How Do Home Updates Affect Resale Value?

Michael Schroeder
Updated June 11, 2014
contractor supervises siding installation during home remodeling project
Installing new siding can increase a home's value and improve curb appeal. (Photo by Mark Wilson)

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Over the course of eight years, Suzanne Varghese of Boston estimates she and her husband invested about $44,000 to update and maintain to their Boston home.

The couple hired Bert Murphy Construction in Milton, Massachusetts, to install central air conditioning to replace window units; to build an electric fireplace with a marble surround, an eye-catching main feature on the first floor; and to refinish hardwood floors on the second floor, along with other fixes and upgrades. “We wanted it to be nice, obviously for ourselves,” Varghese says. But, she adds, they also wanted to increase the value of their home, set in the city’s established South End/Back Bay area. In May last year, the home sold for their asking price of $1.1 million, easily clearing the amount they invested, Varghese says. “Whatever we did was good for us and good for selling. It was definitely worthwhile.”

In addition to personal taste and comfort, for many, remodel decisions come with the expectation of improving a home’s resale value. But experts say not all updates are created equal and not all neighborhoods or markets will reward you for the money you sink into your not-so-humble-anymore abode. “I’d advise caution,” says appraiser David Roberts, based in Columbus, Ohio, of approaching an update with an eye toward raising the resale price. Roberts recounts upset homeowners screaming at him over the phone because an update didn’t add significantly to the value of their home, as they believed it would. “I’m not saying, ‘Don’t do it.’ I’m not saying, ‘Do it.’ I’m saying, ‘Let’s do some research,’” he says.

Realtors, appraisers and remodelers advise focusing on the type of update, where certain improvements big and small tend to return more on the original investment, such as a wood deck addition or garage door replacement, versus others, like a sunroom addition or home office remodel. But even more significant, construction and real estate experts say market factors usually play a leading role in dictating how much value a remodel might add to your home. So it’s important to look at comparable homes in your area to gauge the potential return on your investment.

Remodel to the market

You can “over-improve” a home beyond the value of other homes in the area, says Realtor Petra Richardson, with Home Team of America, in San Antonio, Texas. “You need to rely on your Realtor to give you comps,” otherwise known as a comparative analysis, she says. Roberts adds that you can check listings through your county auditor’s office or Multiple Listings Service Listings at MLS.com.

Robert Criner, vice chair of the NAHB Remodelers, which represents the interests of the National Association of Homebuilders’ remodeling industry members, says as real estate markets have improved of late, so too has the value of individual remodels. That’s especially true in hot markets such as San Diego. “If you’re in an area where values are rising, it will increase the value of your remodel,” Criner says.

The flipside holds true as well. “If you’ve got a declining neighborhood and your house is already average or better, that’s a scenario where I wouldn’t dump a dime into that property because you’re not going to get any more money out of it,” Roberts says.

If you want that new bathroom — or need that new bathroom — by all means go for it, but with the exception of mostly smaller changes, experts say it’s typically not worth making an improvement if your sole aim remains boosting a home’s resale value. “The front door is about the only thing you get your buck back for, if you spend it,” says Jean Wedemeyer, a Realtor with The Charles Reinhart Company in Ann Arbor, Michigan.

From the front door to the back deck

Dollar for dollar, a report published by Remodeling Magazine in January 2014 found entry door replacement — using a steel door — returned 97 percent of the original cost in added resale value, according to national averages, the highest of any update featured. Garage door replacement, a wood deck addition and minor kitchen remodel also returned more than 80 percent, according to the report, which found homeowners recouped only about half of their investment for sunrooms and garage additions, and a little more than that for a master suite.

“Just about any remodeling you do is going to cost you more than it’s going to add value to the house,” echoes the NAHB’s Criner, founder of Criner Remodeling in Newport News, Virginia. “Some of it’s close and a lot of it’s necessary because you have to maintain the house,” he says.

realtor and remodeler surveying side of home
Realtor Christine Garabedian and contractor Emanuel Coehlo oversee the installation of new siding. (Photo by Mark Wilson)

Service providers interviewed by Angie’s List tended to estimate lower average returns than those cited by Remodeling Magazine’s corporate-sponsored “Cost vs. Value” report, and all stressed the importance of doing updates to a home because that’s what a homeowner wants, not for the promise of a huge return at some distant date in the future. In addition, experts advise addressing deficits first, such as modernizing an outdated electrical system. “That has a lot of value, especially in the Boston area where a lot of homes are pushing 100 years or older,” says Emanuel Coehlo, owner of Innovative Contracting Services in Cambridge, Massachusetts.

Coehlo’s company repairs and updates properties and provides estimates for Realtor Christine Garabedian, principal broker for Garabedian Group in Cambridge, Massachusetts. The company represents buyers and sellers on commercial and residential real estate transactions.

Small changes make a big difference

Coehlo and Garabedian put exterior improvements, such as replacing old vinyl siding with fiber cement siding, high on the short list of best-bang-for-buck improvements.

As other experts emphasize, they advise paying special attention to simple, unflashy fixes, regular maintenance, and touchups, like repainting a home in neutral colors and sprucing up an entryway if prepping a home for sale. “A fresh coat of paint always goes a long way,” Garabedian says.

Besides possibly moving the needle on price, real estate agents and contractors say updates serve another purpose related to moving a home, too. “You will sell a home faster if all the improvements are done prior to putting it up on the market,” says Jim Tegge, owner of Home Crafters Building & Remodeling in Glenshaw, Pennsylvania. That includes updating those old, drafty windows, he says.

Still, appraisers like Roberts urge a chaste approach that takes any suggestions from real estate agents to make big improvements with a mathematical grain of salt. “Anything minor that needs to be fixed, for God’s sake if it’s 20 bucks from Lowe’s, go fix it,” he says. So-called “deferred maintenance” turns off prospective buyers, he and others say. Even so, most advise against undertaking big remodels right before a sale unless a home has serious issues. “Kitchens and bathrooms are two things that sell a home,” Tegge says. But if they’re in decent shape, he says, it makes more financial sense to leave them as is, rather than undertake an overhaul.

Home improvement for the current homeowner

For most, renovations amount to enjoying the change while in the home, with a secondary hope of someday benefitting from the investment when selling in the future.

But a big return on the cherry wood butcher block counters and other improvements would prove the equivalent of the cherry on top of the enticing kitchen remodel member John Revitte and his wife Stacy of Whitefish Bay, Wisconsin, recently undertook in the space original to their 1939 Georgian Colonial. “It was so outdated,” he says. “This isn’t a kitchen just for show. My wife and I do a lot of cooking.”

kitchen remodel before and after
Angie's List member John Revitte hired a remodeler to remove ivy wallpaper and put up new cabinetry in a kitchen redo that he expects will significantly increase the resale value of his home in Whitefish Bay, Wisconsin. (Photo courtesy of Revitte)

For about $36,000, the couple hired Home Pride Remodeling in Milwaukee to replace vinyl flooring with tile, put in new countertops, remove wallpaper, add paint, replace cabinets, redo plumbing, and upgrade the electrical system to support new appliances in the kitchen and throughout the house. Add to that a few small touches: “Subway tile backsplash with glass accents [and] motion sensor faucets, which is really nice. If your hands are dirty with chicken, you don’t have to touch anything,” Revitte adds.

A follow-up assessment of the house, prompted by the kitchen redo which required going through the permitting process, didn’t result in an increased valuation of the property or higher taxes, he says. And the couple has no current plans to sell. But Revitte hopes that if they do in the future, they’ll still recoup more than their investment.

“We would showcase the kitchen,” he says, seeing the updated electrical wiring as an added selling point. For now, it’s a great place to work alongside each other preparing food, or to enjoy a meal together to start the day.

“It’s a place that we’re proud to be in,” he adds. “It’s been almost a year since we finished the project and we still love to have breakfast in there.”

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