Like many people, you might be under the impression that home improvements are good investments that pay for themselves when you sell your house. You'd be wrong in most cases. Except for steel entry doors, that is.
Such doors tend to recoup 102 percent of the construction cost when a home is sold. A front door made of fiberglass — which actually costs more to buy and install — won't pay off nearly as well. It only pulls in 60 percent of its original cost.
The sad truth is that most home improvements are like fiberglass doors, and won't come close to paying for themselves. Some projects — namely room additions and upscale remodeling — are just plain dollar drains, according to the 2010-2011 Cost Vs. Value report.
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The annual survey, conducted by Remodeling magazine in collaboration with the National Association of Realtors, compares construction cost estimates (provided by HomeTech Information Systems) with resale value estimates (provided by members of NAR) across the country for 35 mid-range and upscale home remodeling projects.
In 2005 renovations would, at the very least, recoup their costs on resale. Nowadays almost none do. With home prices tanking the past several years, the return on renovations has suffered, especially when it comes to high-end jobs.
"The first projects to start losing value were the bigger-ticket ones, and even now, when people are doing larger-volume projects, they still don't spend what they used to," explains Sal Alfano, editorial director of Remodeling magazine.
"You're competing against the prospective owner's opportunity to build it [an addition or upscale remodeling] themselves," seconds Elizabeth Mendenhall, vice president of committees for the National Association of Realtors. When it comes to renovations, it's vital to keep potential buyers' tastes in mind, not just your own, she says.
Obviously a homeowner with long-term plans to settle down should remodel however he or she sees fit. Construction costs are still down, and if you want to build that bright pink dream kitchen, have at it. After all, many homeowners are now opting to stay put and update their current homes to better fit their lifestyles.
Just be aware that that decadent kitchen will only retrieve $597 of every $1,000 spent if you decide to list. Other projects sure to lighten your wallet: Home office remodeling, which redeem a measly $458 of every $1,000 spent, sun room additions only $486 and bathroom additions at $533.
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These numbers, based on a national average of local comparisons gleaned from across the country, vary relative to each market's values and demands. If you want to know how a project will specifically affect your property's value within your neighborhood, query a local Realtor, urges Mendenhall.
If you're going to shell out money on improvements, focus on your home's exterior. Windows offer relatively decent returns, as do garage door replacements and siding replacements. Still nothing, save that steel entry door, refills the home improvement coffers 100 percent — or even as much as 85 percent. The bright side is these fixes can boost energy efficiency, offer potential tax savings and, when the time does come to sell, add ever-vital curb appeal to your home.
Aspiring sellers would do well to make some basic fixes as well. Forbes reported last year that sellers could improve their homes for buyers more efficiently — and more cheaply — by simply tidying up the rooms and slapping a fresh coat of paint on the walls. Steve Domber, president of Prudential Serls Prime Properties, a real estate brokerage operating across New York state and Connecticut, also suggests replacing old carpets, using neutral colors and bringing more light into the home.
© 2012 Forbes.com