Have your checked out the 2009-2010 Cost vs. Value report yet? If not head on over to Remodeling Magazine to see the latest on the relationship between remodeling costs and resale value. According to this year’s report projects that improve a homes curb appeal are king, the mortgage mess is affecting your client’s remodeling decision and kitchen and bathroom remodels continue to be a good investment.
Because of the recent release of the Cost vs. Value Report there have been several interesting articles about remodeling in the national media. The best synopsis of the report if have found aimed at consumers is below. Check out this one from MSN real estate.
Basic replacements rule
As a group, low-cost replacements — new siding, windows, doors and roofing — deliver the best bang for the buck now, a considerably better payback than from a two-story remodel or a kitchen remodel.
Given great improvements in materials, you can replace your inefficient 10- or 15-year-old products with highly efficient ones for a decent return when you sell. In addition, the improvements help you save on heating and cooling bills. Replacing leaky windows with highly efficient newer ones is a good example. The technology behind the glass and frames has so improved that you’re tightening up your home’s weatherproofing in the process. You get more comfort and, from the real-estate agent’s point of view, new windows show off your house from the street.
Replacement projects included in the Cost vs. Value survey all cost less than $20,000 and most cost considerably less. They instantly enhance curb appeal, boosting a home’s marketability, and they require little maintenance once installed. A bonus: Most of these replacements qualify for a federal tax credit for energy efficiency (not included in Remodeling Magazine’s ROI calculations).
See detailed project descriptions here.
1. Replace the front door.
- The absolute best return on the money of any of the projects surveyed — 129% of cost — is gained by replacing a beat-up front door with a $1,200 steel-shell door filled with foam insulation.
- A new fiberglass door (more expensive, at $3,490) returns less, about 65%. (Fiberglass is the new chic building material because it’s rugged and durable, can be painted and will mimic almost any wood. Unlike wood, it doesn’t crack, warp or shrink and needs zero maintenance.)
- Spend about $7,500 on an entire new entrance, including a widened opening, a solid-core wood door and high-end glass, new lighting and better locks, and you’ll recoup 69%, on average.
2. Replace home siding
- Replacing old siding with a durable fiber-cement product ($13,287) recoups about 84% at resale.
- Use vinyl siding ($10,607) to get an 80% return.
- Foam-backed vinyl ($13,022) costs more and earns back less — roughly 79% — but it is much more efficient at insulating a home.
3. Replace windows. Three of the four window-replacement projects considered in the survey pay back about 77%:
- Wood-trimmed windows ($11,700).
- Lower-end vinyl windows ($10,728).
- Windows trimmed in higher-end vinyl ($13,862).
- The fourth project, higher-end wood-replacement windows ($17,816), has a return of about 72%. Fiberglass windows weren’t included in the study.
Replace the roofing: Spend $19,731 on new fiberglass asphalt shingles and you’re likely to recoup about 67% of the cost.
- A higher-end roof replacement using standing-seam metal ($37,359) pays back about 61% of the cost, agents told the survey.
Additions aren’t cost-effective
Except for a new deck, which pays back nicely, adding to a home’s footprint brings a poor return these days.
A new deck
- Wood is high-maintenance, but homebuyers love it: A new wood deck ($10,634) returns 81%.
- A new deck of midrange composite planks ($15,373) returns around 71% of the cost at resale.
- A higher-grade composite ($37,745) brings an ROI of about 61%.
- Adding a 200-square-foot sunroom ($73,167) recoups 51%.
- A high-end ($225,995) master suite project, adding 640 square feet to the house, including a bath with walk-in shower and stone walls, brings a 56% return.
- A less ambitious, less costly ($103,696), 640-square-foot master suite addition including whirlpool bath and ceramic tile recoups 65%.
- A garage addition ($87,230) earns back about 56%.
- A high-end bathroom addition ($75,812) earns about 58% at resale.
- Adding a midrange, 6-by-8-foot full bath ($39,046) recoups about 60%.
- Add a midrange two-story wing ($156,309) to the house, including 24-by-16-foot first-floor family room and second-floor bedroom and full bath, for a return of about 69%.
- A midrange family room addition ($82,756) returns around 65% of the cost.
- Adding a sunroom or home office were the projects that yielded the least payback, presumably because these special-purpose rooms appeal to fewer buyers and are in less demand.
Best use of the money (besides replacements)
Upgrading existing space is the best bet for recouping cost. It makes sense: Pouring a foundation, framing a structure and bringing in electricity and plumbing are among the most expensive aspects of a building project. When you can largely skip these steps and increase your usable space, the payback is richer:
- An attic conversion, including a 15-by-15-foot bedroom with dormer and a 5-by-7-foot bath with shower ($49,346) returns comparative gold: 83% return, on average. Agents in several cities said this job would return more than 100%.
- A basement ($62,067) remodel —a 20-by-30-foot entertainment room and 5-by-8-foot full bath — recoups about 75% of its cost.
- A midrange 5-by-7-foot bathroom remodel ($16,142) with standard fixtures and trim has a 71% ROI.
- Expanding that bathroom to 100 square feet ($52,295), including moving plumbing and wiring and adding higher-end cabinets and fixtures, brings a 62% ROI.
Kitchens and baths: Scaled back but ever popular
High-end kitchens and baths are fading in popularity, replaced by “very practical things,” Michelson says. “The $400,000 and $500,000 jobs are few and far between. The jobs between $50,000 and $200,000, we’re doing lots of those.”
Kitchen and bath remodeling hasn’t stopped, since these projects maximize the enjoyment of the most-used spaces in a home. But “people are definitely being smarter with their money,” Conneely says. “For instance, a $75,000 remodel five years ago? That same client would today spend $50,000.” People who blithely bought the best of everything now pursue the same look by choosing materials judiciously.
- A minor kitchen upgrade ($21,411) installing new cabinet fronts, laminate counters and other cosmetic improvements is a decent investment, at 78% ROI.
- A major kitchen remodel ($57,215) using midrange materials — semi-custom cabinets and laminate counters — pays back about 72%.
- A high-end major kitchen remodel ($111,794) with top-of-the-line cherry cabinets, stone counters, glass backsplash and expensive, built-in appliances, pays back just 63%.