Make remodeling dollars payoff in buyer's market
By Vicky Katz Whitaker
Copley News Service
You want to sell your house, but the kitchen yearns for a makeover, the exterior needs a new coat of paint, windows rattle in the slightest breeze and the bathroom has seen better days.
When buyers were plentiful and affordable homes were in short supply, sellers could look forward to recouping most if not all of the thousands they plunked down for major interior renovations like a new kitchen or bath, in anticipation of a fast turnaround once they their put their houses on the market. That's no longer true, housing experts say.
In today's crowded buyer's market, it's not what you do to the inside of your home that matters. What counts is curb appeal, what your house looks like from the outside. Upgraded siding, wood replacement windows or a new wood deck can bring would-be buyers to your door, but don't count on getting the heady 90 percent or better return on your investment that up until recently helped define the seller's market.
That's borne out in the results of the 10th annual "Remodeling Cost vs. Value" study conducted by Hanley Wood LLC, a company that monitors and reports on housing and construction industry trends. The study, available online at www.costvsvalue.com, compares remodeling costs with resale values in 60 markets nationwide.
The results, covering 29 typical midrange and upscale remodeling projects in nine U.S. regions, are based on information gleaned from remodeling contractors and suppliers and nearly 3,000 National Association of Realtors sales agents, brokers and appraisers who responded to an e-mail survey. Supplied with project descriptions, construction costs and median home prices for each city, they were asked to estimate the value the remodeling projects would add to a house at resale in the current market.
"Realtors visit hundreds, if not thousands of homes with their buyer-clients each year, and have a unique understanding of what home buyers value in their local markets," explains NAR senior public affairs associate Stephanie Singer, who tracks consumer trends. "They have insight into what projects really make a difference in the buyer's eyes, when it comes to remodeling."
The study found that nationally, homeowners who spent about $10,000 to $13,000 to replace existing siding with upscale products made of fiber-cement or foam-based vinyl, recouped 88 percent of the cost when the home was sold. Adding a $10,000 wood deck or allotting $12,000 to about $20,000 for wood window replacements returned 85 percent and 81 percent, respectively.
The only interior project returning more than 80 percent of its cost was minor kitchen remodeling. While there are regional price differences, nationally, home sellers recouped 83 percent of an average $21,185 outlay to update an outmoded kitchen, redoing countertops, replacing cabinet doors and pulls with raised panel wood fronts and new hardware. An energy-efficient wall oven and cooktop, a mid-priced sink and faucet, a new laminate floor, repainting trim and wallpapering are included in the cost.
Ironically, even though the recoup rate is 78 percent of what is spent, a $16,000 midrange bathroom-remodeling project continues to be popular among home sellers.
That kitchen and bath remodeling and other home improvements have declined in value has not gone unnoticed by kitchen and bath industry expert Ed Pell, manager of market research for the National Kitchen and Bath Association. Pell points out that as recently as 2005, 10 of 22 projects tracked in the annual Cost vs. Value Report returned more than 90 cents on the dollar. That hasn't stopped the home remodeling industry from growing, says Pell. In 2007, homeowners spent $70.2 billion on remodeling bathrooms, a 3.5 percent increase from the previous year. The number of kitchen remodeling projects was up, too.
That doesn't come as a surprise to veteran home remodeler Dean Herriges, head of Wisconsin-based Urban Herriges & Sons, an NKBA-certified kitchen and bath remodeler. Some homeowners are having second thoughts, he says, putting plans to sell on hold while they weigh other options, including remodeling or putting an addition on their existing homes.
Bargain-hunting home-buyers would do well to talk to a home improvement contractor before they make an offer, he adds. Most remodelers will offer a professional opinion free of charge.
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