When you sell you never get 100 cents on the dollar no matter what the improvements. That means homeowners need to be careful when they plan home improvements, renovations or additions.
The Bottom Line
If it is for your own use or helps you get more time and enjoyment from your home, that is smart. But if your sole purpose is to “get it all back at resale,” that usually doesn’t work. Want to be wise with improvement dollars? Here are six points to consider.
1. Over-improve for yourself.
If you are over-improving to suit your own needs, that is fine. But a smart homeowner thinks in terms of getting value through enjoyment of the project, not an increase in home value. So if you are planning to over-improve the home for yourself and your family, do it while (or because) you are planning for many years in this home.
Short-timers should keep it as it is. If you are planning to move in the next two to four years, bite your tongue and bide your time. Over-improving is only ok if you are staying there or if you don’t care if you get it back when you sell.
2. Big improvements don’t yield big bucks.
There is one in every neighborhood, the person who is convinced if he adds enough granite, hardwood and molding to his modest house he will get palace prices when he sells.
Just because a house has new countertops and a brand-new master bath doesn’t mean hou have made more square footage in your house. Compared to the houses down the street with the same amount of square footage, the prices will be basically the same.
Even in the rooms that are renovated most often — kitchens and bathrooms — it is possible to over-improve. You have to pay careful attention to balance. Remember, improvements call attention to the areas of the house that have not yet been improved.
3. Too-little yard syndrome.
While more square footage often equals higher home value, pay attention to how an addition affects the yard. Stand on the sidewalk and look at the other houses. Is what you are planning consistent with the scale of the other houses? If the house crowds the yard it does not matter how upgraded the house is. One of the most financially dangerous over-improvements is outsized additions that are either too big for the neighborhood or too large for the lot.
4. Count the bedrooms.
Another thing to watch is the number of bedrooms relative to the rest of the neighborhood. If you have a detached house with four of fewer bedrooms, then converting one to a walk-in closet or taking that space to add on to an adjoining room could make your house worth less when you sell. Depending on the neighborhood, a smart owner keeps at least four bedrooms. If you want to style any of them as hobby rooms or man caves, that’s fine. Just avoid changes that require actual renovations — like knocking out or moving walls.
5. Renovation = personalization.
You want a swimming pool. The next buyer? Not so much. With every renovation you make you personalize your house and customize it for your own use. You are making improvements for yourself alone. Special amenities that you consider an upgrade may not have any value for the next buyer. Some will see your sparkling pool as luxurious, even glamorous. Others might view it as a maintenance hassle and a liability.
6. Improvements vs. buying a different house.
If you are thinking of over-improving your home, it is going to cost a good deal of money. This may be the time not to over-improve but to sell and buy a different home where the improvements and amenities you want are already in place.
When all is said and done, it is good to consult a professional Realtor to review the improvements you are considering. That way you will have a good idea of the balance between what you are doing for your own enjoyment and what is adding resale value to your home.