Perhaps the question is a rhetorical one but the bottom line is market driven. You could even extend that to homeowners that intend on staying in their home for the long haul – it ultimately comes down to what effect it has on the market value of the home.
Home staging is a frontline topic these days and something every real estate professional should understand and every homeowner should incorporate into the sales process. But sometimes staging that home is just not going to be enough. There are a lot of people remodeling for any number of reasons – it’s over a $240 billion dollar industry. So how do you respond to your sellers when they solicit your opinion – “Should we remodel or not and if so, what should we do?”
That question is loaded one and should be answered very carefully as it “rings” with potential liability. On the other hand as a professional you should be prepared to discuss the process, options and benefits of remodeling in addition to staging. And once again, it falls back on what the market will bear and who should be better prepared to answer that question than you … after all it’s your marketplace.
So how do you answer the question without making those firm recommendations that are full of potential liability? Here are some thoughts to consider:
• Richard Powers, MAI and SRA, of the Appraisal Institute offered this advice, “… avoid over-Improvement by sticking to what’s standard in your neighborhood.”
• Before assuming that remodeling is the only choice, consider: Decluttering (clean up and clean out), Refurbishing (reface or resurface) or Repurposing (change a rooms use).
• Is the issue a deficiency or just a just a nice improvement?
• Do all the neighbors have 2 bathrooms and this house only has one?
• Will it add a distinctive feature to the house that will enhance the marketability like a walk-in closet, whirlpool bath or a fireplace?
• Is the remodel project overkill when looking at the rest of the house and the market?
• Is the project the simplest most cost effective solution to satisfy the need?
• Does the end result fit with today’s homeowners’ expectations?
Obviously questions like these address the reason and need for a remodel but what about the hard ROI side of the equation? Once again you don’t want to step into the contractor’s shoes but a little knowledge to put things in perspective should be part of your knowledge base. Here are some relative ROI values from a past survey by Remodeling magazine:
• Kitchens – often become dated sooner than any other room due to wear and tear – 92.9%.
• Bathrooms – they have changed the most over the years – 90.1%; adding a bathroom yields 86.4%.
• Family rooms – adding one will return approximately 80.6%.
• Bedrooms – adding an additional bedroom results in an 82.75% return; a master suite approximately 80.1%.
• Decks – average ROI here is 86.7%.
• Windows – add “volume” to a home and yield a surprising 84.5%.
Of course the very next question you are going to get is “how much does it cost.” Immediately after answering that you “are not” a contractor you can provide them with some price ranges for different remodeling projects and a great source for you from Remodleing Online is http://www.remodeling.hw.net/content/CvsV/CostvsValue-project.asp?articleID=381305§ionID=173.
They have a complete set of costs and projected returns for a wide range of remodeling projects and – best of all – they have adjusted them for 9 regions of the country. The data is based on 2006 information but certainly current enough to provide your clients with range to consider. Here is an example from their database for a minor and major and minor kitchen remodel comparing the National Average to the South Atlantic Region:
National Average:
|
|
Job Cost |
Resale Value |
% Cost Recouped |
|
Major Kitchen Remodel |
$54,241 |
$43,603 |
80.4% |
|
Minor Kitchen Remodel |
$17,928 |
$15,278 |
85.2% |
