If you're planning on selling your home soon, put down the tool belt and forget the big renos. If you're going to sell within a year, the annual Cost vs.Value report says most renovations are just not worth it. The report, published by Remodelling Magazine in November 2007, compares the estimated costs of 29 major renovation projects with the estimated boost they'll give to the home's resale value in 60 markets across the county.
From modest deck additions to pricey two-storey add-ons, the report finds a national average of just 72% immediate return on investment for all renovations. Whether it's a finished basement, kitchen upgrade or new master suite has little effect on the numbers. It also doesn't seem to matter if you approach your project with the best materials money can buy or plain and practical. Either way, the projected profits still fall an average of 28% below cost when it comes time to sell.
Of course, there are plenty of regional differences that give rise to a few exceptions. Putting a new 16 x 20 wood deck on your San Francisco home for instance, can set you back about $12,812 but increase your resale value by $13,836. That's a cool profit of $1,024.
It's also important to keep in mind that numbers like this never tell the whole story. Material costs will vary as will style and quality of workmanship. The type of neighborhood you live in, the desirability of the market as well as the available housing in the surrounding area will also play a part in the resulting profit margin for any reno. So if you have a strong gut feeling that upgrading your kitchen or residing your house will pay off with buyers, the best thing to do is to get some expert advice. The report advises that when resale value is a major factor in your decision to remodel, the best course of action is to conduct your own survey by getting quotes for construction costs from local contractors and weighing them against the guidance of an experienced REALTOR.
So what does it all mean? Well, in light of the current market, it seems to mean that right now remodeling is a game for home buyers rather than sellers. For those of us who plan on living in our homes for years to come, well-planned renovations will remain profitable. From a practical standpoint, if you've just bought a charming but drafty old house and its got your family bundled up in their scarves and mitts round the dinner table, you might want to consider replacing your windows - if only to increase your quality of life. Over time, the savings in energy costs combined with increased equity and rising market prices will more than cover your investment. The gratitude your family will feel when they leave their winter coats in the hall closet will simply seal the deal.
