October 2010: Real Estate

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 During the housing boom, sellers spent big on luxe touches like granite countertops, spa bathrooms and walk-in closets—splurges meant to increase the value of a home.  

These days, such luxuries are bringing lower returns than they once did. What’s to blame? A glut of new homes on the market, tighter lending and appraisal restrictions and buyers choosing to stay where they are.

Now, in the slower housing market, it’s all about price, and the most prudent home projects are those that emphasize cash over flash—improvements and small renovations designed to save owners money on energy and maintenance expenses, or modestly increase usable space—such as converting unused attic space into a guest bedroom or office. 

In other words, if you’re thinking about selling your home within a year, forget major remodeling, advises real estate agent Pam Dent of Better Homes and Gardens Real Estate III. “You’ll end up spending more money than you recoup.”

Part of the issue, she says, is that buyers already know what’s out there. “Most of my clients search MLS within a specific price point before they come to me. They already know what houses they want to see. If a home has a lot more features—tile versus formica, fancy appliances, a breakfast bar —than others within that price point, the former will sell first but those nice amenities won’t necessarily boost the price. It just means that house is the one that’s picked in a very competitive market.”

Industry professionals such as Dent are touting exterior replacement projects—sprucing up a home’s curb appeal—as among the most cost-effective improvements to make to a house right now. Not only does an attractive façade lure prospective buyers, but replacements are among the least expensive projects to take on, according to Remodeling Magazine’s 2009-2010 Annual Cost vs. Value Report, which compiles a list of home improvement projects, organized by region, that command the most bang for a seller’s buck. Among the least cost-effective improvements? Additions of any kind (new master suite, new bathroom), particularly in the upscale category.

Here are Remodeling Magazine’s top five most cost-effective improvements to make to a house in the South Atlantic region this year.

New front door (steel)
Job cost: $1,172
Resale value: $1,470
Cost recouped: 128.9 percent
Not only does installing a new front door reap the highest payback, but it’s among the least expensive home improvement projects out there. Steel provides better insulation than wood or vinyl, so it reduces energy bills and makes a nicer first impression.

Fiber-cement siding replacement
Job cost: $13,287
Resale value: $11,112
Cost recouped: 83.6 percent
Fiber-cement siding is thicker and denser than standard vinyl siding, giving it excellent impact resistance, and requires very little maintenance once installed and painted. “It gives a home a more quality look,” says Dent. “Fiber cement siding is increasingly common in nicer neighborhoods.” And unlike wood, it’s not susceptible to termites or rot.

Attic bedroom
Job cost: $49,346
Resale value: $40,992
Cost recouped: 83.1 percent
Although turning unused attic space into a guest bedroom with bathroom is by far the most expensive improvement on the list, it means the seller can list the property as a four-bedroom home rather than three, for example, bumping the price accordingly, and allowing sellers to draw from a bigger pool of buyers. The additional usable space sets a house apart from similar houses in the neighborhood.

Wood deck
Job cost: $10,634
Resale value: $8,573
Cost recouped: 80.6 percent
Decks inexpensively add square footage to the home and bring hours of outdoor enjoyment.

Vinyl siding replacement
Job cost: $10,607
Resale value: $8,476
Cost recouped: 79.9 percent
Although not as posh as fiber-cement siding, vinyl siding is a relatively inexpensive way to freshen up the exterior of a home.

Least cost effective improvements to make:

Home office remodel
Cost recouped: 48.1 percent

Sunroom addition
Cost recouped: 50.7 percent

Upscale master suite addition
Cost recouped: 55.7 percent

Upscale garage addition
Cost recouped: 55.9 percent

Upscale bathroom addition
Cost recouped: 57.9 percent

 

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