Which Home Improvements Pay Off?

(Continued from Page 1) By Kathy McCleary
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Bathroom additions have twice the resale value than a new bedroom. Room design by Ammie Kim.
Two key points to consider, however: First, don’t spend money remodeling the bathroom if it’s the only one you’ve got. Your money is better spent adding a second bath. Many people love "the charm of older homes," says Long Beach, Calif., based realtor Dick Gaylord. "But a number of older homes lack a sufficient number of bathrooms. So if you’ve got a four-bedroom, one-bath home, it’s certainly going to pay to add a second bathroom." A 2005 National Association of Realtors study by Florida State University professors G. Stacy Sirmans and David Macpherson found that adding a bathroom increased the sale price of a home by 8.7 percent, more than twice the rate for adding a bedroom.

Second, if you’re not planning to move in the near future, spend your money remodeling in a way that you’ll most enjoy. Realtor Ron Phipps recently showed a house with a kitchen that had been remodeled just two years ago. "I opened the Viking range and the original packaging was still inside," Phipps says. The homeowners "are not cooks. The kitchen is terrific, it’s magnificent, but they don’t use it."

In other words, you can’t measure the value you get out of your use and enjoyment of the home improvements you make. "Even if you get less than 100 percent of your money back, you’re really ahead of the game over time because you get the use of all that space," says Sal Alfano.

Home Maintenance
Still, new kitchens and baths lose some of their glamour if there’s water in the basement when a potential buyer comes to look at your house, says Alfano. Every homeowner’s first priority should be "keeping the existing structure sound," says Don Sever, a general contractor for 18 years and president of Sever Construction in Oakton, Va. "I’ve been in a lot of houses where people are spending thirty or forty thousand dollars to remodel the kitchen, but then you walk into the basement and there’s a musty smell because water is leaking through the foundation. To me, it’s more important to resolve those items first, and get the luxuries later."

Ron Phipps suggests thinking about it from a buyer’s perspective. "I was with someone recently who was going to spend money to remodel their bathroom. But the roof is two layers and 30 years old." For a buyer, knowing the roof needs to be replaced is a much bigger issue than living with a functional but dated bathroom, Phipps points out.

Most buyers have a limit on what they can spend for a house. If they know they don’t have to spend money on the upkeep of basic systems, then they’re more likely to buy the house and consider upgrading the kitchen or baths themselves. More than 70 percent of buyers who purchased existing homes knew what they were going to remodel before they even closed on the deal, according to HanleyWood’s Housing Continuum Study, conducted in 2002 in conjunction with Harvard’s Joint Center for Housing Studies. The same study showed that thirty to forty percent of buyers of existing homes made home improvements within six months after purchase.

The importance of different maintenance issues varies with geographical location, too. Roof replacement (average cost: $11,376) was very important to buyers in the east, according to Remodeling’s 2004 report, where homeowners recouped an average 96.3 percent of the cost. In the Midwest, the average return for the same improvement was just 71.1 percent.