It's that time again, Spring. The daffodils are starting to poke up through the ground, afternoons are getting warmer, and homeowners are starting to take a long hard look at the shambles of their yards and homes after the winter. We decided to take a bit of time for another installment of "Ask Agnes" and focus on home improvements and how much value they add to a home.
"Hi Agnes! It's been a while since we've had a chance to do this and we are excited to be back."
"Me too. What can I do for you today?"
"I'd like to sell and need to know which major home improvements I should do to maximize my sale price? Should I finally renovate my bathroom"
"The short answer is don't do it."
"Truly? Even my bathroom? Everyone loves new bathrooms right?"
"The cost recovered on most home improvements just don't pay back"
"Can you explain a little about this 'cost recovered' to start?"
"Sure. Cost recovered is a way to measure how much value a home improvement adds to your home compared to what you spent to make the improvement . Here is a quick example: you have a lemonade stand that is worth $10 and you spend $5 improving the sign and painting the stand. You then sell the stand for $15. We are interested in how much value that $5 improvement added to the property and in this case it is $5, so you recovered 100% of your investment. This means you only broke even and the improvement, while it added value to the property, didn't net you any extra money."
"Wait, isn't a 100% return an amazing investment?"
"In the stock market it sure would be because they are considering a "Return on Investment' or ROI, which is a little different. For home improvements we are interested in the cost recovered so anything less than 100% means you lost some money."
"Right, that makes sense now. So to get back to the bathroom how do you know it isn't a good investment?"
"Well based on the report here a mid-range bathroom remodel in New England costs $21,891 and adds $15,777 in value to your home at resale. That is a 72% cost recovery which means you lost $4,333. The cost recovered is even worse nationwide at only 60%.
"What are some other examples? What about kitchens or re-siding?"
"People do like new kitchens but a mid-range minor kitchen remodel in New England only returns about 81%, more extensive remodels closer to 60%. Siding is about 89%, backyard patios are 57% and the list goes on and on."
"Is there anything I can do that will actually earn a profit"
"According to the report new garage doors are the only thing that does. And in this case a $3629 improvement nets only $267."
"Yikes, forget home improvements then huh?"
"That thinking isn't quite right either for two reasons. Sometimes an improvement is actually maintenance and deferred maintenance may reduce the value and marketability of your home. For example, a leaking roof will lessen the value of your home through water damage and should be repaired regardless of the cost. The important thing is to consult with your realtor before making improvements to sell your home. They will advise you as to which projects are worthwhile and which are not. My final thought here is that you shouldn't be waiting to improve your home! Enjoy it and make it work for you. If you want to add a back deck by all means do it and enjoy an improvement in both your home and your quality of life. Don't hold back from an improvement if it is something you will enjoy."
Well Agnes, as always we appreciate your sage advice and experience here in the Cape Cod real estate market. Please contact us with questions about buying and selling on the Cape and stay tuned for our next installment of Ask Agnes.