Are Home Improvements Wise Investments for Sellers?

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Image source: http://www.ppmt.ca/

BY RON BARLAY 

Many sellers who I encounter want to know which improvements would be worthy of undertaking prior to putting their home on the market.  There are studies that reveal the approximate percentage of investment you can expect to get back when you sell your home.

The highest return on your investment is remodeling your kitchen. The seller typically will see a 95% return. Although a renovated kitchen can yield a good return, it also can require a significant financial investment as well as be the most inconvenient renovation to the seller. Similarly, bathroom renovations can be costly and inconvenient. However, a seller can usually expect a 75% return on these improvements.

It is important to understand neighbourhood values and recognize the price ceilings for each location. If your home is over-improved, you may see diminishing returns on your investment. For example, if your neighbourhood does not warrant a brand new kitchen or bathroom you may want to consider updating them by resurfacing the cabinets or painting with neutral colours. Other expenditures that may be considered are toilet replacement and fresh caulking on counter-tops, sinks, tubs and showers.

Improvements that yield the highest returns include: roof replacement (88%), landscaping (85%), deck addition (70%) and window replacement (68%).

Improvements that yield the lowest return include: heating/cooling upgrades (30%), skylights (35%), and swimming pools which should be viewed as an expense that will generally speaking not be recouped. (However, the enjoyment you get from it may be worth the cost.)

If improvements are being made for enjoyment purposes, the figures above will help you foresee the return on your investment when you choose to sell your home.

If improvements are being made with the intent of selling your home, it is clear that most improvements will not yield a profit.

However, other intangible factors should be weighed. For example, if your home has a very dated kitchen and you invest $15,000 you can expect to get back 95% of that investment While this may appear to be a loss, by replacing an undesirable kitchen with one that is more appealing, you have made your home more saleable.

Staging has gained popularity in recent days. Staging involves buying fresh flowers, live plants and other decorations to liven up the home. It also may include disposing of old furniture or other large items. In this instance, the staging consultant may recommend renting furniture. Staging can have some benefits depending on the initial condition of the property.

Painting and carpeting replacement may yield positive returns. Your real estate advisor will help you determine if you should invest in these items. If, for example, your carpet is torn, faded, etc., you may want to consider replacing it. If, however, it is only lightly soiled, carpet shampooing could suffice.

Remember, first impressions are very important to the potential buyer. Since purchasers often buy emotionally, it would be to your benefit to take into consideration some of the ideas addressed in this article.

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