Remodel or Relocate?
Weighing the costs and consequences of a big project

-by Shelly Bucksot

Frank Giordano of Professional Appraisals in Richboro, Pa., says a homeowner should consider three questions before sinking big bucks into a remodeling project: Do I like my house, do I like my school district and do I like my neighbors? If the answer to all three is yes, “then do the remodel for the enjoyment of you and your family — not simply to add value,” says the 20-year industry veteran. “There’s a big misconception that you’re going to get a dollar-for-dollar return on a project, and that just isn’t the case.” However, assuming a positive return is at least one of your goals, says Thomas M. Stevens, president of the National Association of Realtors, there are financial advantages to choosing certain projects over others. Converting an empty attic into a bedroom, finishing a basement or adding a deck usually brings a better return than adding square footage in the way of a new family room.

“Projects that add usable space within the structure make it easier to recoup your investment because the upfront costs aren’t as exorbitant,” Stevens says. Sometimes, though, an addition makes economic sense. Brewster Bray, owner of Probe Specialists and a certified real estate inspector in Scottsdale, Ariz., suggests taking a look at what homes in your area sell for per square foot and then figuring out how much an addition will cost. In North Scottsdale, a 1,400-square-foot home sells for at least $400,000, and a 2,400-square foot home sells for between $600,000 and $700,000. “Odds are, you can add 1,000 square feet for less than $200,000,” Bray says.

Echoing other remodeling experts, Tampa, Fla., real estate appraiser James Edwards says kitchens and bath remodels typically deliver the best return. “If you choose the right materials and style, they will return almost the full cost, even if you don’t sell the home for five or more years,” he says. “Quality grade flooring like tile or wood will also return a substantial amount.”

After negotiating a few thousand dollars off the price of his new Hilliard, Ohio, home, Jake Sirkle gutted the dated master bath. “I took it down to the studs,” says Sirkle, who spent $20,000. “I installed natural stone flooring, a brand-new shower, fixtures, plumbing and lighting. It tapped me out financially, but I know I’ll get all of the money back when I resell years from now.”
Real estate inspector Brewster Bray suggests comparing
the cost of an addition to the per-square-foot sale price
of area homes to decide if a project makes sense.

That’s what happened to Krista Greipel, who spent $3,000 installing new plumbing and updating the bathroom of her 1916 Craftsman in Minneapolis last summer. Without the remodel, she would have listed the home well below her desired asking price. “I sold the house four months later and definitely recouped my costs,” she says.

Edwards cautions, however, that the amount of return can depend on your neighborhood. “I recently appraised a home in an entry-level neighborhood where the homeowners had spent $30,000 renovating their kitchen, and I thought, ‘Wow, they made the right improvement in the wrong neighborhood, because the person who can afford to purchase in this area doesn’t want or need a high-end kitchen,’” he says.

Chris Robbins, operations manager for Anderson’s Kitchen & Bath Center in Kent, Wash., says deciding which project to tackle is a personal decision. “You need to assess your home’s value and your income and decide how much you can afford to spend,” says Robbins, who adds that kitchen remodels can range from $4,000 to $80,000, while bathroom remodels run from $6,000 to $25,000.

Another big consideration is whether you can handle the inconvenience involved with remodeling. “There’s going to be a lot of dust, a lot of tradesmen in and out of the house, and a lot of noise,” Bray says. “If you’re redoing a kitchen, plan to eat out more than a few times, and for a bathroom remodel, you’ll need to find another place to shower for at least a week, maybe more.”

Unlike many bath and kitchen jobs, behind-the-scenes improvements that increase the house’s integrity, such as a new roof or air-conditioning unit, won’t garner the return many homeowners expect. “Buyers anticipate a good, solid roof,” Edwards says.

“Spending $5,000 to $10,000 reshingling will make it easier to sell if it was in poor condition, but you’re not going to reap a good return because the market expects it to be in place. The same is true for an air conditioner. The biggest returns come with eye-catching improvements.”

The most prominent remodeling mistake homeowners make is installing a swimming pool, Edwards says. “The majority of the market rejects properties with pools because of the maintenance requirements and safety issues. At best, you might get 50 percent of your costs back,” he says. “The rare exception is if you’re the only house in the neighborhood without one.”

In the end, the return on a remodeling project boils down to timing and the area where you live, Giordano says, adding that the Pennsylvania market appreciated 30 percent to 40 percent between 1989 and 1991. “If you did a $40,000 remodel then, you would have lucked out and gotten a great return,” he says. “But if you did the same remodel between 1992 and 1994, you would have been in big trouble because the market here took a dive. Before you invest any money into remodeling your home, make sure you know whether the market roller coaster is going up or down.”

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