Should You Fix Up Your Home Before Selling?

by John Glynn on February 14, 2011

According to this report from Hanley Wood, who is “the number 1 media company covering construction”, the short answer is “Hell no.”

There are a few key takeaways from this Remodeling Cost vs. Value Report. I viewed the Pacific region, but it looks like they offer much more granular city/area specific reports. You can drill down into San Francisco, Los Angeles, San Diego etc.

The only investment in remodeling that suggested a lower cost to build than implied increase on sale price of the home was to replace the front door to the house. This is for mid-range value property. At the high end, nothing paid off.

In fact, some of these look terrible. A bathroom addition returns 53% of the cost at resale. A home office remodel returns 46%. Why bother? I wonder how accurate this data is. It’s not like they sell the same house with and without the improvements, and compare the outcomes. They are going off averages and comparables here.

But notice also how each of the categories has shown a decline in the percentage that is recouped as compared to prior years. Makes sense, because home values have fallen over that time frame. So naturally, the averages are all lower. But if the input costs were also falling, the year over year changes would be more mixed.

In other words, labor plus materials to do these remodel projects has not fallen as fast as the value of the product they produce.

This is an interesting subtext of markets in transition. I don’t believe for a second that there are not some remodel projects that, when done with cost efficiency to the right property at the right time, can bring on better than 100% return on investment. If this weren’t possible, it would imply that you couldn’t make money building a house. I don’t think we’ve come that far.

But if you are looking to sell a not-so-pretty property, wondering if you should do some cosmetic repairs – or more – you really do have to wonder about this climate. It could be throwing good money after a not-so-pretty asset. Best bet, talk to your real estate agent about it, and get their opinion on this report, and the topic in general.

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