Looking to sell? Don't expect a return on these six renovations
If you intend to sell your home, you may be tempted to overdo the renovations in order to obtain the highest sale price. Certain projects, such as replacing your garage door or performing a minor kitchen remodel, do increase the resale value of your home, but others almost never do. Here are six upgrades that appear to increase the value of your home, but do not.
• Some home improvements increase the value of your home, while others do not.
• Although you and your family will enjoy a swimming pool, prospective buyers may view it as a safety hazard and a maintenance headache.
• Excessive construction for the neighbourhood can be a mistake. In most cases, buyers are unwilling to purchase a $500,000 home in a neighbourhood where the average sales price is significantly lower.
• Invisible improvements, such as a new HVAC system, rarely increase the value of a home.
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1. Swimming Pools
Regardless of how much you and your family may enjoy a swimming pool, it would be prudent to weigh the costs against the long-term value before committing to such an expensive project. The installation of a standard in-ground pool costs between $36,750 and $66,500 (plus up to $4,000 per year for maintenance), and it is unlikely that you will recoup your investment when you sell your home.
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When a pool does increase the value of a home, the average increase is no more than 7%, which is not necessarily enough to justify the expense, and even this modest return occurs only in certain circumstances:
• You reside in an upscale community where pools are the norm.
The design of the pool complements the neighbourhood.
• You live in a warm climate where the pool can be used year-round. • The pool doesn't take up the entire yard, so you still have space for a play area or a garden. • The pool is well-maintained. • You can attract the right buyer. Families with young children may be concerned about the pool's safety, while adults without children may adore the idea.
Generally, you should view a pool as an investment in your way of life. Simply do not expect it to increase the value of your home.
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2. Excessive Construction in the Neighborhood
If you are contemplating a major home addition (such as an extra bedroom, a home office, or an additional floor), be careful not to commit another common error, overbuilding for the neighbourhood. Consider carefully whether the alterations you intend to make to your home will set it apart from the other homes on the block.
A large, costly renovation, such as adding a second story with two bedrooms and a full bathroom, will certainly increase the home's appeal. However, if the rest of the neighbourhood consists of only small, one-story homes, an expensive second floor will not significantly increase the resale value of your home, regardless of how beautiful it is.
This is why. Homebuyers typically do not want to pay $500,000 for a home in a neighbourhood with a significantly lower average sale price. In general, the price per square foot should be comparable to that of nearby homes. Otherwise, your home will appear to be overpriced, even if it is the largest (or most opulent) residence on the street.
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3. Inconsistent High-End Upgrades
Another important rule is that upgrades should be uniform throughout the home; otherwise, they are unlikely to add much value.
In high-end homes, which are typically renovated to a uniform standard throughout the property, high-quality enhancements typically increase the home's value. Sadly, this is not always the case with mid-range homes, where upgrades are frequently inconsistent.
For instance, a home with expensive imported tile in the entryway and a fully remodelled kitchen with stainless steel appliances may still be considered a work in progress if the bathrooms have outdated fixtures and the shag carpet is from the 1960s. One or two remodelled areas may not yield a return if the rest of the home is not brought up to the same high standard.
Specialized rooms are another high-end feature whose long-term value should be carefully considered. For instance, a media room outfitted with audio, visual, and gaming equipment may appeal to some buyers, but many would not consider paying more for such a room if they would never use it.
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4. Invisible Improvements
Invisible improvements are costly projects that make your home a better place to live, but no one else will notice or care. It's wonderful that you just replaced the plumbing or HVAC system, but many homebuyers assume that these systems are in good condition. Infrequently will they pay more because they were recently installed.
Obviously, it is a good idea to make these home improvements, but you should not expect to recoup your investment when it comes time to sell. It may be more appropriate to view these enhancements as routine maintenance than as an investment in your home's value.
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5. Wall-to-Wall Carpeting
While real estate listings may still highlight wall-to-wall carpeting as a selling point, an increasing number of homebuyers dislike this improvement. People are turning away from carpeting due to the harmful chemicals used in its production, as well as the fact that it is considered an allergen hazard, which is a major concern for many people, especially families with young children.
Not only will you not recoup the cost of installing wall-to-wall carpeting, but if carpet is the primary flooring throughout the home, it can actually decrease the value of the property. In the majority of cases, it is preferable to remove the old carpet before restoring (or installing) wood floors. Depending on your location, this is what the majority of buyers prefer and even anticipate.
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6. Expanded Owner's Suites
The addition of an owner's suite with a luxury bathroom and walk-in closet can be a major selling point that increases the value of your home, but not always. If the addition of one room reduces your three-bedroom home to a two-bedroom home, or if you sacrifice other essential living space, you will likely not recoup your investment when you resell your home.
In general, the more bedrooms a home has, the higher its selling price. If you remove a bedroom from your home, it will be priced similarly to other homes in the neighbourhood with the same number of bedrooms, regardless of how beautiful or spacious your master suite is. Additionally, the fewer bedrooms a home has, the fewer buyers will even want to view it, making it much more difficult to sell at the asking price.
Do Home Additions Pay For Themselves?
Not necessarily, especially if you overbuild in comparison to your neighbours. For example, if you spend a fortune, you will receive a reward. When adding a second story to a home in a neighbourhood with much smaller homes, buyers are unlikely to pay a premium price.
Do High-End Home Upgrades Fetch Higher Sale Prices?
Only if the entire house has been upgraded to the same high level can upscale renovations increase the selling price of a home. If not, luxury renovations will not significantly increase the value of your home. If a home with a beautifully remodelled kitchen also has outdated bathrooms, the house is likely to be perceived as a work in progress, and the expensive kitchen renovation may not yield a significant return.
Should I replace the HVAC system before selling my home?
If any essential system (such as the HVAC unit) needs to be replaced, you should certainly do so, but don't expect to recoup the expense when you sell the home. Most homebuyers assume that these systems are in good condition, so they will not pay more simply because they were installed recently.
The Bottom Line
If you are contemplating a home improvement project, it is prudent to consider whether the upgrade is something you will truly enjoy or whether you are simply trying to increase the value of your home. If a pool will provide you with years of enjoyment, you may be able to justify the expense, even if you do not recoup your initial investment. If, on the other hand, you plan to spend tens of thousands of dollars on a renovation to increase your home's resale value, you should be careful not to choose the wrong upgrade.
When in doubt, compare relevant features of comparable homes in your neighbourhood, conduct research on real estate trends, and consult qualified professionals, such as architects, real estate agents, and builders.
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