Will I Get All My Money Back from Home Improvements?

Posted by Jeremy Wascak May 05, 2017 Categories: Mortgages

With Guest Blogger Dawn Lawson

One of the hardest concepts for homeowners to understand is that the market value of land is what appreciates while home improvements depreciate. It is understandable that people want to see a decent return on their sweat equity. However, taking the fair market value of their home and then adding on the money spent to update or maintain the property does not necessarily reflect a change in value.

Buyers assume there will be a working furnace and air conditioner, a dry basement, and a roof that does not leak. Many sellers mistake the replacement of major mechanicals (which is maintenance of a home) as items that will bring a high return. Not necessarily, however, it will help your home get a second look by a perspective buyer.

If you are looking to bring more value to your home, adding a bath or an additional room will definitely give you more bang for your buck. Above ground additions are recognized by appraisers as a value added feature. Below grade level additions, such as an extra bath or finished rec room, will give your value a boost but not the same rate of return as first or second floor improvements.

Updated kitchens and baths are on the top of buyers wish lists. Buyers definitely appreciate a home that is kept current. However, keep in mind that these improvements do depreciate over time.That $20,000 upgrade you did 10 years ago will not bring you $20,000 in increased value today. Even current remodels won’t give you 100% return. When you are considering making an investment in your home, remember some of that return is your own enjoyment.

I always ask my clients to give me a call before doing any updating. I want to pull comps and make sure they are not over investing in their home based on their neighborhood market value.  If you need some guidance before starting a remodel job, please give me a call.

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Dawn Lawson