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Americans collectively spend over $300 billion on remodeling and repairing their homes every year. However, diving into demolition is one thing when you’ll get to enjoy those shiny granite counters and new soak tub for years down the road. The question of “Should I renovate my house before selling?” requires more calculated thinking purely based on ROI and the marketability of your home in its current condition.
“I know that most of the time, you’re going to get back 65% to 70% of what you’re going to spend, assuming that it’s something generic enough in nature to where the next buyer is going to appreciate it,” said Robert Ryczek, a top-selling Gainesville, Florida, real estate agent with 41 years of experience.
“Is it just a touch-up scenario, or a major rehab situation? I’ve seen examples of both, where people have spent things on the right issues and gotten a pretty good return, and then spent money that, in my estimation, didn’t attract many buyers.”
Let’s break down all the factors that help you weigh what you can afford, which types of projects have the best bang for your buck, and when you’re better off lowering the price of your home versus making big changes.
The average amount recouped for home remodeling projects has dropped significantly in recent years. A 2018 Remodeling magazine survey of real estate professionals found that the average return on 21 popular remodeling projects was 56%, down from 64% in 2017 and 62% in 2016.
That said, some upgrades—not major overhauls—do carry a fairly high return on investment, such as replacing street-facing vinyl siding with stone veneer, touching up exterior paint, and installing a steel entry door, and you also have to account for how certain projects make your home more marketable and attractive to potential buyers.
A few examples for comparison’s sake: A kitchen upgrade costs an estimated $35,000 and recovers about 57% of the cost, according to NAR’s Remodeling Impact Report. That said, 23% of the Realtors surveyed in this report said that such a project recently helped result in a closed sale.
Compare that to refinishing hardwood flooring to upgrade worn-out surfaces and the overall finish and materials. The Remodeling Impact Report estimates this costs about $3,000, but homeowners can recover 100% of the project’s cost. Of the Realtors surveyed in this report, 6% said that such a project recently helped clinch a deal.
However, not every upgrade will impress the buyers you want. You might spend a lot of time and money deciding on just the right color for the family room, only to have a buyer want to paint it a different color, noted Ryczek.
He does recommend neutralizing any colors and décor that’s unusual. “Kids’ bedrooms where they’re pink, purple, or red or black—I’ve seen a lot of black bedrooms for some reason. Things of that nature, you’d certainly want to get rid of those wacky colors.”
Although redoing the attic insulation might not be glamorous, functional types of projects such as this that cost $5,000 or less tend to rank high in terms of costs recouped, statistics show.
Some buyers also are impressed with what seem like basic features. According to a 2017 study from the National Association of Home Builders (NAHB) in Washington, D.C., the top home feature that buyers wanted, regardless of income level, was a laundry room.
The Home Improvement Research Institute (HIRI) of Indianapolis, Ind., said in its 2017 Recent Home Buyer Study that 51% of the people who had purchased a home within the past year had planned to buy a home with no major renovations.
That doesn’t mean that buyers won’t roll up their sleeves and start working after they’ve gotten settled in a new home. The HIRI also notes that the majority of home buyers (80%) did home improvement projects within the first year of purchase and spent a median of $4,000.
There’s also a segment of buyers, typically younger couples, who enjoy remodeling, Ryczek added. “They’re happy they’re going into a 25- or 30-year-old home … knowing they’re going to more than likely have to make a lot of changes,” he said. “They see a house where they like the floor plan, but there are some things that are going to have to be updated. If they can get a fairly decent reduction in sale price, that kind of sits hand in hand with what they want to do.”
The HIRI said that about 18% of home buyers seek out a fixer-upper—and some of them get one whether they intended to or not. 25% of buyers planned to purchase a home that was move-in ready and ended up with one that needed quite a bit of work.
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