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Remodeling: What pays most and least

Amid the current housing frenzy, many consumers have come to believe that money poured into their houses will return more than an Internet stock during the 1990s. We decided to test the proposition. We first turned to Remodeling magazine's annual survey, which polls hundreds of real-estate professionals, mostly brokers and sales agents supplied by the National Association of Realtors, to find out the amount various projects are likely to return. We used their 2001 and 2004 data (Their data is shown in the chart below; more information is available at www.remodeling.hw.net. Once there, go to “2004 Cost vs. Value Report” from their home page.) The survey assesses how much a homeowner can expect to recover if the house is sold a year after the project is completed. We submitted Remodeling's projects to real-estate appraisers provided by the Appraisal Institute, a professional association; they estimated how much homeowners were likely to recover from improvements over the same period. After three years, return is impossible to estimate, say our appraisers. They added other observations. On colors: stick with neutrals because they don't date themselves. On swimming pools: in some areas, a pool can detract from a house's value because the homeowner is on the hook for liability insurance and maintenance. On all projects: Those that add square footage to bring a house up to--but not beyond--community norms pay off the most. Projects are presented showing highest to lowest returns, as calculated by our appraisers.

PROJECT

DESCRIPTION

NATIONAL
COST
AVERAGE*
(2001)

(2004,
if available)

VALUE
RECOVERED*
(2001)

(2004,
if available)

APPRAISERS’
ESTIMATE
OF VALUE
RECOVERED

APPRAISERS’ COMMENTS

Major
kitchen
remodeling

Add 30 feet of new semicustom wood cabinets, laminate countertops, resilient floor, center island, midpriced sink and faucet. Include built-in appliances.

$38,800

$42,660

81%

79.4%

50% to 75%

The more expensive the house, the more you will earn from the remodeling. It doesn’t pay, however, to install an ultra-expensive kitchen in a modestly priced house.

Bathroom
remodeling

Update a 25-year-old 45-sq.-ft. bathroom with new fixtures, ceramic-tile walls in tub, and vinyl wallpaper.

9,500

9,861

85

90.1

50 to 75

Same as above. Adding a new bathroom to bring number of baths in line with community standards brings greater returns than restyling an existing one.

Attic
bedroom
addition

Build 225-sq.-ft. room; install 35-sq.-ft. shower/bath, heat, central air conditioning, insulation, and carpet.

31,400

35,960

74

82 .7

50 to 75

Your new space is expensive relative to the potential resale recovery, unless finished attics are the norm for your area.

Master
suite addition

Build new 384-sq.-ft. master bedroom over crawl space, with walk-in closet, ceramic-tile shower and whirlpool tub.

63,300

70,245

75

80.1

60 to 74

Most new houses have master-bedroom suites; the addition is an amenity that people will pay for, particularly in upscale neighborhoods. Brings an older home more in line with new housing.

Basement
refinishing

Add a 600-sq.-ft. entertainment area with a wet bar, 40-sq.-ft. full bath, and 144-sq.-ft. auxiliary room.

39,700

47,888

69

76.1

60 to 70

If of the same quality as the rest of the house, a finished basement will be a plus. Amateur, do-it-yourself jobs won’t yield maximum return.

Deck addition

Build 320-sq.-ft., treated-pine deck.

5,900

6,917

77

86.7

A very large deck like this won’t add significantly to the value of a modest home. A deck also may not add much if a patio is standard for the neighborhood.

Two-story
addition

Add a 384-sq.-ft. wing over crawl space, with a first-floor family room and a second-floor bedroom with full bath. Include prefabricated fireplace, 11 windows, an atrium-style exterior door, heating, and cooling.

67,700

40 to 50

Added square footage itself is what an appraiser would value.

Family-room
addition

Add a 400-sq.-ft. room on new crawl-space foundation with wood-joist floor framing, wood siding on exterior walls, fiberglass shingle roof. Add 180 sq. ft. of glazing, including windows, atrium exterior door, and two skylights. Tie into existing heating and cooling systems.

46,700

52,562

80

80.6

40 to 50

Because a family room is an amenity, it could bring a lower return than an extra bedroom or bath, unless every house in the neighborhood has one. It costs more to retrofit a family room on a house than to have it in new construction.

Sunroom
addition

Add a 200-sq.-ft. sunroom to two-story post-World War II house including footings and foundation, walls of extruded aluminum with windows of double-paned glass. Insulate roof and ceiling. Add ceiling fan.

31,063

70.8

40 to 50

Adds square footage but as an amenity, not a necessity.

Reroofing

Remove existing roofing to bare wood; install 3,000 sq. ft. of fiberglass shingles with felt underlay.

11,376

80.8

Buyers expect houses not to have leaky roofs. They don't want to pay extra for a new roof.

Home
office

Refurbish spare room.

10,500

Adds little to resale value. So-called smart houses, automated by computer, also add little.

Exterior
repainting

Add coat of wood primer and coat of satin acrylic latex paint for two-story wood-sided house built post-1980.

8,300

Buyers expect a home with a decent paint job. Painting is maintenance, not an improvement. Further, we recommend 2 topcoats.

* Source: Remodeling magazine survey.

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