Adding value through remodeling

Blog reader Yara asked a great question - how much value do you add to your house, through certain remodeling projects. Unfortunately, there isn't a correct answer to this. If you put 10 real estate agents, and 10 appraisers in the same house, chances are that all of them will give you a different value.

I think it is extremely important to define value though. Pricing a home or determining the value of a home is always a source of disagreement and tension. The number one thing to remember is that a home is only worth what someone is willing to pay for it. You can compare all you want, but if no one is willing to pay that price for it, then it is a moot point.

Now, in terms of adding value through remodeling, and specifically, Yara's case. Yara bought in June 2007, and gutted the bathroom, removed carpet and refinished the hardwood floors, and put up 6-panel doors.

From a value adding standpoint, Yara absolutely added value by redoing the bathroom. Bathrooms and kitchens are always the best for the buck in terms of getting your money back when you sell. The hardwood floors are a preference - but, just as our parents were enamored with wall to wall carpeting (over all of that beautiful hardwood!) people are obsessed with hardwood floors in today's market. As for the 6-panel doors - they obviously look, and show better, but are more of an item that appeal to a Buyer with an attention to detail.

Now, will Yara see her money realized when selling? There's no right answer. There are a number of factors to consider when contemplating this. First - how much of the work was done by a contractor, and how much by Yara, the actual homeowner? Second - what are market conditions like? Yara mentioned that in comparing her house to others in her area, the others are way lower. Prices are obviously down, so that is playing a role, and as she said, they aren't as updated. So naturally they will be lower. Third - how long are you planning on staying in the house? If you are going to be there for awhile, then natural appreciation of your house should cover and costs to be recouped. In terms of hard numbers, it's generally said with a bathroom remodel, you recoup 90-95% of your money spent. Of course, that number can go up or down depending on how long you stay in the house. And, if you stay too long, that bathroom you remodeled 10 years ago needs to be remodeled again!

So, should Yara continue to remodel? My answer is always yes. You are always adding value no matter what you do - however, that value isn't set by any one person. You set the value by picking what you do, and creating a space that YOU love.