For years, Remodeling magazine’s annual “Cost vs. Value Report” has offered comfort to homeowners investing hefty dollars into home improvement projects. The high payback on the most popular rehabs — kitchens and bathrooms — has even been the catalyst to spur some homeowners to remodel. They felt confident that if they did good work, they’d get back most of their funds.
The values recouped have dropped in the last year. Remodeling a kitchen with upscale materials, like stone countertops and a 36-inch commercial-grade range, which cost more than $108,408 on average nationally last year, paid back only 71.2 percent, versus 84.8 percent on a comparable $81,552 rehab in previous years.
Does this mean that homeowners should stop renovating? Hardly, especially when they have a distinct vision of how they want their home to look and function — and if they have the funds. But decreasing numbers suggest greater caution:
• Never over-improve. Take the value of your existing home, add in the cost of your potential improvements and be sure the new sum doesn’t exceed the value of comparable neighborhood homes.
• Never make major changes unless you stay put. Don’t go overboard unless you’ll be there five to seven years to enjoy the work and amortize costs.
• Never forget to consider the pulse of your specific market. What buyers want varies by geographic area and price. A buyer of a $500,000 home may not expect the professional-style kitchen equipment and granite that owners of a $2 million house do, says Michael Rankin, a managing partner with Tuft, Taylor & Rankin Sotheby’s International Realty in Washington, D.C.
Despite the slump in some areas, a single-family house in good condition that’s priced well still generates strong interest and sometimes multiple bids, says Rankin. “Buyers don’t want to do the work. They have incredibly busy lives,” he says.
Diane Saatchi, senior vice president for The Corcoran Group, East Hampton, N.Y., also has seen the spring market take off strongly. “If you dialed back three to four months ago, you never would have believed it. But I think everyone got tired of waiting on the sidelines for the bubble to burst. I think what you’re seeing is seven months of people wanting to buy,” she says.
And designer Marc Vassallo, author of “The Barefoot Home” (The Taunton Press, 2006), advises homeowners to think seriously about how they’re spending their money, not just where. “You want to spend on the things that will have the biggest effect,” he says. In his own New Haven, Conn., home, he and his wife gave up a sunroom addition off their kitchen because of the $20,000 cost and instead installed a new window for $1,000 at the end of a hall that leads to the kitchen. “It opened up the entire house,” he says.
Here are additional ideas on where dollars are best put:
• Curb appeal. Well-maintained landscapes, freshly painted doors and shutters and spotless windows are still worth the funds.
• Clean, clutterless kitchens. Again, kitchens bring a good return. The “In” style is a white palette, white wood cabinets and softer-looking countertops of honed granite or limestone rather than shiny, black granite, says Rankin. In his price range, he warns against including too many bells and whistles. In Saatchi’s higher-priced niche, homeowners can get more lavish with state-of-the-art equipment but are wise also to invest in a white, clean, modern kitchen and avoid “cutesy” motifs. She warns against equipment that nobody knows how to use. And Vassallo offers first-hand advice based on his kitchen redo. Instead of getting the kitchen of his dreams, which he says he couldn’t afford, he spent $15,000 for affordable IKEA cabinets, trim, a new hardwood oak floor and some new equipment.
• Well-illuminated, spa-like bathrooms. The ideal bathroom includes a double vanity, good lighting, heated floor, soak or other big tub if there’s room, large shower and a simple design without a lot of color or pattern, says Rankin. At a more expensive price point, homeowners also should include a shower and soak tub, Saatchi says. Though they may like a pedestal sink’s look, it offers little counter space.
• Finished basements. These have come back in vogue, but how fancy they get should depend on the area and price. Saatchi’s clients seek lower levels with outdoor access, home theaters and exercise rooms.
Whatever improvements you make, don’t make them so idiosyncratic that they’ll never appeal to the next person.