Should a home be renovated to improve selling price?

A question that comes up often when a client is considering placing their home on the market is should something be replaced or renovated in the home to improve the selling price?

The answer in the short run is yes to replace a broken or worn out item, but don’t renovate just to sell the home.

When buyers consider a home, they want to make sure everything is in working order.  If the water heater is making noises, if the garage door is bent and off track or, if the faucet in the bathroom is leaking then repair or replace it.  In some cases you can do this with a quality that may be less than the one that is being replaced, saving a little money.  If it is broken when buyers walk through the home during a showing, it will pull down the price of the home when an offer is made and provide a negotiating edge to the buyer.  Keep in mind, even if the buyer didn't notice it when they made the offer, the home inspector will pick it up - or at least should.  This will give the buyer a chance to submit a lower offer, or back out of the agreement altogether.

But, when it comes to renovating, don’t.  That is, unless you are going to live in the home after the renovation is completed for at least five years.  The National Association of Realtors (NAR) each year studies the issue.  They have found that of the top ten renovation projects, the best you can get in return is about 85% of the cost of renovation or major replacement back in the selling price.  As you can see from the graph below, sometimes you may only get back about 68%.

1. Entry Door Replacement (Steel) – 85.6%
2. Deck Addition (Wood) – 77.3%
3. Garage Door Replacement – 75.7%
4. Minor Kitchen Remodel – 75.4%
5. Window Replacement (Wood) – 73.3%
6. Siding Replacement (Vinyl) – 72.9%
7. Attic Bedroom – 72.9%
8. Window Replacement Vinyl – 71.20%
9. Basement Remodel – 70.3%
10. Major Kitchen Remodel – 68.9%

If you live in the home for about five years after you complete the project, you can consider the difference between the cost of the renovation and the resulting effect on selling price as your enjoyment return.  Living with the improvement makes for a better living space for the time that you stay.  Then, when you sell the home, the additional value makes sense, or in this case, dollars.

Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan.  He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods.  Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce.  You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.