than what is actually there. When you are planning a home improvement, you should take several things into account. First of all, why are you making the improvement? Are you doing it to increase the value before you put it on the market? If so, it's a good idea to talk to a real estate professional before making the investment. When I first meet with a seller at their house, I will go through the house with them and listen to their ideas for the house, and will make suggestions as to what is or is not likely to work to their advantage.
A few years back, a homeowner that lived up the street from my mother built a stone wall in his front yard for landscaping. I started referring to it as the neighborhood fort. Two weeks after completion of the wall, the homeowner put his house on the market. It actually does look nice, but it was unnecessary for the market in that neighborhood at that time. A year after the property sold, I met the buyer through a friend of mine. Curiosity got the better of me and I said "I have to ask you. Did the wall in your front yard play any role in your decision to buy that home, or in what you were willing to pay?" The answer was "no." The seller probably paid several thousand dollars to do that landscaping project and got ZERO return on investment. It would have been easier for him to take $4000.00 in cash into the front yard and light it with a cigarette lighter, and would have been just as effective.
On the other hand, if you are planning in staying in your house for a while, and are making an investment to enhance the quality of your life, most of the time I would tell you to go for it. That said, it's still a good idea to keep future resale value in mind when you are planning a change to your property. Early in my career, in the early 1990's, another agent and I went on a listing appointment at a townhouse. Market values in the community were about $125,000. A couple of years earlier, the sellers had spent over $30,000 to build an elaborate 3-story decking system on the back of their house, and now (at that time), needed to recoup the investment they had made. They wanted to sell their home for $155,000. But there was no way that was going to happen (they listed with someone else at $150,000 and it sat on the market at that price for 6 months before being withdrawn). The decks took up the entire yard, and in all likelihood, took value away from the property.
Most studies have found that kitchens and bathrooms generally provide the greatest return on their investment, if they are done in a way that appeals to most buyers' tastes. Keep in mind, that if a kitchen is outdated, upgrading the kitchen will bring the home's value back even with the rest of the neighborhood. A twenty-five thousand dollar renovation probably won't make the home worth $25,000 more than the market dictates, but it may keep a seller from having to sell way below the market.
The advice I give most frequently to a seller that is about to go on the market, is to make cosmetic improvements. Certain colors and certain wallpaper designs are very taste specific, and may reduce the pool of interested buyers. Holes in walls, scuffed floors and cracked windows should all be repaired. Thirty-five year old shag carpeting should be replaced, with new carpet in a neutral color (shop around and the new carpet expense could be cut by more than fifty percent). And don't forget, cleaning is extremely important. Ask yourself, are you willing to pay $20,000 for the right to not clean the house, because you may be doing just that.