GENERALLY SPEAKING, there are two ways to go about making home improvements. Either you splurge for something purely for the sybaritic pleasure of having it the Italian marble bathroom you've dreamed about; that skylight that your spouse has been hinting at for the last six years or you take a pragmatic approach, buying an energy-efficient furnace or repairing a leaky roof because you want to increase your home's market value.
Don't expect to score on both counts. Just because you pour $20,000 into your home doesn't mean that your house is worth $20,000 more. Many homeowners spend on amenities such as phones in every bathroom or a decorative stone wall that are only peripheral to the value of the house.
Exactly how much you'll recoup in costs depends on several factors, including the direction of the broader housing market, the value of the homes in your neighborhood, when you plan to sell the home and the nature of the project itself. In some housing markets, you could, indeed, earn more than your investment back on a remodeling project. Adding a midrange deck to a home in San Francisco, for example, often recoups well more than 100% of its costs on homes sold within the year of the project s completion. But you shouldn't count on those types of returns. In Columbus, Ohio, the same project is likely to recoup less than two-thirds of its costs.
And keep in mind that the longer you hold on to your home after a remodeling project is completed, the less likely you are to recoup its value. That's in part because design tastes can shift significantly over time. Remember when avocado green was all the rage? Also, there's little reward for having the fanciest house on the block. A house that's priced higher than its neighboring homes could be perceived as overpriced even if it does have more value.
This section examines a few improvements that real estate experts say pay off more often than not and some that rarely make a difference when it comes time to sell your home.
Even a few basic improvements to your kitchen can pay handsome dividends, says real-estate agent Michael Murphy in his book "How to Sell Your Home in Good or Bad Times." Murphy writes: "For most buyers, [the kitchen] is the heart of the house. Paint, wallpaper, and even refloor the room if necessary. Consider sanding, staining or painting dingy-looking cabinets. Replace old cabinet hardware a low-cost improvement that makes a big difference in appearance." Just be sure to go with a classic design and, if possible, use high-quality materials -- after all, good taste endures. Expect to recoup between 70% and 80% of kitchen-remodeling jobs.
Creating New Space
As a rule, improvements that increase the functional space of a home hold their value longer than ones that just make a house look better. It's also significantly cheaper than adding an addition to your home. Converting an attic into a bedroom, for example, can returns upwards of 75% of its cost. Turning your basement into a room for socializing will set you back, but about 75% of the costs are likely to be recouped.
An Extra Bathroom
Adding an extra bathroom with all the trimmings marble vanity top, molded sink, bathtub with shower and ceramic tile almost pays for itself. You should make back between 65% and 75% of your costs of remodeling a full bathroom, and around 65% of the costs of adding a full bath.
Installing a deck may be the most cost-efficient way to add square footage to your house, and of all the outdoor home improvements except painting, it may be the most reliable value. Deck additions generally recoup 85% of their value.
New Windows and Other Green Updates
The savings on your utility bills is reason enough to consider energy-efficient improvements, but they will also add to the resale value of your home. Efficient windows and doors, a new roof (maybe even solar panels), and new insulation may be pricey, but some 65% to 76% may be recovered at resale. When considering new windows, however, keep in mind that customizing windows with fancy shapes, bays and bows doesn t necessarily add any resale value.
It's commonly agreed that a swimming pool has no resale value at all. In fact, some home buyers spend thousands of dollars to fill in a pool after purchasing a property. The main reason pools repel more prospective buyers than they attract is that they need expensive upkeep. Running a close second is the fear of liability: Pool accidents are a quick way to end up the subject of a negligence suit. A lot of people simply don't want the responsibility.
Fancy gardens which will require time and money to tend usually won't add to the offering price. Landscaping is for your own enjoyment. It may be a $40,000 investment, but it won t add $40,000 to the value of your house. The same goes for expensive fences and stone walls. They look nice, but buyers don't pay up for them.
It may not be all that enjoyable, but it's the basic improvements that may have the greatest return on your home's value. You could have a beautiful new kitchen, but if your roof is leaking, you have a real problem. So if you're thinking of putting your house on the market in the next year or so, be sure to tackle any problems with the home's structure or mechanical systems before you, say, install that hot tub you've always dreamed of.