More Money, More Problems: When Home Remodeling Doesn’t Pay Off

Remodeling bathroom

Although more than half — 53 % — of homeowners feel that now is a good time to renovate a home, you may not want to follow the crowd in this instance.

The 2015 Cost vs. Value Report, a survey published by Remodeling magazine, revealed that major home remodeling projects don’t always pay off.

As the real estate market continues to recover, home values have steadily increased while interest rates remain low, which in turn is attracting more and more potential home buyers. In return, more potential sellers are heading to the hardware store or dialing up their local contractor to get started on home improvement projects. But, their efforts may be in vain.

“A rising housing market lifts up remodeling,” said Craig Webb, editor-in-chief of Remodeling, a noted industry trade publication.

It’s no secret that kitchen and bathrooms often receive the most attention, as these are the rooms where the most time is spent, said Webb. However, before you dive head first into planning your next kitchen or bath remodeling project, know that these renovations don’t always pay off with the highest cost-to-value-ratio. For example, a $25,000 kitchen remodeling is likely to only recoup 68% of its cost once the house is sold, Webb explains. A cool $100,000-plus kitchen remodeling recoups even less, at a mere 59%.

Homeowners and potential sellers aren’t entirely helpless, however. Webb suggests keeping it simple.

“The simpler and lower cost the project, the bigger its cost-value ratio,” Webb said, noting that popular steel door entry replacements, which typically cost less than $5,000, can not only substantially improve a home’s ever-important curb appeal, but can also net a 102% recoupment in 2015. If you decide to install one prior to selling your home, you’re likely to make a profit.

Similarly, you’re likely to recoup more than 80% of the $10,000 it takes to install a wooden deck prior to selling your home, whereas installing a $16,000 composite deck is only likely to net 68%.

However, it all depends on location. In some red-hot housing markets, you may be able to recoup 100 % or more on your home remodeling investments regardless of the nature of the project. In San Francisco, for example, installing a wooden deck, which can be enjoyed year-round, could result in a whopping 147% return.

While you may not be get 100% back on your home remodeling investments, all is not lost. They not only boost your home’s resale value and general appeal, they’re also likely to reduce the amount of time your home is on market.

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