Home Improvements when Selling - Are They Worth It?

Real Estate Agent with HomeSmart

Our listing clients often ask us which home improvements provide the most bang for the buck when it comes time to sell. We always remind them that the market value of a home – what it will sell for to a willing buyer – is in large part determined by the sales prices of similar homes in the neighborhood, and surrounding neighborhoods.

Professional appraisers use the principles of regression and progression when considering the value of homes. The value of a large home (or one with major improvements), located in a neighborhood full of smaller, unimproved homes, will be dragged down by the smaller homes using the principle of regression. Conversely, a small home located near lots of larger homes will see its value increase, when the principle of progression is used.

The principle of regression is important to keep in mind when considering improving a home to ready it for the market. If you improve the home to where it becomes the best home on the block your return on investment for those projects may be subsumed by the loss of value.

A good first step is to get clear on the home’s current market value and we’re happy to help you there, at no charge. While compiling the market analysis we’ll learn what nearby homes are selling for, which is valuable information when you’re thinking about various renovations you’d like to make.

Now you know the starting value, before adding improvements. Remember, when determining which improvements to make, in the end, the home will only sell for the maximum sales price of similar area homes.

The next step is to figure out which improvement projects will realize the largest return on your investment, without putting you over the neighborhood’s threshold. The addition of an attic bedroom, for instance, will net you a 77.2 percent return on investment (the national average), according to Remodeling Magazine’s annual Cost vs. Value Report. If that return is higher than the market will bear, it’s an improvement you don’t want to take on.

Since kitchens sell homes, a minor kitchen remodel may be worth the 79.3 percent ROI, but skip the major remodel with its 67.8 percent ROI, unless you’re selling a luxury home. In other words, don’t create a million dollar kitchen in a $300,000 home.

Choose your improvement projects carefully, get several bids for the work, know the highest potential sales price you’ll realize and you’ll avoid the danger of over-improving the house.

Check out my website HomesByColette.com and see what your house is worth before starting a home improvement project!


Colette Cordner
My Home Group

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Learn more about The Valley Solutions Real Estate Team at HomeSmart and how we are helping agents increase and improve their business.

The Valley Solutions Team at HomeSmart

Comments (2)

Sam Shueh
(408) 425-1601 - San Jose, CA
mba, cdpe, reopro, pe

Spend as little as needed to allow homes to be sold.

Any expensive renovations should have been done before to get enjoyment of them.....

Jun 13, 2017 11:52 AM
The Valley Solutions Real Estate Team


Jun 19, 2017 09:18 AM
Mike Kelly,CRS,CIPS
The MJKelly Team - Santa Rosa, CA
"One of Sonoma County's Natural Resources"

I had a client, lived in his house for 15 years and he decided a new kitchen would do wonders in the selling of his house. I went over and he had done a fabulous job with the new kitchen; spacious granite counter tops, all stainless KitchenAid appliances, new farm style sink, birch cabinets, hardwood flooring, new 6 "light" pella window and new light fixture--stunning. Sold in a heart beat but his wife was so ticked royally ticked off! "I lived here for 15 years and you didn't do squat to this kitchen! You fixed it up so we could leve the place!".  It cost him a new BMW convertible. He took her to dinner, had the new car sales guy take his car and replace it with the BMW! She was very happy--Happy Wife.., ! 

Jun 14, 2017 08:43 PM