A common misconception among homeowners when it comes to home remodeling and renovation is that cost equals value. However, not every renovation or remodeling effort will pay off at closing. While remodeling a kitchen or bathroom may bring the greatest return on your investment, some custom installations can actually detract from value. These are known as “over-improvements.”
Before you start tearing up tile or ripping out old plaster, you should consult a professional real estate appraiser about the economics of your proposed project. An appraiser can advise you on the feasibility and the future marketability of your improvements, point out neighborhood trends, and which renovation or rehab projects might bring the best return when it comes time to sell your home.
Prior to making any upgrades to your home, do your research. This includes:
- Knowing who’s buying in your neighborhood
- Going to home fairs and open houses to see local trends
- Understanding which improvements have the greatest influence on property value
- Market researching through the help of an Appraisal Institute designated appraiser
To increase the marketability of your home consider the following tips:
- Avoid over-improvement by sticking to what’s standard in your neighborhood
- Projects that add square footage to bring a house up to—but not beyond—community norms generally pay off the most
- Consider adding a bathroom, which is an appealing feature for home buyers
- Invest in basic upgrades, such as fresh paint (use neutral colors) and new fixtures
- Clean your house (focus on baseboards, light fixtures, ceiling fans and carpeting)
- Improve basic curb appeal (clean gutters, pull out dead plants, touch up chipped paint)
- Remove clutter
For major renovations consult with a State Licensed Appraiser who can perform a feasibility study – an analysis of the property, the cost of rehabilitation and an estimate of the property’s value after improvement. By basing their study on certain economic principles, including those of contribution, increasing and decreasing returns, conformity, and highest and best use, a professional appraiser can enable you to make a reasonable decision about your remodeling or rehabilitation project.