This is definitely the “million-dollar” question! In this blog, I just want to give you some guidelines, and some things to think about.
Your home’s value is determined by a free market – what are the listed and sold prices of other similarly-featured homes in your area and in other areas that are comparable to yours? One can make adjustments for features (plus or minus) that the other home may have, or that you may have. For example, you may have a home very similar to one that recently sold for $ 300,000 but you have a 2-car garage and the other home had only one. It is simple to make a slight adjustment to add the value of the extra garage to your home. I have often advised prospective sellers to go and look at a few homes similar to theirs first, to help establish in their mind what the market price is.
Here is not how to establish value – by adding up the cost of improvements you made! I’ve heard many times “I paid ‘x amount’ and I’ve spent ‘x amount’ on such and such, so I want ‘x amount’. Sorry, it just doesn’t work that way. If I may, I’ll use an automobile for an analogy. If you went out and purchased parts for any given automobile and pieced them all together into a new car, it probably would cost you 10 times the amount you’d pay just buying the car – houses are somewhat similar. People expect homes to have furnaces, windows, roofs, etc. – just because they were all just installed yesterday does not add the sum of their costs to the value of your home.
Research I’ve conducted shows the amount of return you may expect to receive on certain renovation projects. I’ve listed a few common ones here;
– Doors and Windows 50% to 75%
– Roof replacement 50 % to 80%
– Deck 50 % to 75%
– Pool 10 % to 40%
Kitchen and bath upgrades are highest on the list, generally returning 75% to 100% of your investment. A competent Realtor will show you comparable sales AND comparable current listings – after all they will be your competition when you put your home on the market. And remember, no one has a crystal ball! Even professional real estate Appraisers “hedge” their prices by including a statement that the actual sale price may vary as much as 5 %…up or down!