Remodel Or Replace? Top 10 ROI

In a seller’s market, spending (significant amounts of) money on improvements for resale may not translate to added value.  The goal of improvements from a seller’s standpoint is to attract buyers and achieve top dollar on a listing. But finding the balance between updates and return isn’t that simple.

What that says to the homeowner is that spending money to sell a home requires research.

See chart below of top 10 remodeling projects for home value. Those surveyed about the return on remodeling projects were licensed agents.

Why the top 10 doesn’t matter

National numbers don’t really mean anything to the individual homeowner. Improvements that pay off (or not) depend on the same three factors that affect home prices: location, location, location.

Subtle changes pay off

The No. 1 trend in this year’s numbers is that the subtle changes make for the biggest return on investment. (painting/texture, flooring, etc.) The two highest percentage “remodeling” returns nationally came from low-ticket improvements under $2,000: attic insulation came in no. 1 at 107.7 percent, followed by entry door replacement (steel) at 90.7 percent.

Look outside first

Projects that spoke to curb appeal had overall larger returns than improvements inside the home. Garage doors had a 76.9 percent ROI. Entry door replacements in both mid-range and upscale (fiberglass) received greater than 77 percent ROI. Windows gained at least 73 percent ROI. Siding was also a winner at 76.4 percent. Another project in the top 10 is stone veneer — because it’s become so authentic-looking for a fraction of the cost of the real stuff.

Replacements win

Projects that involved a total replacement — such as windows and doors — scored high among the real estate professionals surveyed. The takeaway for homeowners is that a broken or seriously outdated door should probably be replaced, even if the return is not 100 percent. The same goes for old single-pane windows. This speaks to curb appeal as well as the first impression of a well-maintained home.

Biggest losers

Year over year, the trends show that additions to a home saw less than 62-percent returns overall. There are two reasons to add on regardless of return. First, the homeowner simply needed more room well before they were prepared to sell. Second, the home was disproportionate to those around it (for example, a one-bath in a neighborhood full of two- and three-bath homes). The biggest low-return project was a backup power generator at 54 percent ROI. The second-runner-up loser is a backyard patio at 54.9 percent ROI; the project includes 20×20 flagstone patio, sliding door, stone-veneer-surround outdoor kitchen, a gas-powered firepit, pergola and lighting.

Surprise! (Not surprised)

If you were to guess what buyers want, I’d put money down that most people would say updated kitchens and bathrooms. What’s surprising here is that a minor kitchen remodel at $20,830 could make the Top 10, but a minor bathroom remodel, which cost $18,546, had a surprisingly low 64.8 percent return. Both the bathroom and kitchen remodels with spends over $50,000 returned less than 65 percent (not surprised). Because these rooms are highly personal, spending a lot on one specific style could actually turn off buyers.

Getting what you paid for

Although all but one project on this Cost vs. Value report showed a profit-generating ROI, you could argue that not updating key rooms such as bathrooms, kitchens and front exteriors produces a greater negative result. How many buyers wants a “handyman special”? As housing prices start to dip, this will come into play even more. It’s a difficult lose-lose for some sellers who can’t afford significant updates but need to make money on their house. They’ll need some guidance from an experienced Realtor to make strategic and cost-effective choices.