When you’ve owned a home for a while, it’s a given that you’ll eventually want to make some updates. And while your renovations will naturally reflect your lifestyle and personal choices, remember that your home is also an investment in your financial future. Plenty of home improvements add value, but others may work against you.
Before you schedule demo day, be careful of these projects that could negatively impact your value.
Over-the-top kitchen renovations
If you love to cook, a chef-quality kitchen is probably important to you. But if you think a high-end kitchen will lead to a significant return come listing time, you might be in for a surprise. According to Remodeling magazine’s Cost vs. Value report for 2020, a major, upscale kitchen remodel cost about $135,500, providing only a 53.9% return on investment. A midrange, major renovation ran about $68,500 and yielded only a slightly higher return at 58.6%.
“The biggest problem with any renovation, but especially with kitchens and baths, is over improving for your specific market,” said Doug Petroff with Petroff Appraisals. “Anything outside of what is typical and expected for your neighborhood may not provide the returns you are hoping for. If your home is worth $160,000, a $50,000 kitchen overhaul may impress a few buyers, but it probably won’t add much, if anything, to your overall value.”
An inground pool
Lounging on a pool float with a cool drink in your hand sounds like a great way to spend the summer. But installing and maintaining a pool is expensive. Plus, when it’s time to sell, potential buyers may actually see this feature as a drawback because they don’t want to deal with maintenance and insurance.
If you’ll use the pool regularly, and plan to stay in your home for the next several years, then go for it! But before you break ground, consider how it will affect your homeowners insurance premiums, how it will impact your energy bills, and if you truly have the time to maintain it and enjoy it.
If it’s time for a flooring update, you might as well spring for hard surface options. Carpeting throughout a home is a big turn-off for buyers and that could ultimately mean a hit to your home’s value. According to the National Wood Flooring Association, 90% of real estate agents say homes with hardwood tend to sell for more, while a study conducted by the National Association of REALTORS® (NAR) found that 54% of buyers were willing to pay more for homes with hardwood.
And when it comes to return on investment, there are few projects more beneficial than installing hard surface flooring. In its 2019 Remodeling Impact Report, NAR cited the average cost of a hardwood flooring project at $4,600 with homeowners recouping $5,000 — that’s 106% — of their investment.
Too much of a good thing
Trendy wallpaper in a powder room or on an accent wall is a nice touch that ups your design game and personalizes your home. However, wallpaper in several rooms can be overwhelming and potential buyers will likely see it as another project they’ll need to tackle if they purchase your home.
“It’s the same with any trendy design choice like colorful tiling, textured walls, or bold paint,” said Petroff. “I appraised a home that had shiplap in almost every room, and while it didn’t necessarily hurt the value, it didn’t add anything to it. The problem is these projects are expensive and time consuming, and when it comes to resale, you could turn off a lot of buyers who will only see the added work.”
Converting a garage to a living space or combining two bedrooms into one may suit your lifestyle and needs now. But if you don’t plan on staying put forever, this could come back to bite you.
The number of bedrooms in a home is important to virtually all buyers, so when you turn a three-bedroom home into a two-bedroom, you’ll significantly shrink your future buying pool. And like bedrooms, most buyers prefer a garage they can use with its original purpose, especially in Michigan where we like to protect our vehicles from winter weather conditions.
There may, however, be some benefit in converting unfinished areas into usable square footage. But as with any renovation, you won’t likely see a dollar-for-dollar return on your investment. According to NAR’s 2019 report, converting an attic to a living area produced a 56% return, while finishing a basement into a living space yielded a 64% return.
In addition to these projects, things like high-maintenance landscaping, removing closets, adding a built-in aquarium or hot tub, and shoddy DIY repairs all made online lists of renovations that could negatively impact your value.
And while we’re discussing renovations that could potentially hurt value, Petroff says it’s important to know that a lack of renovations could also work against you.
“If you’re in a higher-end neighborhood where the majority of homes have finished basements and updated kitchens, your value likely won’t be as high as your neighbors’ if you’re lacking those features,” he said. “While you don’t want to over improve for your area, you also don’t want to be ‘underimproved’. Again, the best way to protect your value is to always consider your market when taking on any renovation.”
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