There’s nothing wrong with wanting to perform home improvement projects before you put your home on the market. In fact, some fixes are mandatory.
When you’re considering major renovations, however, you need to be careful that you don’t over-improve the home for the neighborhood.
Getting Started
Before you hire anyone or hammer one nail, get in touch with me so I can calculate your home’s current market value. In the process, we’ll learn how much neighboring homes are worth; important information when you are considering renovation projects.
Appraisers have a lot of tools in their evaluation tool belt and two of them are the principles of progression and regression.
The latter says that a larger home surrounded by smaller homes will be devalued because of the market values of those small homes.
The principle of progression says the opposite: tiny homes surrounded by big homes benefit from the value of surrounding homes.
So, the watchword when contemplating your projects is don’t “over-improve.” Don’t create the best home on the block, thinking you’ll get a return on your renovation investment. You probably won’t.
Here are some tips on how to avoid over-improving your home:
The Next Step
The next step is to determine how much the project costs and how much value, if any, it will add to the home. This will let you know if the project is cost effective.
For instance, suppose your home is worth $390,500 (the average Rhode Island home price currently) and you decide to do a minor kitchen remodel.
The project’s price comes in at $26,214 (the national average for a mid-range kitchen remodel). The resale value of this project is $ $18,927, meaning you will realize a 72.2 percent return on your investment when you sell the home.
If you are remodeling your kitchen for your own benefit, then the fact that the ROI is on the low-ish side may not bother you.
If you want to perform the project for an increase in home value, however, you may want to rethink the idea.
Remember as well that if the return is higher than the local market will bear, it doesn’t make sense to make the improvement to a house you’ll be selling.
The highest ROI you’ll find when it comes to replacements and remodeling is a garage door replacement, according to according to the Remodeling 2020 Cost vs. Value Report (www.costvsvalue.com). The average cost nationwide for the project is $3,907 and the ROI is $3,663 (93.8%).
Think carefully before performing a remodel in the hopes of raising your home’s value. Consider the following:
- Is it necessary? Can the current kitchen, bathroom or whatever be cosmetically updated?
- If a project increases your home’s value, is the new value the highest in the neighborhood?
To avoid wasting money by over-improving your house, choose your projects carefully and learn the maximum potential sales price you’ll realize from the performing the improvement.
I’m happy to help you crunch the numbers so feel free to reach out.
