Remodeling Cost Vs. Value
Wednesday, October 28, 2009
Remodeling Magazine puts out an annual report that displays how maintenance projects and other upgrades can provide paybacks on the sale of real estate, even in slower markets. The findings show how sellers can often recoup as much as 86% of the cost of such projects like new siding, a new deck or new windows.
Especially in light of the price drops we’ve seen over the last year and sluggish property sales in most areas, home owners are viewing remodeling as a way to add value. When looking at spending money on a property someone is ultimately trying to sell, the question often asked is “How much of this will I get back?” It can be difficult to convince a seller to spend additional money on upgrades for a property they are simply trying get out of. But both small and large remodeling jobs can go a long way towards attracting buyers in this competitive environment.
So are home improvement projects in Steamboat going to recoup the same percentage of investment as other parts of the country? With the priorities of your typical Steamboat Springs resident or 2nd home owner varying slightly from those of Midwest America or elsewhere, the answer is most likely no. But improvements made to the common areas of the home (i.e. the kitchen or bathrooms) often hold a consistently high importance amongst potential buyers no matter what the ultimate use of the property might be. Take a look at the 2008 National Averages as reported by Remodeling Magazine in conjunction with the National Association of Realtors:
So why does remodeling pay off in the end? There are a few reasons to note. First, home owners who remodel their home are essentially making buyers’ lives easier and providing a service at the same time. Many buyers don’t want to hassle with the time, effort and money it will take to remodel or upgrade for themselves. It’s often easier to convince a prospective buyer to act when a home is in “move-in ready” condition or close.
The second reason remodeling is a good strategy is because it often helps avoid the negotiation strategy of pecking away at the asking price by harping on the imperfections of a home. Quite simply, if you reduce the number of imperfections ahead of time you reduce the number of objections a potential buyer can raise as a tactic to lower the price. This often leads to an ultimately higher closing price and more money in the seller’s pocket.
Despite what a home owner’s motivation might be for pursuing a remodeling project, the reality is that a person’s home is still one of the best places to invest money. Over time, the dollars spent on upgrading one’s home often recoup double-digit percentage returns over the long run. Not a bad option when we look at what the stock market has historically had to offer (with far more stress).