The look and feel of a home are everything to a prospective buyer. It should then come as no surprise that the big returns on investment encompass some very specific remodel items. While many believe there are a huge list of home improvement projects that a seller can do to increase their home’s value for prospective buyers, sellers will be shocked to hear that there are actually very few.
First, let me be clear, there is no magic formula to selling a home. Every home is different and has different needs or things that should be done to improve marketability. Statistically though there are very few things that impact the actual purchase price directly. Those remodel items that do show value increases are typically very small in the big scheme of things. Almost all of them have to do with first impressions. This should come as no surprise as most buyers make their decision to even consider a property the way they do everything else, at the speed of their mobile device.
Cost vs Value
That being said, the only remodels that produce a return on investment of 80% or more recovery price according to the Remodeling 2016 Cost vs. Value Report (www.costvsvalue.com) were smaller projects or minor updates. Large home improvement projects tended to still provide a return on investment, but compared to cost most did not give sellers back their expense over a 5-10 year period.
According to CostvsValue.com the top items in the small project category in Nashville to get return on investment were attic insulation with an average 123% return, upscale garage door replacement with an average 101% return, manufactured stone veneer with an average 94% return, and an entry door replacement with an average 83-86% return. These small projects were all under or near $5,000 and could prove excellent investments for your 2016 home sale for those who are looking for an immediate sale of their home.
For those who might be looking to make an investment in their home and potentially sell for the right price you might be interested in some of the larger dollar investments. Considering the strength of the seller in 2016 these investments might be a great option if you don’t have to sell, but would be willing to at the right price. We consider the higher price points of much greater than $5,000 to be items that would add long term value and give a return, but should be considered only if you are not in a rush to sell. The top three improvements getting the greatest return well over $5,000 in the Nashville area include the following.
A minor kitchen remodel with estimated costs averaging $19,312 and average returns on cost of $19,256 (99% return) were our focus. The minor kitchen remodels are described as being in a functional but dated 200-square-foot kitchen with 30 linear feet of cabinetry and countertops, leaving cabinet boxes in place but replacing fronts with new raised panel wood doors and drawers, including new hardware. They also include improvements to wall ovens, cooktops, and slide-in refrigerators being replaced with new energy-efficient models while replacing laminate countertops, installing mid priced sinks/faucets, repainting trim, adding wall covering, and removing/replacing resilient flooring. The return for a minor kitchen remodel was the highest of all by far.
Coming in a distant second, third, and fourth for large resale value projects were window replacements, siding replacements, and roofing replacement. We consider these projects to be deal breaker projects. These projects all came in at returns on cost of high 70% to low 80% range. Due to the losses we don’t recommend these projects unless they are a dire need situation. Are your windows outdated? Does your siding look real bad? Is your roof dramatically discolored? If the answers to these are no then don’t do it. Ranging from $13,000 to $19,000 in cost you need to consider whether or not there will be an impact on the sale of the home. At even just $13,000 you will end up taking a loss of nearly $3,000 on your cost for the project at a 80% return on your investment.
As for larger projects, we did not consider any projects over $50,000. With an 80-90% return on investment (the highest on the report over $50,000 was 83%) we felt like our sellers would not be able to recoup a $10,000 or more loss quickly enough if they are considering selling the home in the next 5 to 10 years. We are not discouraging these kinds of projects, but would consider those as long term stay in the home type projects as opposed to projects targeted for resale value.
Ultimately home improvements can be a benefit to making the home sell, but don’t look for huge gains and be very selective on your projects. Targeting small improvements that give big bang for the buck like insulation, garage doors, stone veneer, and entry doors all give great talking points to discuss with a potential buyer and are items the buyer can actually see, which will bring your home to the top of their list of homes under consideration. Remember also that an outdated kitchen that gets a minor remodel can give you a boost as well. Everyone wants to cook in a new kitchen. The big take away though is that if you plan to spend larger amounts of money or plan to spend on projects not on mentioned then don’t look for a quick return on your money if you are planning to sell in the near future.
If you are considering a sale in the near future in the greater Nashville area be sure to give us a call at Real Estate Works. We would love to help you with your coming home sale or purchase.