Will the renovation help your house sell faster?
With fluctuating interest rates and shifting buyer demand, the real estate market has become increasingly competitive. Sellers must carefully consider which home improvements will make their property stand out and attract potential buyers in today's market. If you’re getting your house ready for the market, make sure to spend your money on remodels that will help it sell, not just things you like.
Your house might be great on the inside, but if the outside looks dated or neglected, fewer potential buyers will even schedule an appointment to see it. Get more buyers looking by sprucing up the outside.
The National Association of Realtors reports that something as simple as signing up for a lawn care service with weed control and fertilizer can provide a 300 percent ROI, and 14 percent of Realtors who recommended a lawn care service reported it helped the house sell! So, not only do outdoor improvements offer a great ROI, they also help get you to closing faster.
- Important areas: Think about which areas of your home prospective buyers care about most when deciding where to invest your remodeling dollars. Kitchens and bathrooms are typically the most important spaces in a home.
Although total kitchen remodels usually have an ROI under 100 percent (65–80 percent, depending on the source), they can seriously improve your chances of selling your house. A quarter of Realtors who recommended homeowners renovate their kitchen said the redo led to the house selling.
- Niche markets: Consider whether your home renovation will appeal to a niche market.
Renovations designed for aging in place, energy efficiency and home automation are all gaining in popularity, according to the Joint Center for Housing Studies. Spend money on remodels that offer unique and popular home features because many people move when their physical needs change or when they’re looking for newer technology. For example, if you’re redoing the bathroom, add features like a walk-in shower with a bench and handrails to appeal to buyers concerned with limited mobility. Or, you could add home automation features for buyers who want to control their thermostat or lights when they’re away.
» READ MORE: How to finance home renovations
How much will the remodel really cost?
It’s easy to find the average cost of a home remodeling project online or by calling contractors for quotes, so you might think it’s simple to estimate your ROI. But unexpected problems can lead to higher costs.
- Permits: You’ll need to obtain a permit for many major renovations (like building an addition) and for anything that requires plumbing or electrical work. If you hire a professional to do the job, they’ll probably include the permit cost in their fees. Make sure to ask if permit costs are included before signing a contract.
If you do the job yourself, you’ll need to obtain the permits yourself. Contact your city or county government to learn about required permits and costs in your area.
- Inconvenience: Whether you go the DIY route or hire a contractor, remodeling can significantly alter your daily routine and cause inconveniences. If you’re redoing the kitchen, expect to eat out more than normal during the project since your kitchen won’t be usable.
If you have a pet, you may end up needing to board them during the renovation. Contractors coming and going can cause pets a lot of anxiety, and there’s always the risk of a worker accidentally letting your pet out of the house.
- Rebates and tax credits: Many power companies offer rebates for installing new appliances or for switching from electric to gas. Getting these rebates can reduce the cost of your remodel, resulting in a higher ROI than you expected. Contact your power or gas company to learn about any special programs they have.
There are some state and federal tax credits for installing energy efficient appliances and features. These credits vary from year to year and by state. Contact a local tax professional or research energy credits and rebates by state before you decide on a project.
Renovations with the best ROI
According to The National Association of Realtors and Remodeling Magazine’s Cost vs. Value report that we mentioned earlier, these home renovations will give you the most return on your investment.
- Garage door replacement
- Entry door replacement
- Manufactured stone veneer
- Grand entrance, fiberglass
- Minor kitchen remodel
- Siding replacement (fiber-cement)
- Deck addition (wood)
Factors that affect renovation ROI
Several factors influence how much return on investment a renovation will yield. Understanding these variables can help you make better remodeling decisions and maximize value.
- Location: The neighborhood and regional market conditions play a crucial role in determining how much value a renovation adds. A high-end remodel in an area where home values are lower may not yield a high return, whereas in a competitive housing market, strategic upgrades can be more lucrative.
- Project scope and quality: The scale of the remodel and the quality of materials used significantly impact ROI. Over-improving a home beyond the standard of the neighborhood can limit returns, whereas practical, high-quality updates often yield better results.
- Market trends: Homebuyer preferences change over time. Features that were once considered premium may no longer be in demand. Staying informed about what buyers are currently looking for can help you choose the most valuable updates.
- Timing: The timing of a renovation in relation to when you plan to sell matters. The real estate market fluctuates, and making improvements when demand is high can enhance your return.
» RELATED: Ways to add curb appeal
Bottom line: Should I remodel my house?
Before shelling out big bucks on a home renovation project, consider what's standard in your community. Talk to a real estate professional or contractor if you’re primarily concerned with whether a home renovation will add value to your house and help it sell more quickly. After all, different trends are popular in different places; a pool might be a valuable addition in Arizona but a poor investment in Minnesota.
