The right home renovations can add money at resale. But home renovations can be expensive. How can you know what renovations will return that cash when you sell? Experienced realtors and contractors know the answer to this question, so I asked them.
“Cost overruns are common,” said one contractor. “No matter how well we budget, we always find something that complicates the job, or the homeowner changes their mind about something. It's like building a custom home; there are surprises.”
“So what you are saying is that a homeowner wanting to renovate should plan carefully?” I asked.
“Exactly. Do the research before diving in. We see a lot of people diving in all excited about, say, knocking out a wall to open things up and then finding out that the replacement structure is very expensive.”
One realtor told me, “Homeowners should reconsider a new wallpaper project. Wallpaper looks just great for about three months and then it's dated. I hear prospective buyers say, ‘Uh, we will have to tear off that paper,' almost every time they see flower wallpaper on a walkthrough. It's a negative.”
Another item is when a homeowner knocks out a wall to expand a master bedroom by eliminating the bedroom next to it. “Sure, the master is glorious and wonderful, but now on resale you have a two-bedroom home instead of a three-bedroom home. Believe me, this will bring the home value down, even if you have three baths,” said the realtor.
Another contractor said, “Converting a two-car garage into a family room is one renovation project that we get that will cost more to do than you think, and on resale doesn't add much. If the new room is in a garage without any windows, most code inspectors will not allow you to use it as a bedroom either. And folks do like garages.”
The one mistake that I saw a lot when I was a home inspector was homeowners deciding to do the renovation work themselves. I am not saying that qualified folks shouldn't jump in and do some or all of the work, but make sure you are really qualified. Sometimes people don't know what they don't know. DIY renovations can be pretty obvious and disinviting to home buyers.
One example was a bathroom in a home where the homeowner had installed all the fixtures himself. The wrong plumbing traps, fittings, and couplings were used, the hot water line was going to the toilet (they did not notice it), and three faucets had slow leaks. The buyers liked the home but balked at a $1500 estimate to fix everything to meet code in that “upscale” bath.
“I've seen people spend a lot of money for a very swanky and upscale kitchen. While they really liked it themselves, when they went to sell they only got about 20% of that cost back. The reason was that the home just wasn't on that price point or in an area with other homes that would have that kind of upgrade. So tell your readers to do a thorough analysis before they decide to spend a lot of money on the kitchen, unless they are going to stay in the home.”
The lesson here is this: research and planning are critical if you want to renovate. Find out what the return on investment is (the internet, contractors, and realtors can help) before you start, and get at least three proposals before you begin.