Remodeling still Pays Off!
With the decrease in value of homes, people are staying put. Many are unable to move due to a lack of equity or can’t afford the sale and moving costs. But if homeowners need a change, will they recoup any of their costs if they remodel?
The inability to move is the result of the decrease in value of U.S. homes over the last few years. Nationwide, values fell by about a third from 2006 to 2009 according to the S&P/Case-Shiller index. But in some places, like certain cities in our Phoenix metropolitan area, the losses can be up 55 percent.
As a consequence of the economy and the high jobless and underemployment rate, funds are tight in many households. That means that the pace of remodeling, previously fueled by the boom, has dropped dramatically. Yet homeowners with the ability to invest in their property wonder whether the old rules, which showed that certain remodels almost paid for themselves, still applied.
Earlier this year, the National Association of Realtors (NAR) released their annual Remodeling “Cost vs. Value Report” 2009-2010. It contains statistics on the estimated amount the cost of certain midrange and high end remodeling projects will be recouped upon a future sale. The good news is that according to the Report, it appears that homeowners will still do well if they do decide to make certain improvements.
The data is grouped into Additions, Remodeling and Replacements, with the job cost and estimated resale value given for each item in those categories. The cost data is produced by a computer program, with the resale figures provided by Realtors. The Report is also divided by region. Arizona is in the Mountain area, which includes Colorado, Nevada and other northern mountain states.
According to the Report, upgrading kitchens and bathrooms are still a smart bet. The percent of cost recouped in Arizona on a major kitchen remodel is 73%, and a minor one is 76.6%. A bathroom remodel will recoup 70.4%. Although these numbers are down from years past, since these are the two most important areas to most buyers, remodeling these areas should result in a quicker sale.
The project with the biggest return on investment on average was the replacement of a midrange entry door. The cost recouped was the highest in our Mountain area at 111%. It is also the least expensive item surveyed, proving again that it is worth every penny to make a buyer’s first impression a good one.
If you want to learn more, you can read the whole report at www.realtor.org. Don’t forget to use a “Certified Renovator” if your project disturbs the painted surface on any window, or more than six square feet of interior paint, in a property built prior to 1978 – if there are any children less than six or pregnant women live in the home (See my last blog for more info on the “New Lead Rules”).
We can help you decide on which pre-sale renovations will give you the most bang for the buck. Give us a call before you remodel! You can reach us at 480 675-0112.
– N. Mark Kramoltz © 2015