Summary: Remodeling your kitchen is the best remodeling project to increase home value and the chances of selling your house than any other home improvement.
Carl, can your book be used for a large remodeling project? In the book, page 36 you state, "Some of the expensive items you may want in your house may add little, if any, to the appraised value (resale value).
Examples are handmade tiles, exotic wood trims, and granite counters. Sorry, but that is a real estate fact of life."
What items DO add to the appraised value of a house? Thank you, Eileen
Hi Eileen, Yes, my book can be used for a large remodeling project. It can be used for a small one too. General contracting is General contracting...new construction, additions remodeling. You will save even a larger % on remodeling than on new construction, often as much as 50%. A $40,000 kitchen "make over" should cost $20,000 with you contracting the various trades and suppliers! Yikes!
The answer to your second question is complicated, more so now with today's housing situation, than before. I think your question about increasing home value is a very important one.
In theory, every item (dollar) you add to a house should increase its value, or return, by the same amount. Or at least that's what many think. In reality, some items add more value than others, some less, some none.
What I meant in my quote is, you reach the point of diminishing returns very quickly in remodeling or even new construction.
All real estate value is based on comparable sales. That is how a professional real estate appraiser determines value. This method takes "emotions" out of the "what is my house worth" quandary.
Here is PDF of a standard Fannie Mae appraisal form: Fannie Mae Appraisal Form.
Print it out and study what items the appraiser looks at to compare your house with several other houses in your neighborhood that have sold "recently." They would be houses that are comparable to yours, that is, have almost the same land value, sq. footage, # of bedrooms, baths, etc. You will not see categories for countertops, quality of appliances, types of moldings, etc.
But, if you add a bathroom, you not only add home value, you move up to a set of comparable homes that had higher resale.
What I recommend for you to do is to create a cost estimate spreadsheet for your planed improvements, then hire an appraiser to give you the current value of your house and what the value will be with your planed improvements. This is called a "subject to completion" appraisal with an "as is" addendum. It will cost you about $300. Since your project is large, $300 is money well spent. This would be the most accurate way to do it.
A competent Realtor could help you too, giving you their educated opinion of your home's current value as well as it's "subject to" value. But an appraisal by a professional appraiser is what lenders use.
If the planed improvements put your house at a significant higher value than comparable homes, you then have to decide if you are willing to do this. At this point such a decision making process is a luxury. After the fact, it could be a nightmare.
But, by acting as your own General Contractor, you should be able to save enough money to get more of what you want in improvements. Then, you would have a house with more "goodies" in it than any comparable home. This would make it more desirable in tight real estate market should you decide to sell.
At least as important as the added monetary value of kitchen remodeling is the fact that a newly remodeled kitchen is more likely to sell your house than virtually any other home improvement you can make when the selling competition is tough. The kitchen is the heart of the home for most people, and a welcoming, warm and modern kitchen is an overwhelming factor in the decision to buy one house over another.
Here are the 5 most important items to consider upgrading, and you can do it fairly inexpensively if you put your mind to it, maybe even do some of the work yourself, or contract out the individual jobs yourself to professional tradespeople (subcontractors):
1. Painting, which is the easiest and most affordable kitchen remodeling job, and the most effective for resale.
2. Re-facing your old cabinets to give them a fresh new look. This is a lot cheaper than replacing them. Sometimes, they can just be painted and they look great.
3. New countertops are important, but you don't have to spend a fortune. There are many choices available.
4. Flooring. There are 1000's of options.
5. Appliances can be upgraded, if necessary. Maybe a new cook top, or range hood will give enough of a newer look. Many appliances can even be painted! Read my article Kitchen Appliances Cost. It shows you a way to keep kitchen appliance cost low. Keeping the cost of kitchen appliances lower can lower the total cost of building a house or home remodeling project.
It's all about kitchens and baths according to Realtors and TV home shows, so don't over look your bathrooms.
Don't forget "curb appeal" either, or the prospective buyers won't ever see the kitchen or the baths.
Think like a potential buyer and your remodeling mission becomes clear.
I hope I've answered your questions about increasing your home value.
Carl Heldmann
