Renovations Pay Off When You Sell

Real-estate professionals like Nick Schmitz suggest remodeling the kitchen to increase a home's value. (SHNS photo by Steven Lewis / The Press-Enterprise)

Thinking about sprucing up your fast-appreciating homestead? Making the right renovations will help you recoup your investment in this hot real estate market--and might even sell the house for you. "Usually, people don't buy houses, per se," said Nick Schmitz of ERA Trademark Realtors in Riverside, Calif. "They will buy a kitchen--and the house comes with it," he said in a phone interview. Buyers often zoom in on a feature they love and forgive the property's other faults, Schmitz said. So why not spoil yourself now if it pays off later?

"Certainly, kitchen and baths bring extremely high returns," said Bill Simone, president of the Los Angeles chapter of the Remodelers Council, part of the Building Industry Association of Southern California.

According to Remodeling Magazine's "Cost vs. Value Report" for 2003, sellers will receive about a 90 to 95 percent return on what they spent on a bathroom remodel; kitchens tend to bring nearly 75 to 80 percent returns. A remodeled kitchen can also make buyers feel better about the rest of the house. "Often it's a tell-tale sign they've done other things," said John Couturier, owner of Inland Area Appraisal Services in Riverside. Buyers often zoom in on a feature they love, such as an updated kitchen, and forgive the property's other faults.

Sharon Bowler, a broker for Coldwell Banker Dynamic in Chino Hills, Calif., and a director with both the National Association of Realtors and the California Association of Realtors, said remodeled kitchens and bedrooms are popular with buyers. "I think the luxury in a home is very important," she said. Some of Bowler's relatives put $10,000 into a kitchen remodel and new wood floors into their Ontario, Calif., home; she figures the upgrades added $75,000 to the price when she recently sold it for them.

People also will sink a lot of money into redoing their bathrooms. Simone, who is also president of Custom Design & Construction in Los Angeles, said that "the big thing now is his-and-hers master baths," which can run between $60,000 to $150,000.

There are several reasons owners are putting money into their homes. The terrorist attacks on Sept. 11, 2001, not only had people wanting to spend more quality time cocooned with their families, but "the stock markets have gone into the toilet, and people are into tangible investment," Simone said via phone. While the recent boom in home sales often means sellers need not lift a finger in order to get an offer, high-priced houses had to have upscale amenities in order to fetch the asking price. Buyers "want everything done if they're paying that much," Bowler said.

Adding square footage can help boost a home's value--"If you do it right," Simone said; otherwise, "you can actually detract from the value."

Bigger isn't always better. "Simply adding walls or adding rooms doesn't necessarily add value," Couturier said. "People create these oddball room arrangements," such as a string of bedrooms where one is accessible only through another. And buyers may balk if you added on without getting the proper permits.

Things like new roofs, updated wiring and plumbing, new heating and air-conditioning units and energy-efficient windows can offer decent returns when it's time to sell--as well as savings in the meantime. "I'm seeing a lot of the new windows," Bowler said.

Whether it's smart to dip into your bank account to put in a swimming pool depends on where you live, experts say. In a neighborhood where they're common, "a buyer will typically expect a pool and lower his offer if you didn't have one," Schmitz said.

Whatever renovations you make, "you have to be careful not to go overboard," Couturier said. High-end improvements on a house in an undesirable area won't do much good--remember the old adage about putting lipstick on a pig?

"You can fix the house, but you can't fix the neighborhood," he said.