Homeowners undertaking a renovation may either reap rewards come resale, or regrettably find themselves in the red. The latter, says Scott Robinson, president of the Appraisal Institute, is more likely—somewhat.
“Home improvement projects are not necessarily investments in which a homeowner should expect a dollar-for-dollar return,” explains Robinson, who oversees the nation’s largest association of real estate appraisers. “Rather, these projects can increase the likelihood of a sale, or that a property will be comparable to other properties in a neighborhood.”
Robinson advises renovators to consider if the improvement is in keeping within what’s standard in the community.
“Projects that take a home significantly beyond community norms are often not worth the cost when the owner sells the home,” Robinson says. “If the improvements don’t match what’s standard in a community, they’ll be considered excessive.”
Robinson notes renovators may find it best to hold off on large-scale projects if they’re unsure of how long they’ll be in their home. Generally, the longer a homeowner stays in a home, the greater the opportunity for a return on investment.
A real estate appraiser can conduct a feasibility study, which offers an unbiased analysis of what the home would be worth before and after a project. During the study, the appraiser will analyze the property, weigh the cost of rehabilitation, and provide an estimate of the property’s value before and after the improvement.
Currently, the projects with the highest expected return on investment (ROI) are attic insulation, manufactured stone veneer and a garage door replacement, according to Remodeling magazine’s Cost vs. Value Report. Other projects with potential payoffs are an entry door replacement and a minor kitchen remodel.
Reprinted with permission from RISMedia. ©2016. All rights reserved.