A common misunderstanding in today’s real estate market is that the value of a home will increase by at least the cost if the owners do some remodeling. The magazine “Remodeling” publishes a study every year called their “Cost vs. Value Report” and this report makes the case for the fact that the increase in value is well under the amount invested unless the homeowner does the majority of the work.
The magazine surveyed more than 100,000 people which included real estate agents and brokers as well as appraisers in 65 geographical areas of the country. The survey asked the participants to estimate the percent of cost a project would return when the house was sold for 29 mid to high cost projects.
The fact that the value of remodeling for 2009-2010 was down marginally for most projects compared to 2008-2009 can be attributed to the lack of home appreciation as well as the rising cost of remodeling.
The report also showed that remodeling projects having to do with the exterior of the home were becoming more popular and were gaining in value.
In the Minneapolis/St Paul MN geographical area the greatest return was for an upscale project of siding replacement with fiber-cement siding and that project was estimated to return 94.2%. A remodel job that has also consistently returned one of the highest returns is a minor kitchen remodel which this year was estimated to return 83%.
Other projects which returned a high percentage are an entry door replacement with a steel door returning 92.8% and a siding replacement with vinyl siding returning 80.4% in Minneapolis.
The entry door replacement with a steel door in most areas of the country is estimated to return more than 100% and the national average is estimated at whopping 128.9%. This certainly shows evidence that projects have different values in different geographical areas.
In light of the fact that all projects in Minnesota return less than 100% it makes sense to do remodeling projects only for your own enjoyment and years of appreciation. This does not suggest that minor cosmetic changes shouldn’t be done such as cabinet hardware, light fixtures and painting where necessary.
HOME SELLING TIP: If you are in doubt, with the state of the current real estate market make it a requirement to check costs of a project with your contractor and talk to your real estate agent regarding the expected return before venturing into the project. You can also refer to the “Cost vs. Value Report” which can be accessed through this link. http://www.remodeling.hw.net/2009/costvsvalue/national.aspx
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