The Latest Cost vs. Value Revue

Cost vs. Value Revue:  Every year the National Home Remodeling Association publishes it's annual Cost vs. Value Report, which is then republished by the National Association of REALTORS in their monthly REALTOR Magazine.

I wish I could say how long this report has been published. All I know is that I was using it 10 to 15 years ago when I was selling replacement windows and other remodeling jobs for contractors.  It is a tool with a great amount of credibility that is hard to dispute.  This version is based on data from 2006.

The report looks at the 25 most common renovations.  First it breaks down the projects into one of three categories:  Additions, Remodels & Replacements.  The report then breaks down country into 9 different regions.  (They also offer a paid version of 60 different cities, but somehow, I don't think Hemet is one of them).

Each job then has three figures associated with it; 1) Job Cost; 2) Resale Value; & 3) Cost Recouped.  The terms are almost self explanatory, but I'll go ahead and elaborate.

"Job Cost" is how much the job should cost, including labor, materials and any permits and planning necessary to do it legal.

"Resale Value" is the amount the job should add to the current value of a home.

"Cost Recouped" is a percentage.  This will show what percentage of your money you will receive in return for the money you spent.

Now before I go any further and get into the actual projects, let me share some advise I gave a valued repeat client of mine, very recently.  My client owns a beautiful home on ¾ of an acre - horse property.  She has done much to improve the value of her home, including a major kitchen and bath remodel as well as putting in 20" travertine tile throughout the traffic areas of the home.

Sound good.

The problem is her home is 25 years old and only 1500 square feet.  She is competing with hundreds of new homes with twice the size for what she wants for her home.  In many ways, her home is worth what she is asking, if you consider all of the extras she has invested in the horse equipment (I am not a horse person, so don't ask me to explain what it is - but it definitely adds value for the right person.)

The good news is her brother is a general contractor and owes her a favor or two.

My advice is adding a 2^nd story master suite.  Put in a 1,200 sq ft room addition upstairs with all the trappings that the new construction is offering - his and hers walk in closets, large double vanity, changing room and a retreat with a fireplace and a deck to look out over the horses and enjoy either a sunrise cup of coffee or sunset glass of wine.

She will more than recoup her investment and be able to sell her home much quicker be3cause she is competing with the market and not offering a unique find...which she still is, being that she still has the horse benefits.

All right, lets look at the different projects and how they effect us in the ‘Pacific' region which include Hawaii, Alaska, Washington & Oregon.  Hmmmmm, doesn't sound like Hemet is well represented, but lets look anyway.

Unfortunately, this report does not cover some of the most common upgrades, I see as a REALTOR®.  Folks who are buying new homes are not concerned with replacing windows, siding or roofs.  Certainly no one in this area is going to finish off a basement or add a attic bedroom.

The types of improvements we see in Riverside County, particularly with new homes range from granite counter tops, 20" travertine tiles (16" & 18" are popular also - but how much does one affect the value over the other?  Any ideas?)  A favorite is a closet organizer and perhaps some plantation shutters - they do look good, but what value do they really add?  What about crown molding?  A lot of precision work and it definitely looks good...but what is it worth at the end of the day - is ther a ROI?  Perhaps the biggest question people have about adding value is with a swimming pool and spa.  If they invest $50K in a nice custom backyard, will it come back as profit when they sell their lovely home?

Well to answer the questions I've raised would take a lot more time than I have right now.  So, in parting, let me just say that if you are going to invest in the rehab of your home, do it because it is what you want and will enjoy.  Don't do it just because you think you can make a profit on it, because if you study the chart above, you'll soon realize that most renovations really do not pay off in the resale market.

Now Have a Blessed Day,

John Occhi, Hemet CA REALTOR®
Mission Grove Realty