Smart Remodels That Recover Their Costs Upon Sale

House With For Sale Sign 1500 x 1000
Can You Recoup Your Home's Investment Upon Sale?. CC-Licensed; Flickr User Dan Moyle

Whether a remodeling project is "smart" or not depends largely on when you plan to sell your house. Renovating in a way that makes your house more functional and enjoyable for the next 20 years is usually worth the expense and effort. But how about if you are planning to sell soon?  

The fact of the matter is that most remodeling projects do not add enough equity value to your home to pay for their costs when you sell.

It's possible, of course, that some projects will need to be done in order just to get buyers to make a bid on your home. 

Generally speaking, though, you are better off taking lower offers than you are investing in making major renovations--because you rarely will recoup the cost of those renovations through a higher sale price. 

So, renovating in order to sell is a completely different animal from renovating to improve your quality of life. A homeowner looking for improvements for the next 20 years might well find a $75,000 kitchen remodel to be a valid expense. Not so if you are simply looking at improvements prior to selling your home--it will be very rare for that $75,000 kitchen to translate to a sale price $75,000 higher.

Note, though, that we are not talking about what is called "staging" a house for sale, which can include small cosmetics or repairs. We are addressing a more intense type of home renovation that goes beyond a coat of paint and may include costs in the thousands or tens of thousands of dollars.

When are such expenses a good idea?

Seven Ground Rules

  1. NEVER spend more than you can recoup.  This seems obvious, but you'll be amazed how many people decide to throw vast amounts of money into a house that they will never again enter for the rest of their lives.  Why spend $4,000 on new flooring if the resale value is less than that? Unless, of course, no one will even make an offer on your home without some cosmetic improvements. 
  1. Look for profit potential. This rule is more to the point. Some home sellers consider it a success to spend $7,500 on a bathroom remodel if they recoup $7,500 from the sale. But does it really make any sense? You've invested time, headache, effort. . . for no net gain. Why bother?
  2. Prioritize kitchen and bathroom remodeling. Any big expenses should go into the kitchen and bathrooms over other rooms. These are the improvements most likely to recoup their costs and create actual equity. 
  3. Limit hard costs in favor of DIY costs.  Laying new solid hardwood at $19.99 per square foot is a hard cost--very hard. But borrowing an orbital floor sander and sanding floors yourself is a soft cost.
  4. Refurbish rather than replace. Like the previous cardinal rule, don't give your home buyer with any actual new materials, if you can avoid it. Why hand over 1,200 square feet of Brazilian cherry when you can merely refurbish your existing floors?
  5. Stress appearance, not function. Sad to say, but it's better to put that $800 into paint or flooring, rather than a new water heater. As long as the water heater is functional, keep it. A new water heater will not impress buyers. If a home inspector eventually says the water heater must be replaced, you can always replace it then, or knock off an equivalent amount from the sale price. But appearance is something that is not negotiable, and in fact is something that may only register with home buyers on a sub-conscious level. 
  1. Paint works wonders. New paint, especially well-chosen and contemporary hues, will transform a house. Be careful of deep shades.

Curb Appeal: When Facades Are a Good Thing

Within the whole "curb appeal" category, let's focus on one thing: a new facade.

General contractors can build up a new facade that makes your house look fantastic while diverting attention from things like vinyl siding, which is a turn-off for some people. 

Talk to local contractors. But unless you are an architect or otherwise experienced in such matters, do not force the issue on contractors who don't have a clue what you're talking about. Deal only with contractors who have done this kind of pre-sale facade work before.

Next Order Of Business:  Kitchens and Bathrooms

Most realtors will tell you that the kitchen and the bathroom are the most important parts of the house.

Focus on these items:

Kitchen counters. Countertops are highly visible, so if you're going to do any kind of rip-and-replace work, this is the place. Old laminate countertops should be replaced with at least Corian or Silestone. Ceramic tile countertops are debatable in terms of quality, but most potential homeowners are not looking for ceramic tile counters--replace them.

Kitchen cabinets. Cabinetry is also highly visible because it is at eye level. Replacing kitchen cabinets can easily run you $25,000 or more. If your kitchen cabinets are in terrible condition or are made of melamine or MDF, you may need to just bite the bullet and get new kitchen cabinets. For other types of cabinets, you may be able to re-face or repaint.

Quick upgrade to fixtures and hardware. Fixtures and hardware are surprisingly effective kitchen upgrades. Don't assume that replacing all of your kitchen hardware is going to be cheap, though. Replacing all of your hardware (i.e., getting rid of that fake gold-plated stuff) can easily run into hundreds of dollars.

Removing and replacing kitchen sinks. Kitchen sinks are easy to remove and replace. Most DIYers can do this on their own.

Flooring Renovations

Home renovations performed for the purposes of sale do not necessarily have to be done in a manner that appeals to your tastes. These are remodels that you do to match the tastes of most homeowners. Your realtor may be a good source of information on how to renovate floors. 

Do you like wall-to-wall carpeting in bathrooms? Most home buyers do not. Generally, wall-to-wall carpeting throughout the house is a bad idea, because it gives the impression that you are trying to hide something underneath. Laminate flooring would be the bare minimum type of "cover up" flooring, though home buyers also have come to recognize laminate as another type of suspicious material.

If you have real wood floors, then you are lucky. Severely worn floors should be sanded down with a drum sander. If your floors have only minor scratches, then a circular sander will suffice.

Keep in mind that many prospective home buyers will lift up the edge of carpeting to see if the floorboards beneath are restorable hardwood.

Avoid Like The Plague

  • Areas that tend not to have good resale value: media rooms, theaters, offices, basements, attic remodels, back decks, most backyard work, etc. 
  • Going to desperate lengths to add more space (e.g., converting a garage into a living room).
  • Windows. These are great to replace if you plan to remain in a house, but  you will not get your money back on these if done only for sale purposes.
  • Removing period details that may have some worth. Removing the green shag may be a good idea, but knocking out the circa 1911 newel post that needs "some work" is not a good idea. While the newel post may be unattractive, its intrinsic value is of value to many buyers.
  • Removing lighting, unless it will be replaced by other fixtures. Even bad lighting is better than no lighting.