More cost, less value: Major report shows remodeling doesn't always pay

It’s getting more expensive to remodel a home, yet those improvements don’t necessarily add anything to a property’s resale value.

That’s the verdict of real estate agents who estimated the resale value of 36 common home improvements in 102 cities. The resulting 2015 Cost vs. Value Report, published by Remodeling magazine, revealed that half of those remodeling projects added more value to the home than they would have last year. But at the same time, the cost of the work increased for all of them.

Three-year low

In fact, the report showed the overall cost-value ratio for remodeling jobs, which had inched upward for the past two years, has slipped by 3.9%. For the 50% of projects that gained value over the previous year, the resale value shot up by as much as 11.6%. But for the other half, the value dropped by as much as 8.32%.

The estimated cost of hiring a professional contractor to do the work, in the meantime, rose 4.22%.

That works out to a tiny win on the side of value: the average change was a gain of 0.29%, according to Remodeling editor Craig Webb.

High value

First, the good news. Homeowners who are remodeling because they’re planning to put their houses on the market are most likely to see a good return on their investment if they focus on small jobs.

Simple, low-cost improvements add more value to a home with a for-sale sign out front than a major renovation, the report said.

For example, a homeowner who replaces a front door with a steel door will recoup 101% of that door upon resale, the report said. And replacing the garage door will reap 88.4% of cost. Both of those values increased since last year’s report.

The steel door replacement is the lowest-cost project among the home improvements the Realtors considered when they did their estimates of cost vs. value. And it’s the only renovation that recouped more than 100% of its cost.

More exterior projects showed a higher cost-to-value ratio than indoor pursuits. All of these jobs, for example, will bring back more than 70% of the installation and purchase price upon resale: manufactured stone veneer, deck or garage additions, roofing or siding replacement, and window replacement.

Minor changes to the kitchen, likewise, could recoup 70% of its cost for the owner at resale. And freshly remodeled bathrooms are always popular with homebuyers. The next one you overhaul could recoup 72.5% of its cost for your client.

Low value

Now the downside: Large-scale remodeling jobs are the least likely to recoup the money a homeowner paid for them­.

Adding on a bathroom, family room, second story, sunroom, or a master suite all rang up at less than 70%, as did a major overhaul of a home office or kitchen.

The list

Here’s a list of mid-priced projects and the percentage of cost a homeowner is likely to recoup when selling the home. Numbers are different for upscale versions of these projects; find that list here.



Filed Under: Residential Building