Real Estate Blog - Remodeling Cost vs Value ~ Returns on Home Improvements

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Remodeling Cost vs Value ~ Returns on Home Improvements

Is it economically wise to make major home improvements in this market or just sell and move up?

In the past few years, the former was true, with the value of homes increasing every year, it was smart

to stay and make major home improvements. Now with home prices falling in some areas, is it still a

wise decision?

Remodeling Magazine says returns on home remodeling has decreased from 2006 to 2007, but the

decline is slowing. Remodeling is still a good investment, with two-thirds of upscale and midrange

projects evaluated by their national study. The returns were 65 to 80 percent at resale. That means

homeowners are paying 20 cents to 35 cents on the dollar for more and better space in their homes.

Five of the six projects that earned cost recovery rates of more than 80% were exterior

improvements. These included upscale siding replacements, such as the fiber cement siding

pictured above, wood deck additions, and window replacements. The sixth was a minor kitchen

remodel.

At the other end of the spectrum, these projects scored lowest - from 57% to 59% returns -

home-office remodels, the installation of a backup power generator and a sun room addition.

So it appears that home remodeling projects you have planned might be worthwhile. Check with

your local Realtor for averages and percentage of payback in your area.

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Website url: Terry Westbrook.com

Email: terry@TerryWestbrook.com

source: wwwcostvsvalue.com

photo from certainteed.com fiber cement siding

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Posted by Terry Bonnie Westbrook Westbrook Realty Grand Rapids Forest Hills MI Real Estate on 04/02/2008 06:14 PM

Comments (8)

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Originally posted at: Grand Rapids Michigan Real Estate Blog: Remodeling Cost vs Value ~ Returns on Home Improvements

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8 Comments on Remodeling Cost vs Value ~ Returns on Home Improvements

APR

2008

Interesting stats Terry. Were you surprised at all with the low return on investment of a home office remodel with so many working out of there homes these days?

APR

2008

Lola: I think it is a combination of buyers want the additional space and may not pay for the entire improvement but they won't buy the home if it doesn't have it. Still a good investment if you need the space. In this market speed of sale is nearly as important as price.

APR

2008

I think it really depends on the area itself, some areas you can make money some you won't get any of it back when you go to sell

Nice post Terry, I agree with Eric. It depends on the area what kind of returns one might gain. A very expensive area - you can get a high return on adding a bedroom, in other areas, not so much.

I dropped by to say thanks for commenting on my post.

Eric: I agree but thats why we can be helpful when people are thinking of doing improvements that will add to value.

April:The 4th bedroom or an addition of an office to a three bedroom should get a high return in most areas.

Terry~ I think it is important for sellers to remember that general upkeep to their homes will not necessarily bring a higher sales price. That seems to be what I will struggle with here sometimes. For example, replacing the carpet or putting on a new roof or heat pump if it was needed. I think a lot of sellers believe they will get their money back on everything that they put into the home.

Brittanie: Agreed but "I just paid $4,000 for a new driveway" is sometimes difficult for sellers to accept that the buyer would not have considered the home with out the improvement. Good advice thanks for stopping by.

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