A common misconception about home repairs is that your home’s value will increase by the same amount as what you spent on renovations. Unfortunately, this is not true. Although it can vary by the type of renovation and market conditions, you will not always get back what you put it. Why?
Home repair costs
The cost of home repairs can vary greatly. If you are hiring a contractor to complete repairs, you will spend a lot more than someone who has the skill set to perform some of the work on their own. Thus, the same renovation job can cost one homeowner much less or more than another. Given the many factors that contribute to renovation costs, that figure is not a static one that can directly relate to home value.
Personal use and depreciation
Another factor to consider is that you have the opportunity to use and enjoy the renovations during the time that you’ve owned the home. By the time you go to sell, the renovations may be several years old and would have depreciated in value. A $20,000 kitchen renovation may not necessarily be worth anywhere near that 5, 10, or 20 years later.
Market prices fall and rise regularly. The price of your home is determined by comparing it to recently sold properties and making adjustments for the differences in features. So, part of the value of your renovations will depend on comparable sales. An appraiser would look at what older homes are selling for versus more updated properties. Sometimes, dollar value adjustments are made at the discretion of the appraiser, but it all depends on how different the properties are in condition and features. There is no specific dollar value used across the board.
When renovations pay off the most
To maximize your investment in home renovations, there are a few things that you should keep in mind. First, focus on the most popular rooms in the house such as the kitchen and bathrooms. Secondly, be sure to use high-quality products and materials that are durable. This will allow them to remain usable (or even “new” looking) when you go to sell years later.