Bathroom, kitchen do-overs can pay dividends at sales time
Every year Realtor Magazine, in partnership with Remodeling
Magazine, creates a
”
Cost vs. Value Report
”
to indicate what the pay back at resale will be for various home
projects. The cost information comes from HomeTech Informations
Systems which collects cost information from contractors and uses
an adjustment factor to smooth regional pricing variations in
labor, material, overhead and profit. And the value information
comes from estimates from National Association of Realtors members.
Specpan then analyzes the information.
Bathroom, kitchen do-overs can pay dividends at sales time
Every year Realtor Magazine, in partnership with Remodeling Magazine, creates a ” Cost vs. Value Report” to indicate what the pay back at resale will be for various home projects. The cost information comes from HomeTech Informations Systems which collects cost information from contractors and uses an adjustment factor to smooth regional pricing variations in labor, material, overhead and profit. And the value information comes from estimates from National Association of Realtors members. Specpan then analyzes the information.
Is this information important to you? Well, it depends. If you plan on living in your home forever it might be interesting but irrelevant. If you plan on moving in the next five years, it might be an investment management tool. If you have no money left over from the holidays to pay your bills let alone remodel anything, it might be of no value at all. But whoa, doggies! If you’ve read this far you might as well hang in there to the end.
Sometimes remodeling projects create resale value, which exceeds the cost of the remodel. How can this be? It usually happens in markets with rapidly rising costs, such as we experienced in the past few years. It also occurs in areas where most of the other homes have been remodeled. In this case, NOT remodeling can cause a home to sit on the market and lose value.
Most remodel projects add benefit only when they are needed. Let’s say you have a 3 bedroom home, 1800 square feet, 10 years old. You have tile counters in the kitchen and tile floors in the bathroom and entry. Though it’s in great shape, you just never liked the ecru tile. You want granite tile. So you swap them out. Will that raise the value of your home in order to cover the cost of the remodel? Probably not. It just might make your home more attractive so that a buyer would pick yours over a similar home priced comparably. But if you up the listing price, the buyer could purchase the other home and complete a remodel with the same materials…and the color they like!
Okay, so let’s focus on what does make a difference. First choice is a remodel of a bathroom (over 20 years old or so). This project provides the biggest payoff. Here in the west, the average cost is offset by a 112 percent increase in value. Of course, you have to sell your home in order to see that money! (I hate it when that happens.)
Second choice? It is a minor kitchen remodel: New appliances, new fronts for cabinets, new counters, new floor. The average cost in the west is also offset by 112 percent.
Your next best remodel choice is to replace single-pane windows with dual pane. Not only do they help with aesthetics but they reduce energy costs and keep noise out. The cost recouped is 103 percent.
Adding a 15-by-20 deck incurs a cost, which is recouped at 100 percent. Because of our temperate weather, outdoor living is enjoyable nearly year-round.
Speaking of additional rooms, should you add one onto an existing home? It depends. If you have one of the largest houses in the area, additional rooms probably don’t make sense. You are over-building for the area. But if you have a small home surrounded by many larger homes, it might be viable. Talk to your local real estate agent before adding a bedroom or undertaking any major project. You might find a better option for your home investment dollars. These could include a new roof (93 percent) or replacement of siding (91 percent).
Okay, now let’s look at the real estate market from last week. As you can imagine, the little guy in the sleigh causes some predictable deviations from ongoing trends. In San Benito County, the inventory is off its high of the low 200s and stands at 180 single family homes on the market. There were only seven new listings, and seven contracts made between buyer and seller. The inventory was diminished by 24 units through closed escrows and cancellation, expiration or withdrawal of a listing contract.
Inventory continues to drop in the Gilroy- Morgan Hill area as well. Inventory has dropped from the 300s to 271 single family listings. Last week there were only 12 new listings, and 12 new sales contracts put in place.
This week will probably be just as slow, and then things will pick up in the new year. We are not expecting a return to the roiling market of the recent past, but we expect a good solid market without any bubbles except in the New Year’s Eve champagne glasses. Can you believe it’s going to be 2006? How time flies. I wish you lots of joy, love and laughter in the coming year.
Suggested new year’s resolution: Be kind to your Realtor. It’s easier than losing weight and more fun than exercising.
