Is Your Home Worth Remodeling or Just Repairing?

 

When you’re putting your home on the market, it has to compete with all the other homes on the market. That’s why it’s so important that it look its best. But does that mean you have to shell out thousands of dollars to remodel the kitchen? Not necessarily. It does, however, mean that you need it to be in the best shape possible because every potential buyer is going to compare your home to all the others they’ve seen.

 

So, you’ve got to make a decision, is it worth it to put the money into remodeling your home or would making the necessary repairs and a little updating do the trick? Surprisingly, the answer might often be to remodel. That’s because, depending on the remodeling project, your house might be more appealing to potential buyers who might then be willing to pay more for it, thus increasing your return-on-investment (ROI). Your ROI is the amount of money your efforts will pay you back when the house sells.

 

It’s important to note that often homeowners don’t fully recover the amount of their remodeling investment right away. The average ROI in the first year or two is between 80% and 90% of their investment dollar. By keeping their homes longer, they give the real estate market time to increase and leverage the remodeling investment as property values grow.

 

You should consider three things when deciding if a home improvement project is a good investment or not:

 

1.      How your project impacts your home's appraised value?

 

2.      How long you plan to be in the home?

 

 

3.      How strong the resale market is in your area?

 

If you know that remodeling your kitchen, for example, will increase the value of your home by $20,000 and it will only cost $10,000 to remodel, you have your answer. If, however, you want to put your home on the market right away and it’s going to take two years to get the money back that you put into it, you might want to consider scaling down the remodel or just updating it.

 

If the market is in your area is good, your ROI will be better than someone who’s in a slow housing market. Consider how well houses are selling in your area before you put the money into a remodeling project.

 

So, now that you have that information, you’d probably like to know which projects are the best investments, right? Well here’s what we found out through our research:

 

In their 2005 Cost Vs Value Report, the National Association of REALTORS® (NAR) says, Since 2002 four projects, reported each year since 2002, have shown the greatest return at resale on a national basis. Two of the projects, siding and windows, reflect the importance consumers place on curb appeal and insulation; the others, a kitchen and a bath project, are consistently high performers in most markets.”http://www.realtor.org/wps/wcm/connect/63966b0049369215b509f570b8f35b47/costvalue_dec05_2.gif%3Fopenimageresource?MOD=AJPERES&CACHEID=63966b0049369215b509f570b8f35b47

Provided to the right is a graph indicating the highest returns on specific remodeling projects. Even though the research is dated, the projects themselves and their returns-on-investment are fairly static over the years.

So, if you’re in a good resale market it might be worth it to invest in a remodeling job in order to increase your home’s resale value.



 

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Bill Zufelt  Realtor® License #01491164