Resale Value of Home Improvements
The combination of ultra-low interest rates and a coronavirus pandemic has led to an explosion in home buying/selling and improvements. As homeowners increasingly think about selling their home to adapt to a changing environment, they will be confronted with whether an upgrade is a smart financial decision for getting the most resale value.
Two Different Answers to the Same Question
The question as to whether upgrades and improvements to a home will have a financial payback in terms of a higher sales price is a good question to ask, and the answer may be “yes” or “no” depending upon the circumstances.
Problematic infrastructure, like a leaky roof or rusting furnace, are necessary improvements without which a homeowner is unlikely to get a home’s full value—if they get an offer at all. Fancy kitchen features and high-tech bathrooms are not going to outweigh a prospective buyer’s hesitation about buying a home with looming big-ticket repairs.
More prosaic improvements—like a new coat of paint or fresh bed of flowers—are harder to quantify financially, but any experienced realtor will tell you that it is the little things that create a warmer presentation that are more likely to lead to a quicker sale at a more favorable price.
As far as other improvements to the home, full financial payback may be illusory. For instance, according to Remodeling’s 2019 Cost vs. Value Report, the home improvement that captures the greatest resale value (97.5% recouped) is a garage door replacement.
Other improvements that perform well in recouping their costs include manufactured stone veneer (94.9%); minor, mid-range kitchen remodel (80.5%); and, tied at 75.6%, a wood deck addition and siding replacement.
Some of the more popular updates recoup substantially less, including a backyard patio (55.2%); major, upscale kitchen remodel (59.7%); and a bathroom remodel that ranges from 60% to 67%, depending on the scale of the remodel.
As is often the case with buying a home or making improvements, it is not entirely a financial decision. It’s true that a backyard patio loses money like an investment in WeWork, but how do you attach a price to the many hours spent in a nice space sharing conversation and laughter with family and friends?
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