Will That Renovation Really Increase Your Home’s Value?
Making upgrades to a home can increase the value, but not all home improvements yield a high return on investment and some can even have a negative impact. Here’s what you need to know before starting your remodel.
Are you thinking about refinancing or selling your home? Then it’s helpful to know its value, and a home value estimator website is a great place to start. If you’re serious about selling, consider hiring a listing agent to get a comparative marketing analysis (CMA) report for more accurate pricing. If the CMA reveals a price range that doesn’t satisfy you, a home renovation is one way to drive up the value.
But before hiring contractors or starting DIY projects, it’s a good idea to determine which renovation projects yield the highest return on investment. Surprisingly, many home improvements don’t provide as much value as one might think. Very few home projects break even in terms of home value, while overdoing a remodel can price a home out of the market. Keep reading to learn more about the true value of renovating your home.
Reasons For Renovating
Closely consider the goal of your home renovation before you begin, so you can choose the best renovations for the right situations. Are you making upgrades to sell the house? Do you want to increase your home’s value for refinancing? Or are you simply looking to make your home more comfortable while living in it?
Even if a home upgrade is for quality of life’s sake, there may come a time when you wish to sell your house. For this reason, it’s prudent to make upgrades that are unlikely to hurt a future sale.
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Using Home Improvement Calculators
If you’re considering remodeling, especially for the purpose of selling your house, it’s a good idea to start with an online home improvement calculator. These calculators provide information on how much a project could cost, and some even determine a renovation’s probable return on investment (ROI). There are smartphone apps that predict renovation values, as well.
Leading Indoor Renovations
When you’re ready to start renovating, focus on the projects that will provide the most benefit. A kitchen makeover is a high-ROI project, as it doesn’t involve a full-scale demolition while still adding value. Buying new kitchen appliances, updating hardware, refacing cabinets, installing new flooring, and painting the walls can yield an ROI as high as 72 percent.
In addition to renovating the kitchen, bathroom remodels can provide between 70 and 78 percent ROI. These two areas yield plenty of value indoors on their own. However, if you want to take it a step further and finish an attic or basement, those projects could add an additional 65 and 76 percent value to the interior of a home, respectively.
Top Outdoor Renovations
When it comes to making outdoor upgrades, you may be surprised to learn that updates with the biggest ROI are simple ones. Making minor upgrades to your curb appeal with basic yard care, tidying up the landscape, adding bark mulch, painting your home exterior, and installing a new garage door can produce an ROI of 238 percent, according to a recent study by HomeLight.
Renovations With Negative Impacts
While it would seem that renovations always improve home price, there are times when upgrades can actually downgrade your home’s value. For instance, too much wallpaper can negatively impact home value. Additionally, bold colors have the potential to turn off buyers when trying to sell your home.
Decreasing your home’s number of bedrooms by combining them can hurt value, particularly if houses in your area generally have a certain number of rooms. Extremely lavish updates in the bathroom or kitchen can also put you at a disadvantage. Finally, bad landscaping features can have an adverse effect on home value.
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DIY Renovations May Hurt Value
Some people DIY their renovations to save on costs. While this is often a good strategy, that may not be the case if proper procedure isn’t followed. For example, any unpermitted structural changes to a home could be dangerous and majorly cost you when it’s time to sell. Many other home projects require permits, including roofing work, window replacement, deck-building, fence installation, kitchen or bathroom remodels, and electrical work.
If you want to proceed with the DIY approach, first ensure that you have clearance from your local government and that your final project is approved for safety and legal reasons. Failing to get the right permit(s) could not only block the sale of your home, but it could also place fines or a lien on your home.
A Final Word
You may have heard of anecdotes in which failing to renovate hurt owners’ home sales. However, too much renovation can also negatively impact a sale. Potential buyers may love the beautiful changes you’ve, but lenders may not feel the same way.
An over-embellished home can be almost as bad as one in disrepair in some cases. This is because much of real estate sales depend on comparables. Therefore, if your renovated home is much more highly valued than other houses in the neighborhood, would-be buyers may not be able to secure a loan to purchase it. On the bright side, a cash buyer who isn’t at the mercy of a lender may be able to buy your home.
When it comes to renovations, it’s best to consider all possibilities—positive or negative—before you get to remodeling.