When Stan and Mary Anderson moved into their new house, the first thing they decided to do was renovate the outdated bathroom. “The tub and tiles were avocado green,” Mary complained. “It was straight out of the 70s.” But soon, they’d completely transformed their bathroom, complete with bright track lighting and a Jacuzzi tub. “I love the bathroom now—it’s so luxurious and relaxing. It was definitely worth both the time and the money,” Mary said.
And as it turns out, this was one of the wisest home renovations the Andersons could have undertaken to increase their property value. When looking at houses, buyers consider the kitchen one of the most important selling points in the house, with bathrooms—especially main baths—coming in a close second.
When it comes time to selling a home, homeowners often consider remodeling to try to increase the market value. Remodeling may be smart in some circumstances, but it can also be a double-edged sword: While most home sellers would be unwise to do absolutely nothing to improve their homes before they sell, they’d be equally unwise to improve everything. However, by following a few simple guidelines and avoiding some potentially costly mistakes, you can make home renovation work for you.
One of the smartest things you can do to increase the value of your home is to take care of it while it’s yours. Annual maintenance makes a huge difference on the amount of wear and tear that shows up on your home when it’s time to sell. Therefore, keep the gutters clean, watch out for water damage, take good care of the yard, and slather on another coat of paint every few years. And keep records of everything you do—it will be a strong selling point to show to potential buyers.
We all know a little can go a long way. So before you decide to add on another room or install a fireplace, you might find that minor improvements make a major difference. For instance—as we’ve discussed, bathrooms are one of the most profitable renovations you can make. But instead of installing a Jacuzzi tub, why not start out by changing the toilet—an improvement that can cost as little as $200 and make a drastic difference. Similarly, try a new coat of paint, new fixtures, upgrading towel racks, or a new medicine cabinet before replacing the vinyl or replacing the tile. You might find you don’t need major changes after all.
The details of a home certainly do contribute to the property value, but just as important are neighborhood values. If the improvements bring your house up to neighborhood standards, they’re probably going to be worth it in the end. But adding features above and beyond the other homes on your street or in your complex will actually be detrimental. In a row of Toyotas, a Porsche sticks out, and if you create a white elephant, you’ll actually be making it more difficult to get your asking price.
Before undertaking any major renovation projects, check out the other homes in your neighborhood to make sure you’re sticking with the neighborhood standards.
It’s true that homes in nicer condition often sell for a higher price. After all, most buyers don’t have the time, money, or energy to invest in a major renovation project. However, making unnecessary improvements may impress buyers, but may not actually pay off.
The biggest mistake most people make when they set out to renovate is expecting to get a dollar-for-dollar return on their upgrades. However, even the most desired upgrades rarely yield a 100% return. In the case of the Andersons, remodeling the bathroom would probably yield an 80% return on their investment, similar to major kitchen remodeling (80%), bathroom addition (81%), and adding a second story (83%). The most profitable renovation tends to be minor kitchen remodeling, while the lowest includes replacing windows (68%) and converting a bedroom into a home office (68%).
It may seem strange, but adding a pool actually added no value to a home and was often considered detrimental. Not only are pools a tremendous liability, but few new homeowners want to take on the responsibility of maintaining a pool.
Look at your house objectively and decide which features actually need renovation, and which renovations will go the farthest. If your kitchen still has a Frigidaire from 1950 that could have a negative affect on the entire kitchen. But re-facing the kitchen cabinets in maple just because you like it better than cherry won’t make a difference to anyone but you.
You might be moving out of your home because the old-fashioned fireplace just isn’t modern enough, but don’t assume potential buyers will feel the same way. Don’t add steel appliances to a country kitchen, or sliding glass doors in a rustic family room. Make sure that renovations match the style of your home—not your personal style.
Similarly, don’t change the function of the rooms in your house. If a potential buyer needs a home office, they can easily transform a bedroom by bringing in a desk and some filing cabinets. However, if you designate the room as an office yourself and install permanent bookcases, you’ve limited potential buyers by eliminating an actual bedroom. Customizing the features of your house might make it perfect for you—but can alienate potential buyers.
And finally, don’t waste time and money finishing an attic or a basement, as those features tend to be at the bottom of the priority list. When was the last time you looked at a house and thought, “If only the attic were nicer?”
Another big mistake sellers often make is trying to undertake renovations themselves. If you have no experience laying tile or hanging wallpaper, hire a professional! In most circumstances, you’ll cause more trouble trying to do-it-yourself if you’re unqualified, and you’ll probably just end up having to hire someone to fix your mistakes. Doing it right the first time is always best for the bottom line.
When undertaking a renovation project, most people underestimate their budget by 20-30%. For instance, the average minor bathroom renovation can cost upward of $9,800. It’s smarter to plan for unexpected expenses and to have a little cushion than it is to be on the losing end of a very expensive bargain.
And don’t just underestimate money—time is also a crucial consideration. You can’t expect to completely redo your bathroom in one weekend. Potential buyers are usually turned off by half-finished projects.
Renovations can definitely pay off in the end—if you approach them wisely and with realistic expectations. With a little planning and objectivity, you can strike that perfect balance between your personal tastes and what will appeal to potential buyers—and then reap the rewards!
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