In today’s housing market, many homeowners and investors are taking extra steps to make their houses more attractive to potential buyers who continue to hold a huge advantage when it comes to choices and prices. But which remodeling projects will garner you the highest returns — or even the most interest from local buyers?

Two or three years ago, you could spend five figures or more on an interior remodeling project and expect to recoup that money easily and quickly when selling your property. Today, according to real estate agents nationwide who participate in Remodeling magazine’s annual “Cost vs. Value Report,” the remodeling ROI is trending ever downward (http://costvalue.remodelingmagazine.com).

Paige Martin, a Houston-based real estate agent with Martha Turner Properties, thinks the reason for the negative trend has more to do with slower appreciation rates and rising remodeling costs than the current sluggish market.

Remodeling analyst Kelly Reidinger agrees. The longer you plan to stay in a home, the more likely you’ll recoup the costs of the remodel when the house is sold, she says. But often, people plan a major remodel with an eye toward selling in a year or two. If that’s the case, says Reidinger, it’s better to consider smaller projects in which you modernize or add a few upgrades.

As always, location counts

Everyone knows that with real estate, location is key. So it should come as no surprise that where you live — or where your investment property is located — can make a significant difference in how much of your remodeling investment you’ll recover at closing.

“While the percentage of costs returned in Mid-Atlantic and New England cities is fairly constant year to year, within California, Oregon, and Washington remodeling costs recouped at resale are over 10 percent greater than the national average,” Martin explains.

“Cities in the Southeast and Southwest that are experiencing a building boom actually fall below the national average when it comes to recouping home improvement costs,” adds Martin. “One explanation for this trend is the fact that because these areas have plenty of new homes lingering on the market and falling in price, buyers are turning their backs on even the most attractive renovated older homes.”

Start with the outside

However, if you really want to do a big remodeling project that will attract potential homebuyers, the experts suggest taking it outside.

“Hardscapes like decks, patios, fences, and gates will recoup almost dollar for dollar what you spent on the house’s resale value,” Reidinger says.

In fact, decks are one of the best resale investments right now, according to the “Cost vs. Value Report,” with 85.4 percent of the cost of a wood deck addition recouped when the house is sold.

A new exterior on the home is another remodeling plus, according to Ben Black and Andy Holmes of Ole South Remodeling.

“When people buy a home, they want something maintenance-free,” says Black. “That means a new roof and new siding.” Especially popular right now is fiber-cement siding, he adds, because it’s durable and doesn’t need paint touch-ups.

Because the latest buzzword in the housing market is “green,” an energy-efficient home is more attractive in a crowded housing market. Windows, especially wood-framed windows, should be replaced, and appliances and other fixtures should be of the highest energy standards.

And while outdoor living and recreation space can add to a home’s value, don’t over-think or over-design the landscaping. Although the house should have curbside appeal and the landscaping should be attractive, spending thousands of dollars on ponds and ornamental trees will do little to boost the home’s value.

Think simple on the inside

Investors and homeowners alike usually pick kitchens and bathrooms as their first areas for remodel. But the experts agree any changes in these rooms can be relatively minor if the main purpose is to improve resale value.

It’s quite another matter, however, if you’re working on your personal home, and you plan to stay there for several years. “If your hobby is gourmet cooking, then by all means go all out on the kitchen remodel,” says Reidinger. “You need to take your quality of life into the decision as well as the monetary value.”

Otherwise, a kitchen or bathroom remodeling project should focus on sprucing up the room with small touches. For example, instead of replacing cabinetry — one of the biggest expenses in a kitchen remodel — refinish the cabinets and replace the hardware and other fixtures.

“Get rid of the brass,” says Holmes, explaining that brass fixtures in the kitchen and the bathroom are dated. Also, anytime you’re remodeling the bathroom in an investment property, you should skip the Jacuzzi tubs and focus on installing larger showers.

The No. 1 remodeling project to avoid is turning a spare room into a home office. Even though more people are working from home, the home office recoups only slightly more than half of its initial costs.

In fact, Reidinger says remodeling a spare bedroom into some other type of living space is the worst move a homeowner can make; it completely knocks down the resale value of the home. “Bedrooms and bathrooms sell houses,” she says.

If you must remodel a bedroom — or if you’re adding a spare room that could possibly be used as an extra bedroom — make sure you either leave or add a closet. “As long as you leave the closet, the room can be marketed as a bedroom,” adds Reidinger.

Stick with what works locally

There are, however, differing opinions about some remodeling projects. The “Cost vs. Value Report” states that sunrooms recoup only 59.1 percent of their value — third worst on the survey above a home-office addition or a built-in, back-up generator system. But Black and Holmes say sunrooms are popular amenities in their area of Tennessee. Reidinger advises against garage conversions; Black and Holmes are seeing a brisk business in that area.

So, before you begin any remodeling project, whether it’s just a spruce-up or a major remodel, Black and Holmes recommend talking to real estate agents and contractors in your area to determine what is attracting homebuyers. And the most important factor, they say, is to make sure the home is up to the standard of others in the neighborhood.

And remember, simple touches can be all you need. For example, in many homes replacing the lighting fixtures with a more modern option and adding crown molding can make a world of difference in how quickly the house sells.

“People are particular,” Reidinger says. “No matter what you do, the new owners will make the house fit their needs. So it’s best to do as little as possible if you are planning to sell the house soon.”

Source: Growing Wealth

This entry was posted on Friday, August 1st, 2008 at 2:21 pm and is filed under Home Selling, Owning a Home. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.