Remodeling? Experts say some projects add to home value more than others
SALT LAKE CITY — While spring may be the season for cleaning up around the house in Utah, summer is the unofficial remodeling season for many Utah homeowners.
Whether it's adding a room or upgrading an already existing space, making the decision to invest in home improvements can be especially important, particularly as it relates to home values.
Experts advise homeowners to compare the construction costs of individual projects to estimates of their resale value. In Utah, the top projects include upgrading a bathroom, adding a new deck or a garage addition.
Some other improvements are popular, but seldom yield high resale value, according to Angie Nelden, president of the Salt Lake Board of Realtors.
Adding new high efficient windows can help save money on energy conservation, but don’t offer homeowners the same kind of return on investment that a kitchen or bathroom renovation would, she said.
“For a minor kitchen remodel, the (homeowner) gets 82.7 percent recouped,” Nelden said. However, window replacement recoups about 65 percent. And basement remodels — also very common — recoup about 78 percent, she noted.
Homeowners, she said, should put the most money into the areas that will get them the most return if they decide to sell. Taking that approach is usually “money well spent.”
Upgrading closets will help provide organization, but don’t provide as much value to the property, she noted. Similarly, adding a new backyard deck is a good home improvement investment if the space is a place where people will want to spend a fair amount of time enjoying the outdoors.
In Utah, decks are sought-after amenities that typically recoup 70 percent and up to 90 percent of remodel cost, according to the 2014 Cost vs. Value report.
However, making that investment should depend on the kind of space the home has.
“Maybe your backyard isn’t huge, then maybe (adding or renovating) the deck isn’t the best idea,” Nelden said. She suggested surveying the overall space to determine if remodeling or adding a deck would truly add to the home’s value.
While very popular in Utah, major kitchen and bathroom remodels don’t always offer the highest return on investment when it comes to adding to the property. The report also showed that big bathroom remodels typically yield between 50 percent and 65 percent of cost, while major kitchen upgrades yield about 55 percent for upscale jobs to 80 percent on resale for mid-range renovations — less value than minor upgrades.
Nelden noted that sprucing up front entry doors and garage doors could also help boost a home’s appeal, especially if the house is to be placed on the market. By installing a new entry door, homeowners could recoup up to 96 percent of the cost.
“That’s a smart place to start because it’s the first thing the (potential) buyer sees,” Nelden said. “The first impression of a home makes them look great to (potential homebuyers).”
According to one analyst, using your home equity in a smart way can help add substantial value to your property.
Consider a traditional home equity loan if you have more than 20 percent equity and you’re planning a single, large project such as a new roof, said Jeremy Lowry, Zions Bank Home Financing division president.
He also noted that a home equity line of credit might be better for projects that will require access to funds over time. Meanwhile, construction loans — typically used for major renovation projects or new home building and require an appraisal — allow the homeowner “to use the future value of the home once the improvements are made,” he added.
“The construction loan market has been really solid for the last 2 to 2 ½ years,” he said.
Lowry advised homeowners to consider the project’s time frame. Will your project be one large change, or several smaller improvements over time? Knowing the project time frame allows the homeowner to choose the best financing option for the job, he said.