Upgrading Your Home for Sale with ROI in Mind

Making upgrades can be as easy as replacing the handset on your front door or as daunting as remodeling a kitchen or bathroom or even repainting the entire house. The question is always what home improvement give the best return on the remodeling dollar?

Return on Investment (ROI) is generally less than 100% in real estate, so the rule of thumb is “less is more.” It is frequently advised in this area that it’s better tu upgrade/remodel your home while living in it and not solely at the time it comes to sell. That way, there is more enjoyment in the improvement and less cost in preparing for sale. Some desirable upgrades or home improvements will not return their cost in the sale price.

In 2016, a remodeling publication said that the best ROI improvement a home salle can make is insulating the attic space, with a 116% return. If your home is worth $275,000 and you spend $25,000 to revamp the kitchen, don’t make the mistake of assuming that the investment will increase the value, dollar for dollar. The remodel may add value to the home, but the return in dollars spent will be around 50%. Smaller upgrades, like replacing outdated fixtures in the kitchen, bath, are certainly worthwhile, but major remodeling of the rooms isn’t wise, just to sell your home.

That’s not to say you can ignore necessary repairs that a home inspector would red-flag or mortgage company would demand before issuing a loan to a buyer. If major problems, like a leaking roof or outdated electrical wiring, exist, you may want to repair those before putting your home on the market, or expect to give concessions to a buyer.

Starting with the Basics

Every listed home should meet the basic expectations of any buyer: it should have a sound roof, functioning gutters, and downspouts, foundation without cracks, functioning heating and/or air conditioning system, solid subflooring, and save and secure electrical wiring. With financer-mandated home inspections, any shortcomings may be required to be remedied to get buyer financing approval.

It is important to understand that the market value of a home is determined by the prices of comparable homes recently sold in the area. Extensive remodeling to sell the home or to increase the value may not pay off. The property needs to be up to the standards of neighboring homes, so while the kitchen has to be comparable to others, as in the example above, spending $25,000 to remodel a kitchen int he area where comparable homes recently sold for $275,000 will not increase the house’s value to $300,000. While it may be a helpful selling feature, it won’t return the dollar-for-dollar value.

Excerpted from my book “Selling Secrets – You Can’t Afford to Miss”

Ricardo Parente, Realtor®

Coldwell Banker Realty | Winter Park, FL

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