In a not-surprising news story in the Chicago Tribune, it turns out that those homeowners who choose to do some remodeling in their homes will not make as much money in resale value as they would have in previous years. Most people are under the impression that if you do an upgrade or remodel to certain aspects of your home, you’ll get most or all of that money back when you sell. Well, not so much in this market. Unfortunately, more money is going in the contractor’s pocket than will go back in yours at the closing table.
Remodeling Magazine has just put out their annual cost vs. value report for 2010-2011. While you’re able to look at statistics and numbers for all areas of the country, I want to focus in on Chicago. Let’s use a midrange major kitchen remodel for this year. With the average job cost of $58,367, the homeowner would have a resale value of $40,126. The percent of it being recouped is 68.7%, one of the highest values of all the remodeling projects. However, last year that percentage was 72.1%. So not a significant decrease, but still noticeable.
What’s interesting is that every single category the magazine studied, the percentage in recouped value was a decrease from last year. Some examples of those categories include a basement remodel, bathroom addition, bathroom remodel, master suite addition, deck addition, siding replacement, window replacement, and others. They also break it down into midrange projects and upscale ones.
Kermit Baker, director of the Remodeling Futures program at Harvard University‘s Joint Center for Housing Studies said, “A lot of what drove the (remodeling) market in 2003, 2006, 2007 was the notion that you were playing with house money. You could get 90, 95 percent of your investment back. It was really a no-risk proposition. The mentality has clearly shifted to, ‘What kinds of features do I want in my home?’ given how long you live there and your lifestyle.”
So what does this mean for sellers in today’s market? Just be smart about what projects you take on. You might not have to spend the money on a complete kitchen remodel. Sometimes just painting the cabinets and changing the hardware can make a world of difference. You might not need to replace them all. And if you have linoleum, it’s worth the upgrade to ceramic tile or hardwood. Not every home needs granite countertops, especially those with small kitchens already. It’s not worth the extra expense. But do know that kitchens are the best room in the home to remodel. While you might think you need to spend the money to finish your basement, that’s not necessarily true. A young couple could come in and have a completely different idea of what they want it to look like. See what the feedback is from the potential buyers coming through your home before you make any drastic improvements. Talk to your Realtor about what he recommends before spending all that money.
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