Do you have a sale price in mind if you tried to sell your home today? I’m guessing you do because every homeowner carries around a “magic number.” The problem with many guesstimates is that they’re often based on inaccurate assumptions.
When it’s time to sell, many homeowners believe they should get back every penny they ever invested in home improvements. But to calculate resale value, first we need to talk about what you spent your money on.
Home Repairs and Improvements Fall into 4 Major Categories:
1. Routine Maintenance must be done regularly to keep your systems functioning properly. Just as you get the oil changed in your car every 3,000 miles, you should check your air conditioning and service the furnace annually. Other maintenance includes cleaning out gutters, removing tree roots from sewer lines and trimming trees away from the roof line.
Routine maintenance doesn’t add value to your home, but it will prevent systems from wearing out before their time or contributing to problems such as a leaky basements which can affect your home’s resale value.
2. Repairs. Even with routine maintenance, if you own your home long enough, eventually you’ll have to repair or replace just about everything mechanical or exposed to the weather.
In the St. Louis area, most furnaces, air conditioners, hot water heaters and roofs last about 15 years. (So if you purchase a 14-year-old home, you probably have some big expenses looming!) Of course, it is unlikely that everything will give out at the same time. I have a furnace that is 20 years old. It could break tomorrow or last another 5 years.
The length of time between roof replacements can vary. In the Midwest we get hail storms every spring. I once had a 5-year-old roof that was hit by hail and replaced it with my insurance policy. Or, you might be lucky and not need to replace your roof for 20 years.
The bottom line is that unless you purchase a new home, plan to make repairs each year. Again, repairs do not increase the value of your home since buyers assume that everything works properly. After working with hundreds of home buyers, I can tell you with confidence that none of them offered to pay more for a house just because it had a new roof or furnace.
3. Cosmetic Updates keep your home updated and fresh. Replacing 10-year-old carpeting isn’t improving your home. It is simply taking away a blemish that would devalue your home compared to your neighbor’s.
Every homeowner should spend approximately 1%-3% of their home value annually on. When buyers walk through a home for sale and see it priced at the high end of the comparables, they expect a house in great condition. You can say your home is in great condition if:
- All carpeting and flooring is clean (no stains!) and doesn’t show wear.
Exterior paint isn’t peeling - Interior paint is free from scuffs along walls and trim
- The kitchen and bathrooms are updated
- Cabinetry and fixtures must be similar to what’s popular today–otherwise buyers consider them dated and will expect a discount on the sale price
If a homeowner chooses not to make necessary updates to keep home appearance current and in good condition, buyers always expect to get a discount!
4. Home Improvements are features the homeowner added to the home that didn’t exist before, such as converting existing space into more useful space. One of the best values is adding a bathroom to a master bedroom or a bathroom on each floor.
Other home improvements include:
- Replacing old painted siding with maintenance-free vinyl or cement fiberboard siding
- Converting a floor plan with small separate rooms into an open floor plan by removing walls
- Changing a small galley kitchen into a more functional space by enlarging it and improving the layout
- Adding living space in an unfinished basement
- Converting a carport to a garage
- Increasing a home’s square footage with an addition
You get the idea. If it wasn’t there before, you can consider it a home improvement instead of a repair or cosmetic update.
How Cosmetic Updates & Home Improvements Affect Resale Value
I wish that I could tell you that you’ll get back all the money you spend updating and improving your home. Unfortunately, home sale statistics just don’t support this.
The reality is that unless a home is completely outdated or has an obsolete floor plan AND is purchased at a substantial discount to reflect the condition, a homeowner can expect to get back only a portion of what he invests on cosmetic updates and home improvements when it’s time to sell.
Remodeling Online recently published their annual Cost vs. Value Report. According to the 2007 study, the best mid-range projects to spend your money on in if you live in the West North Central region (including Missouri) are:
Siding replacement – 77.1%
Wood deck addition – 75.2%
Minor kitchen remodel – 74.2%
Window replacement (vinyl) – 73.3%
Window replacement (wood) – 71%
Major kitchen remodel – 69.5%
Bathroom remodel – 68.6%
Attic bedroom remodel – 65.8%
Two story addition – 65.3%
Basement remodel – 65.1%
The percentage is the cost recouped at time of sale. All cosmetic updates and home improvements didn’t add value!
One important factor to consider before you make any improvements is evaluating if the changes you are planning will appeal to the majority of buyers.
If you decide to improve your home by turning your backyard into an English garden, or replacing outdated kitchen counters with brand new BLUE counters, you may find that buyers will see your improvements as a negative that devalues your home value.
Karen Goodman is a Realtor© serving the St. Louis metro area. Her website focuses on information for homeowners, buyers, sellers and St. Louis residents, and features the latest housing market reports and MLS homes for sale in the area.
