Bill Morris: Cost vs. Value of Home Improvements

Cost vs. Value of Home Improvements

The real world -- not always what we wish or see on TV. I am asked frequently about how much certain home improvements will increase the market value of a home, or for advice on which improvements are best. My answer: Make changes that you will enjoy, and plan to stay for a while to enjoy them.

Please, that's not just me being flippant. I find that expectations are routinely inflated. Even in Austin and Central Texas -- perhaps the healthiest real estate market in the United States -- large investments in home remodeling are unlikely to yield large returns in the short run. We have all been exposed over the past several years to a variety of television programs and articles about major home makeovers, prescribing significant home improvements that pay off the very next weekend with a profitable sale at an open house. I suppose it is possible that in selected markets that enjoyed 10% to 20% annual price appreciation during the housing boom, and where any reasonably prepared listing could expect multiple offers, the market might have allowed meaningful gains on remodeling costs. In the real world here, though, I find that more modest preparations make more sense for prospective home sellers.

Remodeling Magazine follows this information closely and publishes annual results of surveys on the subject. Here is their look at cost vs. value for specific improvements to mid-range homes, ranked by "Cost Recouped" and focused on the Austin/Central Texas area:

Cost-Value Home Improvements - Mid-Range - 2009-2010

Surprised? Replacing the front door or garage door are not on the list of improvements that my clients ask me about, but they are the only projects on this list that offer a realistic chance of paying you back more than they cost. Kitchen and bathroom remodels -- consistent recommendations on those TV shows -- return about $3 out of $4 invested.

Remodeling an upscale home instead? Here's that data:

Cost-Value Home Improvements - Upscale - 2009-2010

This ranking is still headed by mostly "un-fun" home improvments. The bad news is that only one project on the list returned more than $8 out of $10 spent on home improvement.

Note: These are averages. Some homes in some neighborhoods will benefit more than others from remodeling investments. Generally, though, I find that if a homeowner plans to sell soon, money is best spent on mundane projects like storing excess furniture and knick-knacks, cleaning the house top-to-bottom, cleaning or replacing carpet, painting, mowing the yard, trimming trees and shrubs, and planting some color out front to improve curb appeal. I also pay for staging most of my listings, with no doubt that it is money well spent.

Not planning to move right away? Remodel to your heart's content, knowing that 25% to 30% of what you spend will be left behind when you sell. It is worth thinking carefully about whether you are the only family in the country who wants what you want in a home, but otherwise do what you will enjoy, and enjoy it.

Bill F. Morris, ABR, CRS, CDPE, e-PRO, MBA
RE/MAX Capital City
Call or Text:       512-785-3345
Toll-Free:           1-800-692-8784, x 162

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Comment balloon 2 commentsBill Morris • April 18 2011 01:38PM


Good information to know.

Posted by James Loftis, ( about 9 years ago

REALTOR® Magazine is another source for useful data regarding remodeling cost versus investment return.

Posted by Mike Mayer (Mike Mayer, Broker/Owner - i List For Less Realty, LLC) about 9 years ago