By: Davis Rowley (President of the Residential Association of Realtors)
A homeowner thinking about fixing up his or her home in order to sell it ought to know that some remodeling projects, such as a minor kitchen upgrade, perform much better in terms of return on investment than others, such the addition of a home office.
In its November issue, REALTOR Magazine reports on cost versus value findings for 11 different common home improvement project types. The report originally was compiled by Remodeling magazine, published by Hanley-Wood, LLC. The report says that a minor kitchen remodeling will return 82 percent of the estimated cost of the work. That makes two years in a row that this type of home improvement was found to be the most cost-effective in terms of home resale value.
The "Cost vs. Value Report" also found that the addition of a bathroom to a home would return 72 percent of the projected expenditure at the time of sale. Other remodeling project types that were found to return 70 percent of cost or more include: a bathroom remodeling (71 percent); the addition of a family room (71 percent); and a major kitchen remodeling (70 percent).
According to the report, all of the 11 project types overviewed would return more than 50 percent of the estimated construction cost. It is up to an individual homeowner, however, to determine what percentage of cost returned will prove worthwhile.
The addition of a master suite would return 68 percent of the construction cost, the report says, while the addition of an attic bedroom would return 65 percent. Also, a two-story addition would return 62 percent, replacement of exterior siding would return 60 percent, replacement of windows would return 57 percent, the addition of a deck would return 54 percent, and the addition of a home office would return 51 percent of the construction cost.
It should be noted that these estimates represent national averages and many variables can change the way a home improvement project performs on an individual basis. The study found that return on investment still depends on the house, neighborhood and region, and that location remains the primary determining factor for the value of real estate.
Improvement that adds curbside appeal may encourage more potential homebuyers to visit a house, but once inside the door, these prospects will value functionality, durability and convenience as much as ever.
Of the remodeling projects analyzed in the report, a two-story addition was projected to have the highest cost, at $73,553 for the entire project. That is worth noting since this project type finished eighth of the 11 project types in terms of cost/value ratio. Meanwhile, a minor kitchen remodeling, the top performer in terms of cost-to-value, has as estimated cost of $8,655, one of the least expensive of the 11 home improvement projects reviewed.
The addition of a bathroom, the second most cost-effective project type, would cost an estimated $13,918, the report says, while a bathroom remodeling would cost $9,135. At the other end of the cost-effectiveness spectrum, the addition of an attic bedroom would cost $28,654.
The cost estimates for this study were developed by R.S. Means, a Kingston, Mass., company that specializes in construction cost estimates. Real estate practitioners and appraisers from 60 markets around the United States then lent their expertise to the study in order to determine which projects would provide the best value.